What You Need to Know about the UAE’s AML/KYC Laws and Regulations

A global hub for international trade and finance, the UAE is home to some of the world’s busiest airports, a wealth of international companies’ headquarters, and a large expatriate population which is roughly equivalent to 90% of its populace. Considered the financial hub of the Middle East, the UAE also features several free trade zones that are attractive to big businesses, furthering the country’s economic growth. The UAE, therefore, works closely with the FATF to counter money laundering, terrorist financing, and proliferation financing as part of its commitment to protecting the integrity of the global financial system.

A growing economy, tax exemptions, relatively simple business setup procedures, and political stability are just a few of the advantages of starting a new business in Dubai. In order to make the most of the opportunity, entrepreneurs who are interested in setting up their business in “The Most Supportive Environment for Entrepreneurship”, as identified by the Global Entrepreneurship Monitor (GEM), must comply with the UAE’s strict AML/KYC Laws and Regulations.

Recent Recommendations by the UAE’s Public-Private Partnership Sub-committee

According to the National News, the UAE has proposed a regulatory approach to combat money laundering and terrorism financing, with a national committee proposing the formal sharing of strategic information and intelligence on such matters between the public and private sectors.

In November 2022, the UAE’s Public-Private Partnership Sub-Committee (PPPSC) recommended in its first draft report that strict confidentiality and data protection rules be established for such information sharing between the public and private sectors.

The committee also advocated for the establishment of a dedicated secure digital platform for such intelligence sharing. This expanded regulatory toolkit will allow private and public entities to better understand the scope of illicit money flows.

The PPPSC will establish key performance indicators for relevant task forces and working groups under its auspices and monitor progress to ensure that collaboration between the public and private sectors continues to grow.

In recent years, the UAE has implemented significant reforms to combat financial crime. The recommendations of the committee are part of a larger effort to strengthen this drive in accordance with international standards and the global AML/CFT agenda. According to the report, the PPPSC will be committed to developing new tools in the fight against money laundering, terrorism financing, and proliferation financing in the coming months.

Who Is Required to Comply With the UAE’s AML/KYC Laws and Regulations?

Domestic and international companies operating in the UAE must comply with AML-CFT legislation. Companies that must comply fall into three categories:

• Designated non-financial businesses and professions.
• Financial institutions
• Non-profit organisations
  
  

Designated non-financial businesses and professions

Non-financial businesses and professions (DNFBPs), just like FIs, conduct financial transactions on behalf of their customers. DNFBPs typically include the following types of companies:

• • Brokers and real estate agents Dealers in precious metals and precious stones in carrying out any single monetary transaction or series of transactions totaling more than AED 55,000 (approximately $15,000)
  • Lawyers, notaries, and other independent legal professionals, as well as independent accountants, when preparing, conducting, or executing financial transactions for their clients.
  • Providers of corporate services and trusts when performing or executing a transaction on behalf of their clients
  • Other professions and activities as determined by a Ministerial decision.
    
    

It should be noted that the regulations only apply to lawyers and corporate server providers who act on behalf of their clients. These are, for example, legal professionals who manage funds owned by their clients.

Financial Institutions

All financial institutions (FIs) must comply if they conduct one or more financial activities or operations on behalf of a customer. These include:

• • Receiving public deposits and other funds, including deposits in accordance with Sharia Law (Islamic religious law).
  • Private banking, cash brokerage, and various types of credit facilities
  • Currency exchange and money transfer services, stored-value services, electronic payments for retail and digital cash, and virtual banking services.
  • Issuing and managing payment methods, guarantees, or obligations.
  • Investing in, operating, or managing funds, options contracts, futures contracts, exchange rate and interest rate transactions, and other derivatives or negotiable financial instruments.
  • Participating in the issuance of securities and providing financial services in connection with these issuances.
  • Managing and saving various types of funds and portfolios.
    
    

This list is not exhaustive, as regulatory authorities may add additional activities or financial transactions to the list.

