Violations of anti-money laundering procedures may amount to Dhs1m: Ministry of Economy

Violators of anti-money laundering or ultimate beneficial owner procedures may lead to administrative fines ranging from Dhs50,000 to Dhs1,000,000, according to the Ministry of Economy (MoE).

This was announced as the ministry held an extensive media briefing on the system for combating money laundering; combating the financing of terrorism; the financing of illegal organisations; and the financing of the proliferation of weapons of mass destruction. The session also briefed attendees on most important international obligations in this regard, laws and decisions related to them, the obligations they place on the public and private sectors, and the Ministry’s and its partners’ efforts in this field.

The event also dealt with the Ministry’s efforts in organising the ultimate beneficial owner procedures and the implementation of the Ministry’s and its partners’ plan to collect data on the ultimate beneficiaries of private sector establishments, in addition to the efforts undertaken in the field of control and inspection, ensuring the implementation of legal requirements and achieving the country’s international obligations in this regard.

Safeya Al Safi, Director of the Anti-Money Laundering Department at the Ministry of Economy; Ahmed Al Hosani, Director of the Commercial Registration and Certificates of Origin Department; and Mohamed Janahi, Head of Money Laundering Control Department at the Ministry of Economy; addressed the media during the briefing session.

"Money laundering and terrorism financing crimes are a major concern that plagues most of the world's economies, especially today with the advent of modern digital technologies in the financial sector, trade and investment activities and doing business. These provide new tools and complex systems for money launderers to commit crimes. Countries around the world are working, in cooperation with the relevant international organizations, to put in place legislation and regulations to ensure that these crimes are tackled in the best possible way, and to monitor their effectiveness," Safeya Al Safi said.

She added that the UAE, under the directives of its wise leadership, is one of the first countries to build an integrated system to counter money laundering and combat the financing of terrorism. Among its most prominent components are the Federal Decree-Law No. 20 of 2018 on countering money laundering crimes, combating the financing of terrorism and financing illegal organizations, and its regulations and executive list and related decisions. Besides, the UAE has developed a number of online systems and institutional and administrative procedures that ensure the implementation of the law and the achievement of oversight in accordance with the best international standards and practices, such as the goAML system and the automatic reporting system for sanctions lists.

She confirmed that the concerned government entities will continue to evaluate the performance of these mechanisms; verify the effectiveness of the country’s procedures and develop them continuously.

Al Safi defined money laundering crime as a group of financial operations aimed at concealing the illicit source of funds and passing them off as funds generated from a legitimate source. She explained that behind every attempted money laundering is a misdemeanor, crime, or a set of crimes that may rise to the level of organized crime, through which criminals obtain these funds and try to pump them back into the official financial system of the respective country through operations designed to conceal its actual source and then legitimize it.

In this regard, she said: "Money laundering is an immoral act linked to crimes that destroy human lives and societies, such as drug trafficking, human smuggling and trafficking in persons, illicit arms trade, child exploitation and other crimes that number 21 crimes according to the classification of the International Financial Action Task Force (FATF), and any support or facilitation of money laundering operations is offering support to crime, drugs, violence and corruption. "

Al Safi explained the negative economic impacts of money laundering operations on the economy. "Money laundering crimes cause low real growth rates, destabilization of the financial and banking system, instability of prices, weakening of vital and productive sectors, and an imbalance in the concentration of wealth and the distribution of national income," she said.

She added: ‘Classifying a country as a high risk destination in terms of money laundering also leads to limiting its access to the global financial system, increasing the cost and time of financial transactions, poor reputation of the economy, and consequently a drop in market competitiveness, a decline in trade and exports, a decrease in foreign investment, the withdrawal of private establishments and global financial institutions from the market and an increase in the burden on individuals and financial initiations, commercial and investment dealings with abroad, and it may lead to sanctions and financial and economic crises. "

Al Safi emphasized the importance of cooperating with government efforts to confront money laundering as it is a national responsibility, an ethical action, a legal requirement, an economic necessity, and an interest in protecting businesses and investments and contributing to their growth and prosperity.

She explained that the approach adopted by the UAE government in this regard is to firmly address money laundering and terrorism financing crimes, in order to preserve the positive reputation of the national economy globally. It also ensures the strengthening of the UAE’s role as a leading player in the global economic landscape, and the consolidation of its position as a competitive economic hub that follows the highest standards of integrity and transparency in the field of financial and commercial control and confronting unsound practices in business activities.

