Understand the UAE's Anti-Money Laundering and Combating Terrorism Financing Law

Discover the key aspects of the UAE's Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering and Combating Terrorism Financing. Learn how Darwish Legal Consultants can help your business navigate compliance, reporting obligations, and due diligence measures.

1. Understand the UAE's Anti-Money Laundering and Combating Terrorism Financing Law.

The President of the United Arab Emirates (UAE) has issued Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organizations. This legal instrument is of paramount importance. The objective of this legislation is to reinforce the nation's initiatives to prevent and combat the financing of unlawful organisations, terrorism, and money laundering. It stresses how important it is to define words and phrases that are linked to these crimes, such as money, proceeds, predicate offences, suspicious transactions, freezing, confiscation, financial institutions, and designated non-financial businesses and professions (DNFBPs).

2. Important Provisions and Responsibilities

2.1. Penalties and criminalisation

The Decree- The law prohibits the financing of terrorism, money laundering, and illegal organisations. It imposes severe penalties on perpetrators, accomplices, legal persons, and other violators. It also mandates the confiscation of funds, proceeds, and instrumentalities linked to these crimes, irrespective of their possession by the perpetrator or a third party, while simultaneously protecting the rights of legitimate third parties.

2.2. Exemptions and Confidentiality

Entities such as supervisory authorities, the Financial Intelligence Unit (FIU), law enforcement authorities, financial institutions, DNFBPs, and their representatives are exempt from criminal, civil, or administrative liability for providing requested information or violating confidentiality obligations unless they make the disclosure in bad faith or with the intention to cause harm.

2.3. The National Committee and Financial Intelligence Unit perform various functions.

The FIU, an autonomous entity within the Central Bank of the UAE (CBUAE), is responsible for collecting, examining, and disseminating reports on suspicious transactions. Additionally, it maintains correspondence with its counterparts on a global scale. Furthermore, the Governor of the CBUAE chairs the National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organizations, which is responsible for developing national strategies, proposing relevant regulations, coordinating with relevant authorities, and representing the state in international forums.

2.4. Reporting and Due Diligence Requirements for Financial Institutions and Businesses

Financial institutions and DNFBPs are required to promptly report any suspicious transactions or funds to the FIU and furnish any supplementary information that may be necessary. They must implement due diligence measures to verify and identify the information of their clients and beneficial proprietors, defining these measures in accordance with national risk assessments and risk factors. We strictly prohibit conducting transactions under fictitious or anonymous identities.

2.5. Internal policies and compliance

These entities must establish internal policies, controls, and procedures to mitigate and manage identified risks, and they must continuously review and update them. They must also adhere to directives issued by competent authorities when implementing decisions by the UN Security Council regarding the prohibition and suppression of terrorism financing and the proliferation of weapons of mass destruction.

2.6. Enforcement and supervision

Supervisory authorities are responsible for ensuring compliance with the Decree-Law and its Implementing Regulation through supervision, monitoring, and follow-up. They have the authority to impose administrative penalties on financial institutions, DNFBPs, and non-profit organisations in the event of violations. The responsibility of law enforcement authorities is to investigate suspicious transaction reports, conduct undercover operations, and implement alternative strategies to identify the sources and destinations of illicit funds, detect offences and apprehend perpetrators.

2.7. Judicial Assistance and Collaboration

The Decree-Law enables judicial assistance and collaboration with other countries in investigations, trials, and procedures that are pertinent to the offences. It also enables the recognition and enforcement of foreign court orders that pertain to the confiscation of funds and proceeds associated with these offences. These crimes and their penalties have no statute of limitations, and foreigners convicted of them are deported.

3. In conclusion

The Federal Decree-Law No. 20 of 2018 mandates that companies conducting business in the United Arab Emirates adhere to its provisions. This entails the implementation of robust internal controls, adherence to stringent reporting and due diligence requirements, and registration with the appropriate authorities. It is imperative to comprehend and fulfil these obligations in order to prevent and combat financial crimes, ensure regulatory compliance, and preserve the integrity of the UAE's financial system.