COMPLIANCE
AND AML FAQ

A: Money laundering is the process through which proceeds of crime, or “dirty money” and their true origin and ownership is changed so that the proceeds appear legitimate.

Traditionally, the money laundering process has been defined as having three basic stages:

Placement – the stage at which cash derived from criminal activity is infused into the financial system. ‘Getting the ‘dirty cash’ into the Financial System’.

Layering – this stage usually involves a complex system of transactions designed to hide the source and ownership of funds. ‘Mixing sources of funds to confuse the trail’.

Integration – the stage at which laundered funds are reintroduced into the legitimate economy, appearing to have originated from a legitimate source. ‘Establishing a legitimate rationale for sources’.

Terrorism financing is the raising of money involving the solicitation, collection, or provision of funds, with the intention that it may be used to support terrorist acts, terrorists, or terrorist organisations.

Whether they are part of large terrorist organisations which control territory or members of small terrorist cells, terrorists need money. Their funds may originate from legitimate sources, or from criminal activities. A lack of funds limits their ability to prepare and carry out attacks, and to develop as an organisation.

Money laundering and terrorism financing are crimes threatening the security, stability and integrity of the global economy and financial markets. The Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) laws have been enacted in the UAE to combat money laundering, terrorism financing, tax and sanctions evasion, and proliferation financing. The following legal acts introduce the AML/CFT legal framework in the UAE:

1. Federal Law No. (4) of 2002 on the criminalization of money laundering and combatting of the financing of terrorism and its amendments
2. Cabinet Resolution No. 38 of 2014 Concerning the Executive Regulation of the Federal Law No. 4 of 2002 Concerning Anti Money Laundering and Combating Terrorism Financing
3. Federal Decree Law No. (20) of 2018 on Anti-Money Laundering and Countering the Financing of Terrorism
4. Cabinet Decision No (10) of 2019 concerning the Executive Regulations of Federal Decree Law No (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations
5. Federal Decree Law No (26) of 2021 to amend certain provisions of Federal Decree Law No (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations
6. Cabinet Decision No. (34) of 2020 concerning Regulating the Beneficial Owner Procedures.
7. Cabinet Resolution No (58) of 2020 Regulating Beneficial Owner Procedures
8. Federal Law No. (7) of 2014 on Combatting Terrorism Offences
9. Cabinet Decision No. (74) of 2020 Regarding Terrorism Lists Regulations and Implementation of UN Security Council Resolutions on the Suppression and Combatting of Terrorism, Terrorists Financing and Proliferation of Weapons of Mass Destruction, and Related Resolutions
10. Administrative Decision No. (11) for 2019 concerning the procedures of implementation the cabinet resolution No. (20) for 2019 concerning the UAE list of terrorists and implementation of UN Security Council decisions relating to preventing and countering financing terrorism and leveraging non-proliferation of weapons of mass destruction, and the relevant resolutions.
11. Cabinet Decision No. (16) of 2021 Regarding the Unified List of the Violations and Administrative Fines for the Said Violations of Measures to Combat Money Laundering and Terrorism Financing that are Subject to the Supervision of the Ministry of Justice and the Ministry of Economy.
12. The Anti-Money Laundering and Combating the Financing of Terrorism and the Financing of Illegal Organisations Guidelines for Designated Non-Financial Businesses and Professions (DNFBPs).

A: The government and regulatory authorities of the UAE set strict requirements, control measures, and reporting obligations on certain categories of legal entities such as:

1. Financial institutions
a. Banks
b. Cash services providers
c. Currency exchange and money transfer services providers
d. Insurance companies, brokers, and agents
e. Investment funds

2. Designated non-financial businesses and professions (DNFBPs)
a. Auditors, accountants
b. Lawyers, notaries, and other legal professionals and practitioners
c. Company and trust services providers
d. Dealers in precious metals and stones
e. Real estate agents and brokers

3. Non-profit organisations
a. Charities
b. Foundations
c. Trusts

A: Money Laundering Reporting Officer (MLRO) is an individual appointed by a firm to oversee the company’s compliance with AML/CFT regulations and to alert the company where there is knowledge or suspicion of Money Laundering or Terrorism Financing.

A: The cost of hiring an experienced full-time CO/MLRO can be high, especially for recently established companies and small businesses. Hiring a less experienced CO/MLRO incurs certain risks of being non-compliant with numerous compliance and AML/CFT requirements.

The appointment of an outsourced professional is an optimal solution offered by InBusiness to our clients. Our ACAMS and ICA-qualified compliance specialists (having significant AML/CFT experience in the UK, EU, Middle East, and North Africa) will be a perfect fit for your business and will help you to build an effective AML/CFT program, oversee the application of the required AML systems and controls and act as your point of contact in front of government and regulatory authorities, while you will be able to focus on day-to-day operations.

A: Yes. As per articles 20.4-5, 21.4 of the Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations, the regulated entities must prepare, execute, and document ongoing training and development programs and plans for the employees on combatting money laundering and terrorism financing.

A: The UAE Financial Intelligence Unit (the “FIU”) has launched the GoAML system for the purposes of facilitating the filing of suspicious transactions reports (“STRs”) and suspicious activities reports (“SARs”) by all regulated firms. The regulated firms shall register themselves on the GoAML system by following the procedure manual and maintain their registration in an active status.

A: Suspicious transaction refers to any transaction, attempted transaction, or funds which the company has reasonable ground to suspect as constituting any of the following:

• The proceeds of crime.
• Being related to the crimes of money laundering, the financing of terrorism, or the financing of illegal organisations.
• Being intended to be used in an activity related to such crimes.

Suspicious activity is an unusual activity which is not consistent with customer's known or expected activity or is abnormal for the type of customer or structure.

A: There are both civil and criminal penalties for failing to comply with AML/CFT obligations in the UAE. For example, the Competent or Supervisory Authorities may impose administrative penalties on regulated entities in the UAE, including:

• a written warning.
• fines of between AED 50,000 and AED 5 million per violation;
• restrictions on working in the regulated sector;
• arresting managers, board members, or members of the executive or supervisory management of the entity who are found to be responsible
  for the failure to comply (this can include the appointment of a temporary controller);
• restricting the powers of board members or members of the executive or supervisory management of the entity; and
• revocation of an entity's license to practice.
  
  

Cabinet Resolution No. 16 of 2021 introduced 26 additional administrative penalties for DNFBPs, including a fine of AED 200,000 for failure to provide additional information requested by the FIU and a fine of AED 50,000 for a failure to provide training to employees on combatting ML and TF.

Failing (intentionally or by gross negligence) to make an STR is punishable by imprisonment and/or a fine of AED 100,000 to AED 1 million.

Any person who warns or tips off a person or reveals that suspicious transactions are under review may be sentenced to imprisonment for at least one year and a fine of AED 100,000 to AED 500,000.