On 31 January 2021, the United Arab Emirates (UAE) Central Bank (CBUAE) publicly announced that it had sanctioned 11 banks in the UAE a total of AED 45.76 million (approx. USD 12.46 million) for failures to achieve appropriate levels of compliance with regards to Anti-Money Laundering (AML), Combatting the Financing of Terrorism (CFT) and local UAE sanctions compliance. The sanctions, imposed on 24 January, were imposed pursuant to Article 14 of the Federal Decree Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations (the UAE AML Law).

A few days prior to the announcement, the CBUAE held a forum attended by over 100 Chief Compliance Officers and other senior officials, where it emphasized the role of compliance functions in combatting financial crimes. On the same day, the UAE’s National Committee for Combating Money Laundering and Financing of Terrorism and Illegal Organisations (the AML/CFT National Committee) held its first meeting of the year, where it discussed the latest developments and AML and CFT issues.  The AML/CFT National Committee addressed the recently enacted UAE Cabinet Decision No. 10 of 2021 concerning the establishment of the Executive Office of Anti Money Laundering and Countering Financing of Terrorism, as well as the need for further public-private partnerships to identify trends, patterns, behaviours and threats in the market from a AML and CFT perspective.

Article 14 of the UAE AML Law provides the relevant ‘Supervisory Authority’ (which in the case of banks in the UAE is the CBUAE) with a number of administrative penalties in its toolkit for violations of the provisions of the UAE AML Law and its Implementing Regulations (UAE Cabinet Decision No. 10 of 2019). These include:

  • issuing a warning;
  • administrative penalties between AED 50,000 to AED 5 million  (approx. USD 13,600 to USD 1.36 million) per violation;
  • censuring/banning individuals from working in the sector concerned;
  • constraining the powers of the Board of Directors, management or even of ultimate beneficial owners where responsibility can be proven;
  • appointment of a temporary inspector;
  • suspending or requesting the removal of individuals (including any members of the Board of Directors);
  • suspending or restricting activities;
  • request regular reports on the measures taken to correct any violations further to any of the above listed penalties; and
  • cancelling the license of the concerned entity.

The UAE AML Law also provides for a number of other penalties, including but not limited to criminal sanctions.  This includes imprisonment and/or a criminal fine of up to AED 100,000 (approx. USD 27,200) where the obligation to file a Suspicious Activity Report (SAR) has been either violated on purpose or even due to gross negligence.

Following the UAE’s Mutual Evaluation Report (MER) by the Paris-based Financial Action Task Force (FATF) and the Bahrain-based Middle East and North Africa Financial Action Task Force (MENAFATF) issued on 30 April 2020, the UAE has been working diligently on plugging any identified areas for improvement and development, with AML and CFT issues being a key priority on the national agenda.

Key Takeaways

Following its enactment in 2018, the UAE AML Law (and its Implementing Regulations issued in 2019) contain a number of provisions that require both regulated Financial Institutions (FIs), as well as Designated Non-Financial Businesses and Professions (DNFBPs), to take a risk-based approach to compliance. There are a number of both external and internal reporting and audit obligations that FIs and DNFBPs should be following, which include periodically identifying risk factors relevant to one’s business, sector exposure and client base. Furthermore, in addition to the UAE AML Law and its Implementing Regulations, the provisions of UAE Cabinet Resolution No. 74 of 2020 – which addresses the UAE’s own National Terrorist List and the UAE’s local implementation of the United Nations Security Council’s non-proliferation financing and sanctions resolutions – should also be well understood.

Should you have any questions with regards to your AML, CFT and sanctions compliance obligations, please do not hesitate to contact us.

Author

Borys Dackiw is the Head of Compliance practice in the Gulf based in the Firm's Abu Dhabi office. A partner of Baker McKenzie since 1995, Borys regularly advises clients across various industries on their compliance and anti-bribery policies and programs and has participated in whistleblower interviews relating to allegations of bribery and other bribery-related investigations. He also advises on mergers & acquisitions (including privatizations), private equity and general corporate and commercial law.

Author

Mazen Boustany is the UAE Head of the Financial Regulatory, Policy & Legislative Group of Baker McKenzie Habib Al Mulla, based in Dubai. He has over 22 years' experience in banking and finance law in the Middle East, including financial services regulation, Islamic finance, structured finance, securitisation, private equity, financial structuring and restructuring, cross-border transactions and investment funds. Mazen has helped draft many of the financial regulations for the UAE Central Bank and Ministry of Finance.

Author

Samir Safar-Aly is an English-qualified senior associate in Baker McKenzie's DIFC office in the UAE, focusing on financial crime and financial regulation for the wider MENA region from both an advisory and investigations perspective. Samir's expertise includes UAE, Saudi and wider international anti-money laundering (AML) and counter-terrorist financing (CTF) rules, anti-bribery and corruption laws (covering the GCC, UK and U.S.) and other areas of white-collar and financial crime. He also advises governments in Africa and Asia on public policy and legal and regulatory reform. Samir has particular expertise in financial and economic sanctions and regularly provides guidance on UN, U.S. (OFAC), UK, EU and GCC sanctions regimes and export-control issues across a wide range of sectors. With regards to financial regulation, Samir covers the GCC and wider Middle East and provides guidance on the cross-border marketing of financial services and products, conduct issues and license applications. He regularly advises the world's leading financial institutions, asset managers, as well as FinTech start-ups.

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