UAE’s Robust Regulatory Framework in the Fight Against Money Laundering and Terrorist Financing: A Comprehensive Look at the DIFC AML/CTF Legislation

The United Arab Emirates (UAE) upholds a strong commitment to combating money laundering, terrorist financing, and proliferation activities. This commitment is underpinned by the country’s comprehensive and evolving regulatory framework, which encompasses both the mainland and the Dubai International Financial Centre (DIFC). In this article, we delve into the UAE’s Federal Anti-Money Laundering, Counter-Terrorist Financing (CTF), and Proliferation Financing (CPF) legislation applicable to the DIFC.

Overview of UAE’s Key Legislation

The UAE legislation, enforced by various authorities, imposes obligations upon all “Relevant Persons” in the DIFC, requiring them to prevent, detect, and report potential violations related to money laundering, terrorist financing, and proliferation financing. Below is an overview of the key pieces of legislation effective as of now:

Federal Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.
Cabinet Decision No. 10 of 2019 and subsequent amendments.
Federal Law No. 74 of 2020.
Federal Law No. 7 of 2014.
Regulation No. 1/2019.
Federal Law No. 5 of 2012.
Federal Penal Law No. 3 of 1987 (as amended).
Federal Penal Procedures Law No. 35/1992 (as amended).
Central Bank Board of Directors’ Decision No. 59/4/219.
Guidelines for Financial Institutions.
Ministerial Decisions Nos. 532/2019-536/2019.

Please note that this list may not be exhaustive, and the UAE authorities reserve the right to amend or add to the regulations as deemed necessary.

Guidelines for Financial Institutions

The UAE Government provides Financial Institutions with guidelines under the “Guidelines for Financial Institutions on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.” These guidelines assist institutions in understanding their statutory obligations and implementing effective measures to meet these requirements. Relevant Persons can access the following guidelines: AMLCFT Guidance for FI’s or AMLCFT Guidance for DNFBP’s.

Adhering to Federal and DIFC Regimes

The DIFC regulatory structure includes both the Federal regime and the DIFC regime. Relevant Persons are expected to comply with both regimes to ensure compliance with UAE Federal Anti-Money Laundering Legislation. Failure to adhere to the legislation may lead to sanctions under the Regulatory Law and DFSA Rules.

DFSA Rulebook’s Anti-Money Laundering (AML) Module

The DFSA Rulebook’s Anti-Money Laundering (AML) Module provides a single reference point for Financial Institutions’ compliance regulations relevant to a Relevant Person in the DIFC context. It is crucial for institutions to familiarise themselves with this Module and assess the extent to which the rules apply to their business.

Effective Implementation of Risk-Based Approach (RBA)

To ensure effective implementation of the Risk-Based Approach (RBA), all Relevant Persons are encouraged to adopt a proportionate approach to Anti-Money Laundering/Counter-Terrorist Financing/Proliferation Financing. By applying this approach, institutions can recognise, assess, and manage risks within their business, exercise discretion, and develop appropriate strategies to mitigate these risks efficiently.

DFSA Annual AML Return Process

The DFSA conducts an annual AML Return process, requiring all Relevant Persons to provide crucial information to the regulatory body. This information helps the DFSA understand the specific risks faced by each institution, ensure data accuracy, and allocate resources efficiently to meet its AML/CTF regulatory objectives. Relevant Persons are required to submit their AML Return by the end of September each year. Guidance on completing it is available on the DFSA e-Portal.