Why Your Business Must Take AML Compliance in the UAE Seriously
In recent news, the UAE Ministry of Economy suspended 50 companies during the third quarter of 2023 for failing to register in the anti-money laundering (AML) system, goAML, of the Financial Intelligence Unit (FIU).
This move underscores the critical importance of AML compliance for businesses operating in the UAE, both in the mainland and free zones.
As a company setup in UAE or a foreign branch office in the UAE – do you really need to be worried?! In this article, our co-founder and tax consulting expert Ms Vibha Malik Modi shares just this latest news on the suspension of 50 companies in the UAE due to lack of AML compliance means for us.
First things first…
Why is AML Compliance Relevant to Companies in the UAE?
The suspension of 50 companies highlights the UAE government’s commitment to combating money laundering and terrorist financing.
The Financial Intelligence Unit (FIU) is responsible for examining transactions and activities to detect and prevent financial crimes, exercises supervision over designated non-financial businesses and professions (DNFBPs), including real estate brokers and agents, dealers in precious stones and metals, auditors, and corporate service providers.
Failure to register with the goAML system can result in suspension and more stringent sanctions if the status is not rectified within a three-month period.
AML compliance is essential for maintaining a company’s reputation and avoiding legal penalties. It also plays a crucial role in preventing money laundering and terrorist financing, which can undermine the UAE’s regulatory efforts and the global financial system.
Key Considerations for AML Compliance in the UAE
Okay, first, let’s quickly breakdown what AML compliance in the UAE actually is:
AML (Anti Money Laundering) compliance in the UAE, refers to the adherence to regulations and guidelines set by the UAE government to combat money laundering and terrorist financing. AML stands for Anti-Money Laundering – this comprehensive legal framework in place for AML compliance, which includes several key components:
Registration with the goAML system
All Designated Non-Financial Businesses and Professions (DNFBPs), which includes real estate brokers, dealers in precious metals and stones, auditors, and corporate service providers, must register with the goAML system of the Financial Intelligence Unit (FIU).
Customer Due Diligence (CDD)
Businesses are required to implement robust CDD procedures to identify and verify the identity of their customers and assess the risks associated with them.
Suspicious Transaction Reporting (STR)
Businesses must report any suspicious transactions or activities to the FIU promptly.
Businesses are required to maintain accurate and complete records of all transactions and customer information for at least five years.
Businesses must implement internal controls, policies, and procedures to ensure compliance with AML regulations.
Businesses must appoint a Compliance Officer responsible for overseeing the implementation of the AML compliance program and reporting to the FIU.
Businesses must provide ongoing training to their employees to ensure they are aware of the AML regulations and their responsibilities in relation to AML compliance.
Businesses must conduct a risk assessment to identify and assess the money laundering and terrorist financing risks they may be exposed to.
The UAE has been actively updating and strengthening its AML regulations in recent years to align with international standards and combat emerging threats. Non-compliance with AML regulations can result in severe penalties, including fines, imprisonment, and suspension of business activities.
Recent Changes to AML Regulations
In fact, the UAE has been continuously updating its AML regulations to align with international standards and combat emerging threats. Recent changes include enhancements to the goAML system, stricter customer due diligence requirements, and increased scrutiny of politically exposed persons (PEPs).
What are the most common mistakes to avoid in AML Compliance?
Businesses often make several mistakes when it comes to AML compliance. These include:
Inadequate Customer Due Diligence (CDD)
Not conducting thorough due diligence on customers to verify their identity and assess their associated risks. This includes failure to identify the beneficial owner, not updating customer information regularly, and not conducting enhanced due diligence on high-risk customers.
Not maintaining complete and accurate records of all transactions and customer information. This includes failure to keep records of customer identification documents, transaction records, and risk assessments.
Failure to Report Suspicious Transactions
Not reporting transactions or activities that are suspicious or inconsistent with the customer’s known business or personal activities to the Financial Intelligence Unit (FIU).
Lack of Employee Awareness
Not providing ongoing training to employees to ensure they are aware of the AML regulations, the risks associated with money laundering and terrorist financing, and their responsibilities in relation to AML compliance.
These mistakes can have severe consequences, including legal penalties such as fines and imprisonment, reputational damage, and operational disruptions including the revoking of business licenses or suspensions.
Best Practices for Managing AML Compliance Effectively
At Horizon Biz Consultancy, AML compliance experts Dubai, we employ specific framework in line with the latest regulations to effectively manage AML compliance. These include:
Implementing a Comprehensive AML Compliance Program
This should include written policies and procedures, appointment of a Compliance Officer, implementation of internal controls, and ongoing employee training and awareness.
Conducting Regular Risk Assessments
Creating an implementation plan in line with your unique business operations on conducting regular risk assessment. Businesses should regularly assess the money laundering and terrorist financing risks they may be exposed to and update their AML compliance program accordingly.
Providing Ongoing Employee Training and Awareness
Employees should receive ongoing training on AML regulations, the risks associated with money laundering and terrorist financing, and their responsibilities in relation to AML compliance.
Implementing Robust Customer Due Diligence Procedures
This includes verifying the identity of customers, identifying the beneficial owner, assessing the risks associated with the customer, and conducting enhanced due diligence on high-risk customers.
Maintaining Accurate and Complete Records
Businesses should maintain complete and accurate records of all transactions and customer information for at least five years.
Reporting Suspicious Transactions Promptly
Any transactions or activities that are suspicious or inconsistent with the customer’s known business or personal activities should be reported to the FIU promptly.
Special Considerations for Foreign Businesses Operating in the UAE
Foreign businesses operating in the UAE need to be aware of the specific AML requirements that apply to them. This includes registration with the goAML system, adherence to local customer due diligence requirements, and compliance with international sanctions lists.
While these best practices are an excellent starting point, your unique business practices and processes need a more tailored approach.
It is always recommended to seek professional advice and guidance tailored to your specific business and circumstances. At Horizon Biz Consultancy, we offer a range of services to help businesses navigate the complexities of AML compliance in the UAE including quick AML Compliance process audits and company workshops.
Get in touch for a quick 30 minutes consultation over call to understand how you can streamline your AML compliance processes.