On 3 February 2020, the Abu Dhabi Judicial Department (ADJD) announced that the Abu Dhabi Criminal Court sentenced a former Chairman of an Abu Dhabi Government-owned company, as well as its Chief Executive Officer (CEO), to 15 years’ imprisonment for money laundering.
In addition to receiving a 15-year imprisonment sentence, the individuals were ordered to return around AED 8 billion (approx. USD 2.18 billion) in misappropriated public funds, pay compensation to the companies they represented of AED 501,000 (approx. USD 136,000), with the expatriate CEO being ordered for deportation following the serving of his imprisonment sentence.
The Abu Dhabi Criminal Court noted that the two individuals had misappropriated funds to conceal their origin and location and had layered these funds into several companies.
The investigations by the Public Prosecution in Abu Dhabi demonstrated that the accused individuals had created a number of companies outside of the United Arab Emirates (UAE) to cover-up misappropriated assets, using fake accounts to distribute the funds to others involved in the crime.
Last week’s judgement is the latest in a string of recent money laundering cases, demonstrating the strong commitments of law enforcement agencies and public prosecution authorities in the UAE to address such financial crimes. On 24 November 2020, the ADJD announced that nine individuals and nine companies had been found guilty by the Abu Dhabi Criminal Court in a AED 306 million (approx. USD 83 million) money laundering case – which carried a fine of AED 5 million (approx. USD 1.36 million) for each individual and AED 50 million (approx. USD 13.6 million) per company / legal person. In this case, the money obtained from illegal activity was confiscated, and the individuals were sentenced to jail terms ranging from seven to 10 years. In another example where corporate entities were also found to be criminally liable, it had been reported in December 2020 that six expats were charged by the Abu Dhabi Criminal Court of money laundering linked to drug trafficking and organized crime, each receiving 10 years’ imprisonment (followed by deportation), a fine of AED 10 million (approx. USD 2.7 million), along with a fine of AED 50 million (approx. USD 13.6 million) for each of the companies involved (collectively AED 160 million – approx. USD 43.6 million – in fines).
Specialized AML Courts and other actions
On 10 November 2020, H.H. Sheikh Mansour bin Zayed Al Nahyan – Deputy Prime Minister, Minister of Presidential Affairs and Chairman of the ADJD – passed a resolution (ADJD Resolution No. 35 of 2020) to establish a specialist money laundering and tax evasion court in Abu Dhabi – the first dedicated court of its kind in the UAE – falling under the purview of the Abu Dhabi Criminal Court. Following this announcement, it was later announced on 29 November 2020, that a number of UAE Ministry of Justice resolutions had been issued by H.E. Sultan bin Saeed Al Badi Al Dhaheri, Minister of Justice (UAE Minister of Justice Resolutions Nos. 658, 659, 660 and 661 of 2020) on the establishment of similar money laundering specialized courts within the UAE’s Federal Courts system, covering the courts in the Emirates of Sharjah, Fujairah, Umm Al Quwain and Ajman (respectively). Each court has been established with minor, major and appeals circuits. These initiatives will inevitably ensure that money laundering related cases will be addressed in an efficient and effective manner.
Additionally, in September 2020, the UAE’s National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) had it regulations re-issued (UAE Ministry of Finance Resolution No. 110 of 2020, which replaced Resolution No. 183 of 2019). This provided the NAMLCFTC with an even more robust mandate and scope to address AML and CTF strategic issues.
Considering Designated Non-Financial Businesses and Professions (DNFBPs)
The UAE AML Law’s Implementing Regulations (Cabinet Decision No. 10 of 2019) outline a number of categories of DNFBPs, which like regulated Financial Institutions (FIs), are also subject to, amongst other things, standard Client Due Diligence and Know-Your-Customer (KYC) requirements, as well as reporting obligations to file Suspicious Activity Reports (SARs) to the UAE’s Financial Intelligence Unit (FIU). Examples of DNFBPs (as outlined in Article 3 of the UAE AML Law’s Implementing Regulations), include:
- brokers and real estate agents;
- lawyers, notaries and other independent legal professions and independent accountants;
- dealers in precious metals and stones; and
- providers of corporate services and trusts.
Excluding activities in the two Financial Free Zones in the UAE (the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM)), the DNFBP supervisory authorities in the UAE are: (a) the relevant emirate Land Department (for category 1); (b) the Ministry of Justice (for category 2 – other than accountancy firms); and (c) the Ministry of Economy (for categories 3 and 4, as well as accountancy firms).
Amongst the observations made in 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, were that certain DNFBPs sectors had not implemented comprehensive compliance procedures to address AML-related obligations.
According to the UAE Central Bank Annual Report 2018, 79% of all received SARs were filed by banks, meaning that filings from the DNFBP sectors accounted for only 21%. However, there does appear to be a significant increase in the number of SARs that were referred by the UAE’s FIU to law enforcement authorities for further investigation – representing a 38% increase between 2017 and 2018. This clearly demonstrates stronger collaboration between the relevant UAE governmental agencies in tackling the issue of money laundering.
In July 2019, the UAE Ministry of Justice issued Ministerial Resolution No. 532 of 2019 establishing a division for Combating of Money Laundering and the Financing of Terrorism at the Ministry. Since then we have seen 200 law firms have their licenses temporarily suspended for a month in October 2020 for shortcomings in AML compliance. Whilst 193 law firms were able to remediate identified failures in compliance, seven law firms were announced to have been fined AED 100,000 each for not rectifying identified failures adequately.
In November 2020, the UAE Ministry of Economy announced the establishment of a dedicated AML Department, divided into three divisions: (a) Policies and Risks; (b) Money Laundering Control; and (c) Investigation and Enforcement, adding to a more robust AML infrastructure for the DNFBP sector (in particular, categories 3 and 4, as well as accountancy firms).
Despite the initial observations in the UAE’s most recent FATF / MENAFATF MER with regards to DNFBPs, DNFBP-sector regulators have been investing heavily in AML and CTF compliance initiatives.
With AML and CTF issues on the UAE’s top list of priorities, it is clear that FIs and DNFBPs (and their regulators) are becoming more and more sophisticated in identifying potential threats and reporting suspicious transactions. With the FIU increasingly referring SARs to law enforcement authorities and with specialized AML courts now being established in several emirates, the recent criminal cases demonstrate the seriousness and magnitude of identifying issues and dealing with financial crime-related obligations in accordance with the law and international best practice. Whilst money laundering crimes apply to every person, FIs and DNFBPs should consider how to best protect themselves against the potential of enforcement actions – both at an administrative and a penal level. Furthermore, in light of the recent examples of corporate criminal liability linked to money laundering, companies should consider the implications of the actions of its employees and representatives.
Should you have any questions, please do not hesitate to get in touch with Samir Safar-Aly.