1. Introduction
1.1. Purpose
Article 44.11 of the Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations charges Supervisory Authorities with “providing Financial Institutions…with guidelines and feedback to enhance the effectiveness of implementation of the Crime-combatting measures.”
The purpose of this Guidance is to assist the understanding and effective performance by the United Arab Emirates Central Bank’s (“CBUAE”) Licensed Exchange Houses (“LEH”) of their statutory obligations under the legal and regulatory framework in force in the UAE. It should be read in conjunction with the Chapter 16 of the Standards for the Regulations Regarding Licensing and Monitoring for Exchange Business, Version 1.20 of November 2021 amending Version 1.10 of February 2018 (issued by Notice No. xx/2021 dated xx/xx/2021), the CBUAE's Procedures for Anti-Money Laundering and Combating the Financing of Terrorism and Illicit Organizations (issued by Notice No. 74/2019 dated 19/06/2019) and Guidelines on Anti-Money Laundering and Combating the Financing of Terrorism and Illicit Organizations for Financial Institutions (issued by Notice 79/2019 dated 27/06/2019) and any amendments or updates thereof.1 As such, while this Guidance neither constitutes additional legislation or regulation nor replaces or supersedes any legal or regulatory requirements or statutory obligations, it sets out the expectations of the CBUAE for LEH to be able to demonstrate compliance with these requirements. In the event of a discrepancy between this Guidance and the legal or regulatory frameworks currently in force, the latter will prevail. This Guidance may be supplemented with additional separate guidance materials, such as outreach sessions and thematic reviews conducted by the Central Bank.
Furthermore, this Guidance takes into account standards and guidance issued by the Financial Action Task Force (“FATF”), industry best practices and red flag indicators. These are not exhaustive and do not set limitations on the measures to be taken by LEH in order to meet their statutory obligations under the legal and regulatory framework currently in force. As such, LEH should perform their own assessments of the manner in which they should meet their statutory obligations.
This Guidance comes into effect immediately upon its issuance by the CBUAE with LEH expected to demonstrate compliance with its requirements within one month from its coming into effect.
1Available at https://www.centralbank.ae/en/cbuae-amlcft.
1.2. Applicability
Unless otherwise noted, this Guidance applies to all Exchange Houses that are licensed and supervised by the CBUAE.
1.3. Legal Basis
This Guidance builds upon the provisions of the following laws and regulations:
• Federal Decree Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations (“AML-CFT Law)” and its amendment (Federal Decree Law No. (26) of 2021 amending certain provisions of Federal Decree Law No. 20 for 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations). • Cabinet Decision No. (10) of 2019 concerning the Implementing Regulation of Federal Decree Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations (“AML-CFT Decision”). • Cabinet Decision No. (74) of 2020 Regarding Terrorism Lists Regulation and Implementation of United Nations Security Council (UNSC) Resolutions on the Suppression and Combating of Terrorism, Terrorist Financing, Countering the Proliferation of Weapons of Mass Destruction and its Financing and Relevant Resolution (“Cabinet Decision 74”). • CBUAE Regulations regarding Licensing and Monitoring of Exchange Business issued in January 2014 (“the Regulations”) issued by Notice 1/2014 dated 06/01/2014 and its amendment issued by Notice 269/2016 on 25/08/2016.
• Chapter 16 on AML/CFT Compliance of the Standards for the Regulations Regarding Licensing and Monitoring of Exchange Business, Version 1.20 of November 2021 amending Version 1.10 of February 2018 (“The Standards”).
Furthermore, LEH may be guided by the FATF standards on AML/CFT, Guidance for a Risk Based Approach for Money or Value Transfer Services, and Report on Money Laundering through Money Remittance and Currency Exchange Providers2.
2 FATF: Guidance-RBA-money-value-transfer-services.pdf (fatf-gafi.org); and Money laundering through money remittance and currency exchange providers (fatf-gafi.org)
1.4. Definitions
Beneficial Owner: The ‘Natural Person’ who ultimately owns or exercises effective control, directly or indirectly, over a customer or the natural person on whose behalf a transaction is being conducted, or the natural person who exercises effective ultimate control over a legal person or legal arrangement.
Exchange Business: Shall mean: (1) Dealing in sale and purchase of foreign currencies and travelers cheques; (2) Executing remittance operations in local and foreign currencies; (3) Payment of wages through establishing a link to the operating system of “wages protection system” (WPS); and (4) Other business licensed by the CBUAE.
Exchange House: A juridical person licensed in accordance with the provisions of Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities to carry on money exchange activity, and conduct funds transfers within and outside the UAE, and any other businesses determined by the CBUAE.
Politically Exposed Person (PEP): natural persons who are or have been entrusted with a prominent public function in the UAE or any other foreign country such as heads of states or governments, senior politicians, senior government officials, judicial or military officials, senior executive managers of state-owned corporations, and senior officials of political parties, and persons who are, or have previously been, entrusted with the management of an international organization or any prominent function within such an organization; and the definition also includes the following:
1. Direct family members (of the PEP who are spouses, children, spouses of children, parents) 2. Associates known to be close to the PEP, which include: (a) Individuals having joint ownership rights in a legal person or arrangement or any other close business relationship with the PEP; (b) Individuals having individual ownership rights in a legal person or arrangement established in favor of the PEP.
Instant Money Transfer Service Provider: A money remitting institution licensed and regulated by an appropriate Regulator in its home country who will have the necessary proprietary software applications and infrastructure to transfer funds instantly from an agent in one country to an agent in another country and/or domestically.
Legal person: Any entities other than natural persons that can establish in their own right a permanent customer relationship with a financial institution or otherwise own property. This can include companies, bodies corporate, foundations, partnerships, or associations, along with similar entities.
Legal arrangement: A relationship established by means of a contract between two or more parties which does not result in the creation of a legal personality. Examples include trusts or other similar arrangements. Many legal arrangements allow for ownership, control, and enjoyment of funds to be divided between at least two different persons.
Licensed Exchange House (LEH): An Exchange House licensed by the CBUAE.
Source of funds: How the money, involved in the transaction, was originally derived or earned. Examples of source of funds are: salary, wages, inheritance, gratuity, end of service benefits, bank loan, income from businesses, sale of property, sale of land, sale of investments, etc. For verification of the source of funds, documents include but are not limited to salary slip, labor contract, court order, bank statements, etc.