The UAE is known the world over as an open and welcoming business environment. It is one of many reasons why entrepreneurs from across the globe flock to live and work out here in the Emirates.
To remain on a level field with other business powerhouses such as the EU and US, the UAE implements a range of regulations aimed at avoiding money laundering.
In this article, we will explore the country’s anti-money laundering (AML) legislation, with a focus on:
- What is anti-money laundering?
- What are the AML laws in the UAE?
- Who needs to register for AML?
- What are the AML penalties in UAE?
What is anti-money laundering?
Anti-money laundering is the simple term for a set of legislation governing the source, maintenance and transfer of funds in the UAE. The aim of the legislation is to increase transparency and keep the country in line with other international jurisdictions.
This legislation comprises two specific laws: No 2/2002 Anti-Money Laundering (AML) and No.1/2004 Counterterrorist financing (CTF).
Why is anti-money laundering important?
Anti-money laundering regulation is important as it gives businesses, governments and individuals greater confidence and peace of mind to trade within the UAE.
With a clearly defined and internationally recognised standard in place, the UAE can be proactive in combatting money laundering practices, give regulators and financial institutions the tools they need to tackle such crimes, and counter other serious law breaking such as the funding of terrorist groups and other malicious organisations.
What are the AML laws in the UAE?
Under the anti-money Federal Decree No. 20 of 2018, it is an offence to:
- Transfer or transport proceeds of crime with intent to conceal or disguise its illicit origin.
- Conceal or disguise the true nature, origin, location, way of disposition, movement or rights related to any proceeds or the ownership thereof.
- Acquire, possess or use such proceeds.
- Assist the perpetrator of the predicate offence to escape punishment.
To ensure complete adherence with anti-money laundering regulations, banks and other institutions such as insurers and brokers must comply with Know Your Customer (KYC) guidelines. This means such businesses must verify all customer ID and maintain transaction records for amounts over $545 for account holders, and $10,900 for non-account holders. These records must be kept for at least five years.
Who needs to register for AML?
AML legislation does not only apply to financial business. Banks, brokers, real estate agents, gem and precious metal dealers, auditors, accountants, and corporate service providers are just some of the other businesses that must register for and adhere to AML standards.
What are the AML penalties in the UAE?
The types of offences covered by anti-money laundering regulation range in severity from failing to spot suspicious activity to knowingly assisting it. The punishments for such offences range considerably too.
Fines for the most severe offences can reach AED 1m while the maximum jail sentence is ten years. Secondary offences such as failing to deter or report money laundering activity carry fines of up to AED 100,000. There is no minimum or maximum jail sentence for this type of offence.
Other notable offences and their punishments include:
AED 1m fine:
- Dealing with fake financial institutions
- Maintaining bank accounts with fake names
AED 200,00 fine:
- Failure to carry out due diligence
- Failure to respond to requests for information from authorities
- Tipping off customers about reports or investigations into suspicious activities
AED 100,000
- Failure to determine the risk of crime
- Failure to verify identity before entering into a business relationship
- Failure to keep accurate records
AED 50,000 fine:
- Failure to take measures to reduce known risks
- Failure to set policies aimed at reducing crime
- Failure to continuously monitor clients throughout the business relationship
- Failure to appoint a compliance officer
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