Al Safi reviewed MoE’s efforts in this regard, based on the Ministry’s responsibility in the oversight of Designated Non-Financial Businesses and Professions or the DNFBPs sector within the country and in the free zones, which includes: brokers and real estate agents, dealers of precious metals and gemstones, account auditors, and companies' service providers. These activities are of a high-risk nature and are usually resorted to by money launderers to conduct their suspicious operations.

She further explained that the Ministry seeks to enhance understanding and raise awareness among the establishments of this sector on the dangers of money laundering, their methods and means of protection against it. "We also seek to raise awareness on the importance of cooperation with government oversight in this context to protect establishments' investments and business, as well as the need to comply with laws and implement the requirements of relevant legislation and decisions," she added.

"A national team has been formed by the Ministry and its partners to implement action plans to raise awareness, whether through the media, through direct communication channels, or by issuing evidence, holding workshops and providing information that underlines the measures that establishments must take to comply with the requirements of the law. It is available on the Ministry’s website and social media platforms," Al Safi said.

"As you may have followed during the last period, our awareness raising efforts have previously focused on registering the targeted establishments in the FIU system. As a result, more than 13,000 establishments have registered so far, with a compliance rate of 70 per cent of the registration requirement. We call on the establishments included in the Information Unit System to actively use this leading digital platform to file Suspicious Transaction Reports (STRs) and Suspicious Activity Reports (SARs), in order to enhance the ability of the regulatory authorities to analyze and evaluate risks and take the necessary actions and measures accordingly," she added.

She also urged the establishments that have not yet registered in the system to register as soon as possible and submit reports of suspicious transactions and activities through the system to avoid fines of up to Dhs 5 million or suspension of the license or even the closure of the establishment itself.

‘Our awareness-raising efforts included encouraging Designated Non-Financial Businesses and Professions to register with the Automatic Reporting System for Sanctions Lists, which will enable these establishments to receive updated information on the local and international sanctions lists of the Security Council and to take necessary measures of preventing crime associated with terrorism financing," Al Safi added.

"The Ministry of Economy is committed to raising awareness on the dangers of money laundering, and enhancing your knowledge of the tools, methods, and mechanisms of money laundering and terrorism financing crimes. Know your clients, and protect your investments by complying with legal requirements in this regard. Improve your internal systems to enhance your ability to identify sources of money laundering and monitor and report suspicious transactions. Registration in anti-money laundering systems is a major and mandatory action, but it is only the first step, to be followed by many other essential steps. The most important of these is actually using these systems for reporting, taking customer due diligence measures, and providing the ultimate beneficial owner data. It is important to communicate continuously with government entities and follow their directions. The Ministry of Economy welcomes any inquiries you may have regarding the anti-money laundering system. Let us be careful not to be the instruments through which criminals achieve their goals and let us work together to protect our national economy, enhance its stability and competitiveness, increase global confidence in it, and ensure its true growth that reflects on the prosperity of society and the UAE’s sustainable development." Al Safi concluded.

While addressing the media, Ahmed Al Hosani, emphasized that ultimate beneficial owner procedures are key elements in the UAE’s approach to curb money laundering and financing of terrorism and illegal organizations and financing the spread of weapons of mass destruction, in line with the Financial Action Task Force’s requirements and the National AML strategy’s determinants. These will support the achievements of the objectives of Federal Decree Law No. 20 of 2018 on Anti-Money Laundering and Countering Financing of Terrorism and Financing of Illegal Organizations, and in line with the Cabinet Resolution No. 58 of 2020 regulating the ultimate beneficial owner procedures.

Al Hosani explained that collection of private sector establishments’ ultimate beneficial owner data contributes to the development of governance and disclosure/ reporting systems in the UAE’s business environment, thereby offering increased protection against financial crimes, money laundering and commercial fraud. This move will enhance confidence in our national economy’s transparency and resilience in accordance with international standards.

Al Hosani added that the campaign that the Ministry launched last week in cooperation with its partners, included an awareness campaign dedicated to raising awareness among private sector establishments about the importance of submitting ultimate beneficial owner data to the licensing authorities as a mandatory legal requirement that must be complied with, to avoid penalties and fines.

