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Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) Compliance Framework for Licensed Financial Institutions in the UAE

The Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) compliance framework is a critical aspect of regulated businesses, particularly Licensed Financial Institutions (LFIs) in the UAE. This comprehensive guide outlines key aspects of AML/CFT compliance, ensuring LFIs meet regulatory requirements.

Key Aspects of AML/CFT Compliance

Governance and Management Oversight

  • LFIs should have a Board of Directors that oversees the design, implementation, and maintenance of an AML/CFT program.
  • The Board should ensure effective governance and oversight of the program.

Policies and Procedures

  • LFIs should have policies and procedures governing changes to their transaction monitoring program, including:
    • Protocols for designing and implementing new detection scenarios
    • Periodic assessment and validation of existing detection scenarios
    • Retirement of detection scenarios

Clear Lines of Responsibility and Reporting

  • LFIs should have clear roles, responsibilities, and reporting lines, including:
    • Reporting and escalations to the Board of Directors and senior management
    • Effective communication and coordination among departments

Ongoing Training

  • LFIs should provide ongoing training to employees on:
    • Changes to the UAE’s legislative and regulatory frameworks
    • Internal policies or procedures
    • Evolving risk issues related to transaction monitoring and suspicious activity reporting

Transaction Monitoring Methods

  • The five key components of an effective transaction monitoring and reporting system are:
    1. Identification of unusual or suspicious activity
    2. Managing alerts with an alert risk scoring model
    3. STR (Suspicious Transaction Report) or SAR (Suspicious Activity Report) decision making
    4. Completion and filing of STRs or SARs
    5. Monitoring and filing on continuing activity

Risk-Based Approach

LFIs should adopt a risk-based approach to AML/CFT compliance, tailoring controls to their specific risks and circumstances.

Group-Wide Controls and Procedures

In cases where Group entities or branches operate outside the UAE, LFIs should implement group-wide controls and procedures for AML/CFT compliance.