Anti-Money Laundering and Compliance: The Latest Regulations

Lily Eid Compliance Specialist lily.eid@bsabh.com

Rima Mrad Partner rima.mrad@bsabh.com

Throughout 2022, the United Arab Emirates (UAE) has reaffirmed its ongoing commitment and efforts to strengthen its regulatory framework in relation to anti-money laundering (AML) and counter terrorist financing (CFT). As a country that has become an important global financial center for doing business, the UAE has reiterated its commitment in working with the international community to combat financial crime and remind businesses of their obligations in relation to international sanctions programmes.

The latest updates to the UAE AML and sanctions laws regulations were issued in 2021 but throughout 2022, efforts were invested in ensuring the proper implementation of the latest changes and appropriate adaptation of the programs that aim ensuring fulfilment of FATF recommendations.

The principal AML/CFT legislation applicable remain to be:

• Federal Decree-Law No. (20) of 2018 On AML and CFT and Financing of Illegal Organisations and implementing regulation along with;
• the Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree Law No. (20) of 2018 On AML and CFT and Illegal Organisations.
• the Cabinet Resolution No. (24) of 2022 issued lately to amend some provisions of the above Cabinet Decision.

The AML Law in the UAE requires Financial Institutions ("FIs") and Designated Non-Financial Business or Professions ("DNFBPs") to establish a comprehensive AML/CFT Program including AML Policy for KYC, Screening, Risk Profiling, Governance, STR Filing, and more. The AML policy, procedures and guidelines have to be commensurate with the nature and size of the business. The appointment of an AML Compliance Officer will ensure that the provisions of the UAE AML Law are complied with.

To date, effective measures, and proactive regulatory action for protecting the UAE’s regulatory and financial environment have been implemented by the competent UAE authorities, including the Central Bank of the UAE; Securities and Commodities Authority; Ministry of Economy; Ministry of Justice; Abu Dhabi Global Market; and the Dubai Financial Services Authority, as well as close inter-agency cooperation.

These measures were mainly concerned this year on the application of strict customer due diligence ("CDD"), on-going transaction monitoring, sanctions screening systems and the importance of the subscription to the sanctions lists, suspicious transaction reporting and GoAML registration, in addition to the awareness on the targeted financial sanctions.

The Supervisory Authorities in the UAE continue to monitor the evolving risk environment and remain agile in identifying emerging risks and responding promptly by issuing necessary guidance, spreading awareness and training webinars.

Below we provide an overview of the key regulatory updates in 2022.

Legal & Regulatory Update 1:
Circular Number No. (05) of 2022, issued by the Ministry of Economy (MOE) regarding the Real Estate Activity Report (REAR) submission by real estate brokers and agents and law firms

The real estate sector is one of the main drivers of economic growth in the country. According to the results of the national risk assessment, this vital sector is one of the high-risk sectors. The Ministry of Economy has recently issued this circular in June 2022 which became effective within 1 week of its publication, instructing the real estate brokers and the law firms, to report the specified transactions pertaining to real estate in the new report named as – Real Estate Activity Report ("REAR").

The main purpose of REAR is to curb the illicit investment in real estate and track down the high-risk transactions around real estate involving money laundering.

Payments for real estate transactions in the UAE through virtual assets, sale of virtual assets, or cash amounts above AED 55,000 will now be subject to additional reporting to authorities.

Filing a REAR to report any transaction pertaining to freehold property is an additional requirement. Submissions of REARs do not exempt the reporting entities from their existing AML-CFT obligations to submit the following types of reports via GoAML:    

• Suspicious Transaction Report (STR)
• Suspicious Activity Report (SAR)
• Funds Freeze Report (FFR)
• Partial Name Match Report (PNMR)
  

As part of the CBUAE's mandate to promote and protect the stability of the financial system in the UAE, the CBUAE maintains a regulatory framework applicable to Licensed Financial Institutions ("LFIs") and Licensed Financial Activities. Within the CBUAE, the Regulatory Development Division is tasked with developing the regulatory framework by drafting and proposing regulations, standards, and guidance. In 2022, the CBUAE issued several guidance on AML and CFT on the risks related to different aspects, particularly focused on politically exposed persons ("PEPs"). These guidelines and regulations will assist LFIs’ adhering to financial PEP regulations to prevent money laundering and terrorism financing.

What are the implications on businesses?
This will assist LFIs’ effective implementation of their statutory AML/CFT obligations and takes Financial Action Task Force (FATF) standards into account.

Will there be any further developments on this in 2023?
CBUAE guidelines and regulations will ensure an adequate organisation, supervision and development of all financial services companies in the UAE. This provides an operational framework, protection for both the finance companies and their customers, and enhances financial sector stability going forward.

Expectations for 2023

The UAE’s commitment to advancing efforts to combat money laundering and counter terrorist financing remains a key pillar underpinning the country’s status as an attractive global business hub that operates in line with international standards. Robust actions and ongoing measures taken by the UAE government and private sector are in place to combat money laundering and more specifically counter the proliferation financing in the upcoming year. The UAE has chosen to create a specific offence and implement additional measures of proliferation financing including:

• Enhancing enforcement against proliferation and proliferation financing.
• Raising awareness and helping to clarify the obligations on individuals, firms and FIs to be vigilant to proliferation and proliferation financing.
• Establishing a national definition of proliferation financing.
• Providing a basis for suspicious activity reporting.

In addition, the UAE has published a Control List that can be found in Cabinet Decision No. 50 of 2020 implementing internationally agreed dual-use goods subject to import and export control. The list can be accessed through the EOCN website at https://www.uaeiec.gov.ae/en-us/control-list-good

Moreover, the United Nations Security Council ("UNSC") has imposed sanctions to prevent and counter the proliferation of Weapon of Mass Destruction and its financing, this includes targeted financial sanctions against specific persons and entities that have been identified as being connected to the proliferation of WMD. All UN member states, the UAE included, are required to implement these measures. Recommendation 7 of the Financial Action Task Force Standards requires countries to implement proliferation related targeted financial sanctions ("TFS") made under UNSC Resolutions without delay.

Proliferation financing can contribute to global instability and the UAE has proven its commitment and reiterate that combatting money laundering, counter financial terrorism and proliferation finance remains a strategic priority and goal.

We expect extra attention, awareness and requirements that will be targeting the private sector this upcoming year concerning proliferation financing and related reporting mechanism in order to meet the regulatory reporting requirements.