Non-Compliance in AML/CFT Rules: Company Fined for AED 1.2 million - Stay Informed

Posted by Dr. Hassan Elhais on May 1st, 2024

Introduction:

In a significant development aligning with Federal Decree-Law No.20/2018 on Combating Money Laundering Crimes, the Financing of Terrorism, and the Financing of Unlawful Organizations, the Central Bank of the UAE (CBUAE) has taken action against a notable breach of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations.

Recently, the CBUAE imposed a substantial financial sanction on an insurance company operating within the UAE. This penalty, amounting to AED 1.2 million, was imposed under Article 14 of Federal Decree Law No. 20 of 2018. Federal Decree-Law No.20/ 2018 empowers regulatory authorities to take robust measures against entities found to violate AML/CFT regulations.

Range of Penalties:

Article 14, stipulates a range of penalties that supervisory authorities may impose on financial institutions, designated non-financial businesses, professions, virtual asset service providers, and non-profit organizations that violate AML/CFT regulations. These penalties may include warnings, administrative fines ranging from AED 50,000 to AED 5,000,000 per violation, bans from working in the sector related to the violation, restrictions on the powers of responsible individuals, suspensions, and even license revocation.

In this case, the CBUAE's instant and significant action sends a clear message to all financial institutions operating within the UAE: adherence to AML/CFT regulations is non-negotiable.

Furthermore, the decree-law empowers the Central Bank to establish an independent Financial Intelligence Unit (FIU) responsible for receiving suspicious transaction reports and related information from all relevant entities. The FIU is pivotal in examining, analysing, and referring these reports to competent authorities. It also facilitates information exchange with international counterparts and establishes databases to track and assess the effectiveness of AML/CFT measures./p>

Additionally, the Public Prosecution may seek the opinion of the FIU on money laundering, terrorism financing, and illegal organization-related reports. Law enforcement authorities are tasked with receiving and following up on suspicious transaction reports, gathering evidence, and obtaining necessary information from relevant authorities.

By enforcing adherence to AML/CFT regulations, the UAE aims to safeguard its financial system's integrity and stability. It also aims to bolster investor confidence and protect the interests of all stakeholders. Compliance with regulatory requirements is not only a legal obligation but also a cornerstone of maintaining the UAE's reputation as a trusted global financial hub.

In light of this development, all financial institutions, including insurance companies, are strongly encouraged to review and enhance their AML/CFT policies and procedures. Proactive measures must be taken to address any deficiencies and implement robust risk mitigation strategies.

Conclusion:

It is important for all entities operating in the UAE's financial sector to remain vigilant and proactive in their efforts to combat financial crimes. Non-compliance with AML/CFT regulations not only exposes companies to significant financial penalties but also undermines the integrity and reputation of the UAE's financial system as a whole. Therefore, strict adherence to regulatory requirements is paramount to maintaining the UAE's position as a global financial hub built on principles of transparency, accountability, and integrity.

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Author

Dr. Hassan Elhais, legal consultant in Dubai along with his team of legal consultants and prominent local lawyers across the UAE, has made a name for himself as a renowned specialist in the fields of civil law, construction law, banking law, criminal law, family law, inheritance law, company incorporation, and arbitration.