New Standards To Follow Under AML Laws

Posted by Awatif Mohammad Shoqi Advocates & Legal Consultancy on June 20th, 2021

Early this year, Securities Commodities Authority (SCA) issued recommendations proclaimed rules for budgetary establishments regarding Anti-Money Laundering & Combating the Financing of Terrorism and Illegal Organizations (the AML Guidelines).

The AML Guidelines, coming about because of a joint exertion among the supervisory experts of the UAE, set out the base desires for the supervisory specialists with respect to the elements that ought to be mulled over by monetary establishments while recognizing, surveying, and moderating the dangers of tax evasion, financing of fear-mongering, and financing of unlawful associations. The fall of 2018 witnessed several amendments in the law and regulations of UAE wherein Federal Decree-law Number 20 of 2018 regarding Anti Money Laundering and Combatting Financial Terrorism and Illegal Organizations (the Anti-Money Laundering Law) was one of those several amendments in the Laws of UAE.

Legislation Outline

The first and the foremost feature of the Anti-Money Laundering Law is the provisions of Financial Action Task Force (FATF), an authority or a task force entrusted with the responsibility of overseeing the activities of financial terrorism and money laundering. The second most crucial feature of the Law is its adaption of international Anti-Money Laundering Laws. It is evident from the new provisions, that the lawmaker had certainly adapted important principles of international laws in such aspect to make this law more internationally viable and acceptable. Other noteworthy features and objectives of Anti-Money Laundering Law are as follows:

  • The Law gives more investigative and analytical powers in order to use financial intelligence. This allows for controlled transactions, wherein the regulatory authorities allowed to permit criminal transactions to continue so as to follow their stream and recognize their network The change is from merely gathering information to proactively utilizing the data in a more fundamental headway for implementation of the Law.
  • The fines imposed by the Law is quite significant as compared to the previous laws which will set as a strong deterrent amongst the society, as the Law now impose a fine of a maximum of AED 50,000,000 (UAE Dirhams fifty million) and mandatory liquidation of the illegal organization.
  • Immense authority for the Public Prosecution to lead their examination. In particular, this includes, however isn’t constrained to, authorization for the Public Prosecution to get and explore outsider information and records through mandatory cooperation with companies or business or institutions.
  • The law further criminalizes any activity which is against the United Nations Security Council Resolution of UN Charter for Economic Sanctions and Terrorism, which is a clear example of its international viability.
  • The Law further authorize the authorities to cease any suspected funds coming within or going outside the country. The authorities along with Central Bank of UAE will take action against all suspected criminal transactions to minimize the risk of money laundering activities.

Post issuance of the Anti-money Laundering Law, the government of UAE issued implementing regulations in 2019 vide Cabinet Resolution number 10 of 2019, which clarified the provisions of Anti-Money Laundering law and for adequate implementation of the law. In furtherance, Securities Commodities Authority (SCA) of UAE issued further guidelines on Anti-Money Laundering for financial institutions registered within the country, in line with provisions of the Anti-Money Laundering law. These Guidelines are a constant effort of FATF, SCA and other regulatory authorities responsible for overseeing the activities of money-laundering. These guidelines explicitly lay down the pre-requisites for the financial institutions through which they can identify, asses and mitigate the risks of money-laundering in the country and avoid cases of financial terrorism and financing of illegal organizations. The AML Guidelines don’t comprise a part of the Anti-Money Laundering Law or any other enactment. SCA issued these Guidelines to read along with the Anti-Money Laundering Law and its Implementing Regulations and other similar laws or regulations issued by any Free Zone Authority. The AML Guidelines are not a swap or substitution for any current legitimate requirements or statutory commitments. Importantly, it has been very-well clarified that in case of any irregularity between AML Guidelines and the Anti-Money Laundering Law, the Law shall prevail.

Applicability of AML Guidelines

Basically, these Guidelines apply to all financial institutions registered within the country, wither mainland or free zone including their directors, managers and all sorts of employees who are directly dealing with clients or customers engaging in financial activities or transactions. Critically, these Guidelines are for banks, financial institutions, money exchanges, insurance companies, agencies, brokers, Securities and commodities brokers, investment managers, advisors or other financial companies not mentioned herein.

As defined under the Guidelines, a financial institution can be any natural or legal person conducting one or more financial activities for or on behalf of their clients. Wherein, the term business is defined as an ongoing commercial relationship between financial institutions or designated non-financial businesses & professions (DNFBP) and their clients for financial activities.

Nexus between AML Guidelines with other Guidelines

The AML Guidelines address a few irregularities that may emerge from the lawful and administrative system at present set up, from previous laws or guidelines, or from differences in administrative requirements of various supervising authorities. The AML Guidelines suggest, notwithstanding, that for any unaddressed inconsistencies between supervisory specialists, financial foundations should contact their significant regulatory authority.

It is more likely that with the issuance of these Guidelines, other supervisory authorities will now issue guidelines in such regards and to be in line with current regulations of SCA. In the middle of last year, the Ministry of Justice issued several regulations for making AML initiative effective in the court by taking the following initiatives:

  1. A new section especially for AML and ATF was established;
  2. New procedures regarding AML was issued for lawyers and legal professionals;
  3. A new committee was set up for dealing with seized and confiscated funds from such cases;
  4. Laid down procedures for sharing the funds from financial terrorism for having international judicial cooperation.

Although these Guidelines are not binding on the Financial Institutions, yet it issues guidance for other supervisory authorities and helps understanding the Anti-Money Laundering Law and it’s implementing Regulations. It further guides all the institutions and authorities to assess and identify all suspected or fraudulent transactions happening in the country and to take relevant steps to prevent happening of such an event.


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Awatif Mohammad Shoqi Advocates & Legal Consultancy

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Awatif Mohammad Shoqi Advocates & Legal Consultancy
Joined: February 3rd, 2021
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