Financial Crime World

UAE Must Enhance Anti-Money Laundering Framework to Combat Financial Crime

The United Arab Emirates (UAE) has made significant progress in combating financial crime, but a recent report from the Financial Action Task Force (FATF) urges authorities to take additional steps to improve the effectiveness of their anti-money laundering (AML) and counter-terrorist financing (CFT) framework.

Key Observations

The FATF Mutual Evaluation Report highlights several key observations:

  • The need for a consistent supervision framework for Trust and Corporate Service Providers (TCSPs) across relevant ministries and authorities.
    • Adoption of UN standards to categorize all TCSPs can provide the required consistency.
  • Mandating AML/CFT frameworks reviews for high-risk Designated Non-Financial Businesses and Professions (DNFBPs), such as DPMS, real estate firms, and law firms.
    • Risk-based approach must be adopted while onboarding clients and on an ongoing basis.

Enhancing Suspicious Transaction Reports

The report also highlights concerns about the low level of Suspicious Transaction Reports (STRs) submitted by DNFBPs, which limits the financial intelligence available at the national level. To improve the quality of STRs:

  • Enhanced guidance, awareness, and training are needed for private sector entities, particularly DNFBPs.
  • A data-led analytics approach, coupled with machine learning and AI, can increase the volume of intelligence and insights available.

Collaborative Approach

The effectiveness of the STR framework could be enhanced by a model that allows stakeholders to work in collaboration more easily:

  • On suspicions aligned to agreed national priorities.
  • Expediting the creation of a comprehensive intelligence picture, informing and driving the response of all stakeholders against key threats.

Free Zones Challenges

The report highlights challenges in monitoring and supervision outside of DIFC and ADGM:

  • The risk of criminals misusing legal persons for money laundering or terrorist financing purposes remains high.
  • The sheer number of registered entities across various free zones poses a challenge, given their predominantly foreign ownership.

Progress Made

While the UAE has made significant progress in combating financial crime, including the introduction of economic substance rules to fight economic crime:

  • Deloitte has worked with free zone authorities in investigating and remediating registered entity records.
  • Conducting enhanced due diligence on high-risk entities to identify beneficial owners.

Conclusion

In conclusion, while the UAE has made significant progress in combating financial crime, further efforts are needed to enhance its AML/CFT framework and address the challenges posed by free zones.