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UAE Adopts New Anti-Money Laundering Law to Combat Financial Crimes

The United Arab Emirates (UAE) has introduced a new Federal Law No 20 of 2018 on Anti-Money Laundering, Combating the Financing of Terrorism and Financing of Illegal Organisations, also known as the AML Law. This landmark legislation brings digital currencies into its scope for the first time, aiming to address money laundering conducted online involving cryptocurrencies.

Key Provisions

  • Requires Designated Non-Financial Businesses and Professions (DFNBPs) to implement adequate systems and controls to assess their risk exposure to financial crimes.
  • Mandates the preparation and submission of Suspicious Activity Reports to the Financial Information Unit, an independent entity within the UAE Central Bank.
  • Introduces the concept of controlled delivery, allowing authorities to permit a suspected money laundering activity to continue in order to better investigate and arrest persons suspected of conducting such acts.

Implementing Regulations

In 2019, the UAE Cabinet Resolution No 10 introduced further provisions necessary for implementing the AML Law. The regulations require:

  • Financial institutions and DFNBPs to assess clients’ money laundering risk and conduct customer due diligence at the start of each business relationship for transactions above AED55,000 (or wire transfers above AED3,500).
  • These changes have brought the UAE’s AML/CTF legislation in line with that of other advanced jurisdictions.

Financial Action Task Force Assessment

In 2020, the Financial Action Task Force (FATF) and Middle East and North Africa Financial Action Task Force issued its Mutual Evaluation Report on the UAE. The report identified significant white-collar crime risks posed by the country’s cash-intensive economy and active markets for trading gold, precious metals, and stones.

FATF Recommendations

  • Acknowledging the UAE’s “emerging understanding” of money laundering and terrorism financing risks, the FATF report highlighted a need for further improvement in addressing these threats.
  • Recommended that the UAE enhance its national AML framework to better combat financial crimes.

UAE Authorities’ Response

In response to the report, UAE authorities have taken a robust approach in investigating and addressing financial crimes. For example:

  • The UAE Central Bank froze bank accounts held by the former chairman of NMC Health following allegations of multi-billion US dollar fraud.
  • The DFSA also issued a record fine of $315m against Abraaj Investment Management and Abraaj Capital for unauthorized fund management activities and misusing investors’ monies.

Challenges Ahead

Despite these efforts, concerns remain about the role of external auditors in detecting internal fraud and the risks they face when clients experience financial crimes. The lack of access to independent sources of information and varying standards of internal audit capability in the region exacerbate these challenges.

COVID-19 Pandemic Impact

  • The COVID-19 pandemic has further complicated matters, making it more difficult for auditors to verify data provided by management.

Recent Enforcement Activity

In recent months, UAE authorities have made significant strides in combating financial crimes. For example:

  • Ramon Abbas was arrested and accused of leading a transnational network of cybercriminals and laundering $14.7m from a foreign financial institution.
  • Afzal Khan, featured on the FBI’s most wanted list, was extradited to face wire fraud charges after defrauding dozens of customers and lenders out of $1.5m.

Future Directions

As the UAE looks to fortify its national AML framework in response to the FATF assessment, it is expected that authorities will:

  • Enhance cooperation with foreign law enforcement agencies.
  • Raise domestic awareness about financial crimes.
  • Consider greater use of existing cybercrime legislation and collaboration with foreign enforcement authorities.
  • Encourage the private sector to invest in high-quality corporate governance to mitigate white-collar crime risks.

Overall, the UAE’s new AML Law marks a significant step forward in combating financial crimes, but there is still work to be done to address the complex challenges posed by money laundering, terrorism financing, and cybercrime.