Anti-Money Laundering In UAE
As a home to many well-known banking and financial institutions, UAE has become one of the most important financial centers in the Middle East and the world. Due to this, UAE and its capital Dubai have become a haven for money laundering.
Today, money laundering has become a problem for the UAE, irrespective of its taking the necessary steps to combat financial, organized, and terrorist crimes. To address money laundering and other financial threats that UAE faces, its special economic zone called the Dubai International Financial Centre or DIFC implemented its own regulations. These regulations are overseen by its financial regulatory agency called Dubai Financial Services Authority (DFSA). Let’s know more about DFSA in detail.
What is Dubai Financial Services Authority (DFSA)?
Dubai Financial Services Authority or DFSA is a financial regulatory agency that is responsible for detecting and preventing financial crimes and enforcing anti-money laundering and counter financing of terrorism regulations in UAE and the special economic zone of UAE called Dubai International Financial Centre or DIFC. It was established in 2004 under powers granted by Article 121 of the UAE Constitution. It covers all financial services, including banking and credit services, insurance, Islamic finance, asset management, securities, and investment funds.
It is important for financial institutions that operate in Dubai to be aware of the anti-money laundering and counter financing of terrorism risks they face. They must also know how to comply with the relevant DFSA regulations.
What has the UAE Government Done to Curb Money Laundering?
Since 2001, the UAE Government has made consistent efforts to curb money laundering and monitor the cash that flows through the UAE financial system. It has anti-money laundering acts based on UAE federal legislation. They were developed to meet the international Anti Money Laundering (AML)/ Counter-Terrorist Financing (CFT)standards set out in the recommendations of the Financial Action Task Force (FATF).
The UAE has put two important laws in place that serve as the foundation for the country’s Anti Money Laundering (AML) and Counter-Terrorist Financing (CTF) efforts. These are:
Federal Law No. 4/2002 (the Anti Money Laundering law)
This law is responsible for combating money laundering and terrorist financing crimes. It also contains guidelines for financial institutions on how they should monitor money laundering activity. The UAE regulations require banks, money exchange houses, and finance companies to adhere to strict Know Your Customer (KYC) guidelines. In addition to this, financial institutions are required to verify customer identity and keep transaction details (including name, address, beneficiary, originator, and beneficiary) for any exchange house transaction exceeding $545. This is also true for transactions with non-account holders bank transactions exceeding $10,900. This regulation outlines the requirements for the identification of legal and natural persons, as well as the types of documents that must be presented and the rules regarding what records should be kept on file at the institution.
Federal Law No. 1/2004, (the counterterrorism law)
On July 29, 2004, UAE strengthened its legal authority in fighting terrorism and terrorist financing by passing Law No. 1/2004. This law imposes severe penalties on the crimes that it covers, including the death penalty and life imprisonment. It also allows asset forfeiture or seizure. The law makes terrorist organization founders subject to life imprisonment. The law also punishes illegal import, manufacture, and transport of “nonconventional weapons” and their components with the intent of using them in terrorist activities.
The federal UAE laws mentioned above are not the only ones. A separate but complementary, DIFC Regulatory Law 2004 imposes specific AML/CFT regulations in relation to the special economic zone. It is under the control of the DFSA. Article 7(1) of Regulatory Law 2004 requires DIFC firms to adhere to the UAE federal law obligations.
UAE has also set up a National Committee for Combating Money Laundering and Financing of Terrorism and Illegal Organisations (NAMLCFTC). In a meeting of the NAMLCFTC, its Chairman and Governor of the Central Bank of the UAE (CBUAE), Khaled Mohamed Balama, urged financial sector regulators and law enforcement agencies to tighten their procedures to combat money laundering and terror financing.
“Effectively responding to the threat of financial crime, notably money laundering and terrorist financing, requires a concerted effort and the mobilisation of the public and private sectors’ collective resources and expertise. As such, the UAE is strengthening its cooperation with local and international financial institutions to swiftly monitor and report any and all activities deemed suspicious”, said Balama.
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