Introduction

In an effort taken by the UAE government to combat money laundering crimes in the UAE, the Ministry of Justice has introduced a set of new measures and guidelines in relation to the Federal Decree-law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations (“AML Law”). These include establishing Special Courts and Committees to investigate and handle money laundering cases in all the Emirates.

However, these measures and guidelines specifically apply only to certain types of businesses that have been listed by the Ministry of Economy and would need to register in the anti-money laundering systems before 31st of March, 2021. The target business/entities include real estate brokers and agents, gold dealers, auditors, accountants, and service providers for companies, referred to as Designated Non-Financial Businesses (“DNFBs”) have been directed to register in the Financial Intelligence Unit (“FIU”) and the Committee for Commodities Subject to Import and Export Control system.

A wide range of non-financial business and activities have been recognized as “most exposed to money laundering risks”. These have been divided into four main categories.

1. Brokers and real estate agents: When entering into operations in the interest of their clients for purchase and sale of real estate.
2. Dealers of precious metals and gemstones: When they perform any single-cash transaction or several seemingly related transactions with a value of AED 55,000.00 or more.
3. Independent auditors and accountants: When they prepare, conduct or implement financial operations for the benefit of their clients, related to the following activities:

• Buying and selling real estate.
• Managing money that the client owns.
• Managing financial, savings or stock accounts.
• Contributing to establishing, operating or managing companies.
• Establishing, operating or managing companies, or legal arrangements.
• Buying and selling commercial entities.

Corporate service providers and trust funds: When they undertake or execute an operation for the benefit of their clients or on their behalf in relation to the following activities:

• Work as an agent in establishing companies.
• Working or preparing someone else to work as a director or company secretary, or as a partner in the company.
• Providing a registered office, business address, place of residence, address for correspondence, administrative address of a legal person, or legal arrangement.
• Act as trustee for a direct trust fund or to perform a similar function for another form of legal arrangement.
• Working or preparing another person to act as a shareholder for another person.

Such businesses were given an extended grace period till March 31, 2021 to register, in order to avoid penalties, which include licence cancellation and closure in accordance with Circular No. 5 of 2021 which was issued on 03/03/2021 by the Ministry of Economy (“MoE”) regarding the requirements to register on the ‘goAML’ system by 31st of March, 2021 (“Circular No. 5”).

This circular was issued in pursuance of the AML Law that creates an obligation on all relevant persons to report suspicious activities directly through its electronic system or by any means approved by the FIU of the UAE Central Bank.

In this context, it may also be noted that, all suspicious transaction reports are to be submitted to the FIU using the ‘goAML’ portal. Registration on the ‘goAML’ portal is mandatory for all relevant persons including DNFBs.

In light of the provisions of Circular No. 5 read with that of the Cabinet Decision No. (3/1) of 2019 and the Cabinet Decision No. (28/4) of 2019, the MoE is the competent authority for all DNFBs (other than Law Firms and DNFBs incorporated in Financial Free Zones). The MoE has previously reminded all DNFBs of the requirement to complete the ‘goAML’ registration, including through the issuance of Circular No.1 of 2021, Circular No. 2 of 2021, Circular No. 3 of 2021 and Circular No. 4 of 2021.

Following the issuance of Circular No. 5, it is clear that DNFBs that have not completed the registration on the ‘goAML’ system are required to immediately rectify their position and complete the registration by no later than 31 March 2021.

PENALTIES FOR VIOLATION

The MoE also underlined the importance of adopting measures to counter money laundering. Failure to do so may result in fines ranging from 50,000 Dirhams to 1 Million Dirhams fine – which can be doubled to as much as 5 Million Dirhams.

The UAE Central Bank has imposed financial sanctions of over 45.75 Million Dirhams on 11 banks for violating anti-money laundering regulations.

The financial sanctions were imposed on January 24, 2021, under Article 14 of the AML Law.

Fines stipulated under AML Law

1 .One Million Dirham Fine

•  Dealing with fake banks.
• Opening or maintaining bank accounts with fake names or numbers without the names of their owners.
• Failure to take measures related to clients listed on international or domestic sanctions lists, prior to establishing or continuing a business relationship.

2 .Two Hundred Thousand Dirham Fine

•  Failure to take enhanced due diligence measures to manage high risks.
• Not notifying the Financial Information Unit of a suspicious transaction report when it is not possible to take due diligence measures towards a client before establishing or continuing a business relationship with him or carrying out a transaction for the benefit of the client or in his name.

3. One Hundred Thousand Dirham Fine

•  Failure to apply due diligence measures towards politically exposed clients before establishing or continuing a business relationship.
•  Not creating records to keep track of financial transactions with clients.

4.Fifty Thousand Dirham Fine

• Failure to take simplified due diligence measures to manage low risk.
• Failure to take due diligence measures of continuous monitoring towards clients during the business relationship.

Further, as a matter of course, the Department of Economic Development in Abu Dhabi with reference to the Cabinet Resolution No. (58) of 2020 regarding the regulation of the true beneficiary procedures (“Resolution”), detail the requirements that the owners and managers of commercial establishments and companies registered and licensed in the UAE should submit the True Beneficiary Declaration form through the DED website.

EXEMPTED ENTITIES

The Resolution applies to all entities licensed in the UAE, excluding the following:

• Entities in financial free zones (Abu Dhabi Global Markets and Dubai International Financial Centre);
• Entities which are directly or indirectly wholly owned by Federal or Emirate government.

In case of violation of the prescribed obligations the authority shall impose different sanctions such as warning, administrative pecuniary penalties, banning the violator from working in the related sector of the violation, constraining the powers or suspending managers, board of directors, supervisory and executive managers who are proven to be responsible for the offence. This may also include suspension or restriction of the activity or the profession and cancelling the license.

To illustrate the above, in a recently decided case brought by the Public Prosecution, the Abu Dhabi Criminal Court exercising its jurisdiction over money laundering and tax evasion offences, sentenced a former Chairman of the Board of Directors and CEO of a government-owned Abu Dhabi company to 15 years in prison for committing money laundering crimes, and for abuse of their power/position in the company resulting in detriment to public funds. The Court further directed them to pay a fine and return about AED 8 billion to the two victim companies. The Court also ordered the seizure of the proceeds of the money laundering crime and the property of equivalent value and sentenced the two accused to pay an amount of AED 501,000.00.

As discernible from the report of the aforementioned case, the investigations conducted by the Public Prosecution in Abu Dhabi into the crime of money laundering after it was discovered in the context of corruption cases in which the first and second accused were involved, revealed that the accused exploited the names of the two victim companies to enter into agreements with companies outside the country, and that was done based on insider trading and breach of confidentiality. This coincided with the conclusion of other parallel and identical agreements with the same foreign companies, but this time with companies in which they cloned the name of the company in which they work, so that the actual transactions took place with the cloned companies thereby benefiting the accused personally, leaving all legal liability on the original company, in order to achieve their basic objective, which was to pour money from the agreements and contracts into their personal bank accounts.

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