He pointed out the resolution on ultimate beneficial owner procedures targeting all establishments licensed and registered in the UAE, including those licensed by the local licensing authorities and the non-financial free zones, excluding the establishments owned by, or affiliated with, the federal government or local governments, and the establishments listed in financial free zones, namely: Abu Dhabi Global Market and Dubai International Financial Center. The total number of targeted establishments across the UAE is approximately 513,000, regulated by 38 licensing authorities.
Deadline for submission of ultimate beneficial owner data to end on June 30; detection of violations from July 1.

"This campaign will continue till the end of June 2021 as part of our efforts to raise more awareness in this regard. Following this, starting from July 1, 2021, the penalties stipulated in the Cabinet Resolution No. 53 of 2021 on the Administrative Penalties Against Violating ultimate beneficial owner procedures will come into effect. These include the issuance of written warnings up to imposing Dhs 100,000 in fines in the event of recurrence and continued noncompliance, along with additional administrative penalties, including, among others, license suspension for one year, and restrictions on board of directors’ authority," Al Hosani said.

Private sector establishments can submit ultimate beneficial owner data in 3 simple steps:

Step 1: Creating a register of their ultimate beneficial owner data and maintaining the same within their documents, so that this register is treated like the memorandum of association, internal regulations and the rest of the main documents of the establishment. Accordingly, the aforementioned register shall be exhibited upon the request of concerned entities and individuals. In this respect, licensing authorities have provided forms stating all the details and information to be listed in the Ultimate Beneficial Owner Register, and these forms are available on the concerned authorities’ official websites as well.

Step 2: Submission of an undertaking to create the registry and ensure the accuracy of its data to the licensing authority to which each establishment is answerable to. This step gives the opportunity for establishments with complex structures to start the procedures for determining their ultimate beneficial owner and keep them in the addresses registered with the licensing authority and submit their data to the competent authorities. This undertaking is submitted online through the official websites of the respective licensing authority.

Step 3: Entering the ultimate beneficial owner data in the systems of licensing authorities through dedicated web pages on their official websites. Therefore, every establishment should constantly check the official website of its licensing authority and communicate with it in this regard as soon as possible, to avoid penalties.

Al Hosani explained that the Cabinet Resolution No. 58 of 2020 defines an ultimate beneficial owner as "the natural person who owns or controls the establishment definitively, through direct or indirect ownership shares of 25 per cent or more of the firm's capital, or someone who holds the right to vote by 25 per cent or more; or to appoint and dismiss the majority of the establishment’s managers; or any other means by which he exercises ultimate control over the establishment; or a natural person holding the position of a senior management official.

Al Hosani explained that the ultimate beneficial owner procedure has been designed to make this easier and without imposing any burden on the private sector establishments. It will be connected and inducted within the databases of the National Economic Register and made available to the concerned authorities when needed. He pointed that this step is necessary to achieve effective disclosure of the ultimate and politically exposed beneficiaries, and the disclosure of the complex structures related to the ownership chain and the ultimate benefactors of the licensed establishments in the country. This in turn will raise the level of transparency in the economic environment and meet the country’s obligations towards relevant international organizations, such as the Financial Action Task Force (FATF).

"Ultimate beneficial owner database of the establishments will be dealt with by government entities in accordance with the highest levels of confidentiality. It will not be used for any commercial purposes, and even the employees of these government entities do not have free access to this data except in cases of investigation and the required disclosure to specific official entities, according to strict internal policies and regulations," Al Hosani confirmed.

Al Hosani called on targeted establishments to cooperate with government entities and licensing authorities in providing the ultimate beneficial owner data in accordance with the steps mentioned above, and to follow up with the authorities in this regard. In case of any change or amendment to the ultimate beneficial owner information, the relevant licensing authority must be notified within 15 days of that change or amendment. Establishments are required to appoint a person residing in the country as a point of contact, so the licensing authority can communicate with him or her regarding the ultimate beneficial owner data and the basic information regarding the company.

"These establishments should take adequate steps to ensure transparency, obtain accurate information regarding the ultimate beneficiaries, and update the information in the records on an ongoing basis. Also, the Ministry of Economy will continue the awareness raising efforts through workshops in cooperation with its partners and provide support and guidelines that can help establishments achieve the highest levels of compliance ," he concluded.

