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The UAE has demonstrated strong commitment to combating money laundering, terrorist financing and financing of illegal organizations. This effort is strengthened by Federal Decree Law No. 20/2018 and its amendments, which criminalize money laundering and address a wide range of issues related to illicit financial activities.
To effectively implement this Decree-Law, Cabinet Decision No. 10/2019 and its amendments were enacted, providing a comprehensive framework for enforcement and regulation. This comprehensive legal framework has a significant impact on the UAE’s financial sector and strengthens its position as a responsible player in the global fight against financial crime.
Understanding money laundering under the law:
Federal Decree Law No. 20/2018 comprehensively defines money laundering in the UAE and covers various aspects.
Transfer or Transfer of Proceeds: An individual who knowingly transfers or transfers illegal funds with the intention of concealing the source of the illegal funds is considered to be involved in money laundering.
Concealing or disguising the nature, source, or location of money: Money laundering involves concealing or altering the nature, source, or location of illicit funds and the manner in which their nature, movement, ownership, or rights are involved. Includes acts performed in
Obtaining, Possession, or Use of Proceeds: A person who obtains, possesses, or uses funds known as the proceeds of a felony or misdemeanor launders money.
Assisting the perpetrator of the predicate crime: Money laundering also extends to assisting the individual who committed the original criminal act to avoid punishment.
The term “proceeds” in the UAE’s Anti-Money Laundering Law (AML) is defined as “funds arising directly or indirectly from the commission of any crime or felony.” This includes not only profits but also privileges, economic benefits and other similar funds arising from criminal activity.
Impact on UAE financial sector:
The impact of these legislative measures on the UAE’s financial sector is significant, ushering in a new era of transparency, compliance and due diligence. Below, we consider key aspects of this initiative and its impact on the UAE’s financial position.
Strong regulatory framework: Federal Decree Law No. 20/2018 established a solid legal foundation for anti-money laundering (AML) and counter-terrorist financing (CTF) efforts. Requires financial institutions and designated non-financial businesses and professionals (DNFBPs) to implement strict AML and CTF measures.
Risk-based approach: The UAE’s AML administration follows a risk-based approach. Financial institutions must identify, assess, and mitigate risks related to money laundering and terrorist financing. This approach increases the effectiveness of AML/CFT protection by ensuring that resources are allocated proportionately to the level of risk.
Enhanced due diligence: The UAE regulatory framework requires enhanced due diligence and know-your-customer (KYC) measures for high-risk customers, businesses and transactions. This includes disclosure of beneficial ownership and verification of funding sources. These stringent requirements strengthen the financial sector’s resilience against illicit financial flows.
Reporting and Compliance: Financial institutions are required to report suspicious transactions to the UAE Financial Intelligence Unit (FIU). This facilitates proactive detection and prevention of money laundering and terrorist financing activities. Failure to comply with AML/CFT obligations can result in significant fines.
International cooperation: The UAE’s commitment to AML/CFT compliance extends beyond its borders. The country is actively collaborating with international partners, and this collaboration will strengthen global efforts to combat financial crime.
Fostering financial innovation: Regulations are strict, but they also foster financial innovation. The UAE has balanced innovation and security while embracing fintech and virtual assets, ensuring these emerging sectors are subject to AML/CFT compliance.
Continuous improvement: The UAE’s AML/CFT compliance efforts are a dynamic process. Regulators regularly update guidelines and directives to address evolving risks and international best practices. This commitment to continuous improvement allows the financial sector to remain vigilant and adaptable.
In conclusion, the UAE’s commitment to anti-money laundering and anti-terrorist financing compliance, as enshrined in Federal Decree No. 20/2018 and Cabinet Decision No. 10/2019, will have a transformative impact on the financial sector. It has had an impact.
This initiative will not only protect the integrity of the UAE’s financial system, but also strengthen its position as a responsible global player in the fight against money laundering and terrorist financing.
