Financial Crime World

Here is the rewritten article in markdown format:

Financial Institution Customer Due Diligence Procedures in United Arab Emirates: Key Takeaways from Central Bank Guidance

The Central Bank of the United Arab Emirates (CBUAE) has issued a guidance note on the risks relating to payments, aimed at assisting licensed financial institutions (LFIs) with their statutory obligations under the UAE’s legal and regulatory framework. The guidance highlights key requirements for LFIs to conduct effective customer due diligence (CDD), transaction monitoring, and risk assessments.

Customer Due Diligence: A Critical Component of Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Regime

The CBUAE emphasizes that payment sector participants and LFIs providing services should incorporate clear allocation of AML/CFT responsibilities into their governance frameworks. This includes allocating responsibilities among LFIs involved in a payment, even when some may not form a direct relationship with the ultimate customer or beneficiary.

Key Elements of Customer Due Diligence

  • Customer identification and verification
  • Beneficial owner identification
  • Understanding of the nature of the customer’s business and purpose of the business relationship
  • Ongoing monitoring

Enhancing Compliance Programs: A Proactive Approach

To address the risks associated with payments, LFIs should review and enhance their compliance programs, including:

Risk-Based Approaches to Transaction Monitoring

  • Conducting risk assessments to identify ML/FT risks
  • Implementing effective CDD procedures
  • Developing a governance framework that allocates responsibilities among stakeholders
  • Enhancing transaction monitoring systems

Transaction Monitoring: A Critical Function in Preventing Illicit Activity

LFIs must monitor all transactions processed or conducted through their institution, using the information available to them. While they cannot outsource responsibility for reporting suspicious activity, they can outsource certain aspects of transaction monitoring.

Best Practices for Effective TM

  • Develop a risk-based approach to TM
  • Implement a trigger event approach design
  • Utilize next-generation TM tools, such as AI and ML

Training and Capacity Building: A Key Component of Effective AML/CFT Regime

LFIs must provide their employees with adequate training on the risks associated with payments and the obligations of the LFI. This includes training on:

Recognizing Red Flags for Illicit Activity

  • Identifying suspicious transactions
  • Understanding the ML/FT risks associated with PPS
  • Applying risk-based controls

By implementing these measures, LFIs can enhance their compliance programs, prevent illicit activity, and maintain a robust AML/CFT regime in line with CBUAE guidance.

Contact Us

For more information on how to apply these principles to your specific circumstances or to discuss further, please contact:

Muzzi Ebrahim Partner +971 52 883 5537 muebrahim@deloitte.com