During his speech, Mohamed Janahi highlighted that the monitoring efforts being exerted by the Ministry have recently been stepped up through the development of an administrative unit specialized in monitoring has been set up within the Money Laundering Department at the Ministry of Economy. The unit is concerned with inspection and control of the designated non-financial business and professions or DNFBPs, which include real estate agents and brokers, dealers of precious metals and gemstones, auditors, and corporate service providers.

"Last April, the Ministry of Economy launched its supervisory and monitoring plan to combat money laundering, and an inspection and control team was formed in cooperation with some expert government entities with experience and in accordance with best practices. Work is underway to implement this plan on an ongoing basis, targeting the four sectors included in the designated non-financial business and profession category," he added.

Janahi also said that an inspection plan for June 2021 has been prepared to cover 425 establishments across the UAE through more than 100 inspectors. The results of the control and inspection plan will be continuously evaluated and reviewed in line with the evolving nature of risks.

Janahi clarified that the Ministry’s supervisory and monitoring plan focuses on a set of main elements. The inspections will focus on these elements, most notably on conducting a comprehensive assessment of the risks an establishment is prone to, through inspections of offices and field visits to their headquarters. Furthermore, it also focuses on conducting studies targeting a sample of the concerned establishments to examine their compliance and implementation of a set of key measures concerning anti-money laundering. He pointed that the comprehensive assessment of the establishment’s risks, the Ministry follows a risk-based approach to determine the establishments targeted for evaluation, so that establishments whose nature of work have a high risk of money laundering are selected. The comprehensive assessment includes:

First, providing support and guidance to enterprises belonging to the Designated Non-Financial Businesses and Professions (DNFBP) sector in a way that reduces the risks they face and reduces their classification to low risks.
Second, a detailed examination of the establishment's systems, policies, and procedures for Anti-Money Laundering and assessing their suitability and quality of implementation. The objective of these systems, policies, and procedures is to reduce the risks inherent in the establishment's activities.

Third, an assessment of other risks after setting Anti-Money Laundering regulations, policies, and procedures, as this evaluation will feed the Ministry's supervisory plan on that establishment in the long term.

Furthermore, Janahi urged the targeted establishments to ensure that a set of basic requirements are applied, the most prominent of which are 5 procedures:
1.Registration in the Anti-Money Laundering and Combating the Financing of Terrorism systems 1) The Financial Information Unit system 2) the automated reporting system for sanctions lists. In addition, they must report suspicious transactions or activities using the goAML platform. It is also important to establish a list of indicators that enhance the awareness of the employees of these establishments.

2. Appointing a qualified and appropriate compliance officer.

3. Ensure that the establishment conducts an internal study of its money laundering risks. This study requires identifying, assessing, and understanding money laundering risks and takes into consideration the following aspects:

The business of the establishment.

Type of clients (politically exposed clients, high-income clients, corporate).

Countries and regions with which the establishment deals.

The financial and operational volume of the business of the establishment.

Channels for providing a service or product.

4. Taking due diligence measures against clients through:

Gathering complete KYC information, which include ultimate beneficial owner information.

Identifying risk rating for all its clients (example: high, medium or low).

Conducting the appropriate level of ‘Customer Due Diligence’ measures based on the identified risk rating, including:

Simplified due diligence for low-risk customers.

Regular due diligence for medium risk clients.

Enhanced due diligence for high-risk clients.

Conducting ongoing due diligence measures against clients over time periods based on client risk rating.

5. Providing appropriate training for the concerned employees in meeting the general requirements of Anti-Money Laundering procedures, considering the nature of the establishment’s business activities.

He added that all the measures and procedures required of establishments in this regard are explained in the executive regulations of the law, which are available on the official website of the Ministry of Economy. They have also been explained and clarified in the manuals and workshops issued and conducted by the Ministry. The Ministry welcomes any inquiries or clarifications by the DNFBPs regarding these legal requirements and international obligations.

Janahi concluded with a review of the violations of Anti-Money Laundering or ultimate beneficial owner procedures may lead to administrative fines ranging from Dhs50,000 to Dhs1,000,000.

The criminal violations of Anti-Money Laundering legislation could even lead to court sentences or imprisonment and/or administrative fines ranging from Dhs50,000 to Dhs5,000,000, in extreme cases, he concluded.

WAM