Companies and financial institutions operating in the UAE should be aware of anti-money laundering. Money laundering and terror financing can result in companies facing strict legal action under the relevant UAE law. Illegal money movements usually happen through phishing, online account takeovers, malicious malware, or other mediums which benefit the unlawful economy and shatter the formal economy, financial and security aspects of a country.
What is Money Laundering?
Money laundering can be considered a process of concealing the actual origins of money generated from criminal activity by transferring it through multiple bank transfers and other commercial transactions to make it originate from a legitimate source. Thus, the funds generated from any illegal activity are always considered dirty and unaccountable, and the process launders the dirty money to make it look clean and accountable.
Criminals generally use a variety of techniques to clean the dirty money. In recent times, fraudsters have used modern online banking and cryptocurrencies to transfer money between accounts and withdraw without any detection. Countries worldwide have implemented many measures to prevent money laundering.
Anti-Money Laundering (AML) is a set of policies and regulations implemented by country Governments to prevent money laundering. Customers always trust those companies which have a robust anti-money laundering policy. Therefore, if AML compliance is achieved, there are higher chances of customers staying faithful. Therefore, AML compliance for the business is vital to ensure brand reputation, business strategy, and profitability.
Anti-Money Laundering Policies in the UAE
Governments worldwide have increased their efforts to combat money laundering practices in recent times by adopting regulations that require financial institutions to employ systems to detect and report possible suspicious activity proactively. International institutions have put in place AML policies for all international financial transactions, and the respective national regulators of every country have adopted a separate AML policy.
In the UAE, the banks and financial institutions must develop specific internal procedures and use indicators that help identify suspicious transactions and report them immediately to the UAE central bank's Financial Intelligence Unit. All banks must regularly screen their respective databases and transactions against possible names on blocklists issued by the respective United Nations Security Council or by the UAE Federal government before entering into any deals with applicants. In addition, the financial institutions must follow the policies of customer due diligence, screening the clients to identify politically exposed person status and against international sanctions lists. At the same time, the banks shall appoint an internal compliance officer in the role of Money Laundering Reporting Officer (MLRO) with the necessary expertise and authority to deal with the money laundering activities.
Best Anti-Money Laundering Practices for Companies
The below are some of the best AML practices that companies can adopt to adhere to AML compliance and prevent money laundering:
Clear Policies on Anti-Money Laundering
With the help of experts, companies must draft strict policies to counter the money-laundering menace in the organization. The AML policies must be regularly updated based on the changes in the national and global regulations. Ensure all the company staff, executives and regulators are aware and clear of the company AML policy. The AML policy should clearly state the company's identification policies, record creation & retention policies, and corresponding communication procedures of the company.
All company employees dealing with the customers and transactions should be well-versed in your organization’s AML Compliance policies. The employees must also be aware of the Modus Operandi of the money launderers and possible risk mitigation steps. In the UAE, companies must educate their staff on required AML compliance as per the law failing, which will attract a hefty fine of AED 50,000.
Compliance with Government AML Regulations
The Federal government regularly announces new requirements for companies to ensure AML compliance on all transactions. All companies must be updated with all notifications and adapt their policies to ensure compliance without fail.
Periodic Review of AML Policies
Companies must periodically conduct a review of current AML policies to detect business risks that may occur in the business transactions with products and services, clients, and factors like the geographical region of the transaction. In such money laundering cases, it may be late to rescue the business from hefty penalties before the loophole in the system is detected. Therefore, the company must carry out regular Due Diligence for all parties, including customers, consultants, and company associates, to ensure the legitimacy of the money involved and the risks involved in the transaction.
Hiring risk consultants can help the company with end-to-end AML compliance requirements. The consultants can further support the customer onboarding process, complete KYC compliance, define and design an AML framework, and monitor the AML process.
Beware of Money-Laundering Red Flags
The company staff should be trained to identify the cases considered red flags about AML compliance. The activities involve any large money transactions, any suspicion on identity credentials provided by customers, transactions linked to high-risk activities like gambling, jurisdictions with money laundering history, and individuals who could be with possible money launderers.
Jaxa Chartered Accountants are one of the pioneer accounting and auditing companies in the UAE. We serve clients with all matters regarding bookkeeping, accounting, auditing, and payroll processing in the UAE. In addition, our expert consultants assist companies in adhering to Anti-money laundering policies in the UAE and help them formulate and update the guidelines. Please Contact Us with any questions regarding AML compliance. We'd be delighted to help!