Non-profit organisations

Non-profit organisations (NPOs) are defined as any organised group of a continuing nature established for a temporary or permanent period, consisting of natural or legal persons or not-for-profit legal arrangements.
Unlike FIs and DNFBPs, NPOs have very few legal obligations

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Regulator of the UAE’s AML/KYC Laws and Regulations

The Central Bank of the UAE (CBUAE) regulates AML in the UAE. Anti-Money Laundering and Combating the Financing of Terrorism Supervision Department (AMLD) enforces UAE anti-money laundering laws and regulations, as well as the AML/CFT Guidelines 2021.

According to the official government website, the UAE Cabinet approved the establishment of the Executive Office of Anti-Money Laundering and Countering Terrorist Financing in December 2020, with the goal of adhering to international standards in this sector. The Office will ensure the UAE’s active collaboration with companies and partners involved in combating money laundering and terrorism financing.

The national risk assessment process is overseen by the National Committee to Combat Money Laundering and the Financing of Terrorism and Illegal Organizations (NAMLCFTC). In accordance with its obligations under the Financial Action Task Force Standards, the UAE identifies and assesses the money laundering and terror financing risks it faces.

How to Comply With the AML/KYC Regulations in UAE

Businesses must monitor customer transactions, provide authentic data, and report suspicious cases in order to remain compliant with all regulations.

Meet Customer Due Diligence requirements

In the cases specified in Article 6 of the AML-CFT Decision, FIs and DNFBPs are required to implement appropriate risk-based Customer Due Diligence (CDD) measures, such as understanding the nature of the customer’s business and the purpose of the transaction.

Examples include:

• Carrying out occasional transactions in favour of a customer for amounts equal to or exceeding AED 55,000 (approximately $15,000), whether the transaction is carried out in a single transaction or in several seemingly linked transactions.
• Carrying out occasional wire transfers for amounts equal to or exceeding AED 3,500 (approximately $950).
• Suspicion of a crime.
• Doubts about the veracity or sufficiency of previously obtained identification data for the customer.

FIs are required to improve their CDD measures for customers identified as high-risk, which the AML/CFT Decisions categorise. Politically Exposed Persons (PEPs), customers from high-risk countries, and correspondent banking institutions are among them.

Report Suspicious Activity

If FIs detect any suspicious activity related to ML/FT operations, they must fulfil certain obligations.

When there are suspicions, or reasonable grounds to suspect, that the proceeds are related to a crime or the attempt or intention to use funds or proceeds for the purpose of committing, concealing, or benefiting from a crime, FIs are required to report transactions “without any delay” to the Financial Intelligence Union (FIU).

There is no minimum reporting threshold and no statute of limitations for ML/FT crimes or suspicious transaction reporting. The designated Competent Authority for reporting suspicious transactions is the FIU as determined by federal law and regulations, regardless of whether the FI operates on the mainland UAE or in a Financial or Commercial Free Zone.

Adhere to Know Your Customer Requirements

When working with customers, businesses must adhere to Know Your Customer (KYC) requirements. The process of identifying and verifying customers is known as Know Your Customer (KYC). Businesses must collect various types of documents from individual customers and businesses in order to verify personal data:

Individual customers must provide identification or a travel document, as well as proof of residency.

For Companies, an ID/travel document is required for all shareholders owning 25% or more of the company, as well as proof of UAE operating address (utility bill or other bank statements from the previous three months). The Memorandum and Articles of Association, Trade License or Certificate of Incorporation, The Board of Directors’ decision to open an account and identification of those with authority to operate the account are also required.

Why Meydan Free Zone?

The free zone is located in the heart of Dubai, close to downtown Dubai. While overlooking numerous golf courses, tennis clubs, and restaurants, the free zone serves as a central hub for booming business activity and maximum productivity. Even more compelling would be Meydan Free Zone’s affordable prices, backed up by a panel of business advisors with extensive experience dealing with practices in free zone areas and offering the best possible solutions to meet your needs.

Contact us today to get advice on AML/KYC compliance when establishing a business in Dubai.