2. Overview of the AML/CFT Legal, Regulatory, and National Strategy Frameworks of the United Arab Emirates
2.1 National Legislative and Regulatory Framework
The legal and regulatory structure of the UAE is comprised of a matrix of federal civil, commercial and criminal laws and regulations, together with the various regulatory and Supervisory Authorities responsible for their implementation and enforcement, and various local civil and commercial legislative and regulatory frameworks in the Financial and Commercial Free Zones. As criminal legislation is under federal jurisdiction throughout the State, including the Financial and Commercial Free Zones, the crimes of money laundering, the financing of terrorism, and the financing of illegal organisations are covered under federal criminal statutes and the federal penal code. Likewise, federal legislation and implementing regulations on the combating of these crimes are in force throughout the UAE, including the Financial and Commercial Free Zones. Their implementation and enforcement are the responsibility of the relevant regulatory and Supervisory Authorities in either the federal or local jurisdictions.
The principal AML/CFT legislation within the State is Federal Decree-Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations (the “AML-CFT Law” or “the Law”) and implementing regulation, 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 (the “AML-CFT Decision” or “the Cabinet Decision”).
The UAE issued Cabinet UBO Resolution No. 58 of 2020 on the Regulation of the Procedures of the Real Beneficiary (UBO Resolution) which came into effect on 28 August 2020 and replaced Cabinet Resolution No. 34 of 2020 issued earlier this year.
The UBO Resolution introduces the requirement for a beneficial ownership register in the UAE mainland and unifies the minimum disclosure requirements for corporate entities incorporated in the UAE mainland and in the non-financial free zones. Financial free zones (Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) and companies owned by the Federal Government and their subsidiaries are not covered by the UBO Resolution.
2.2 International Legislative and Regulatory Framework
The AML/CFT legislative and regulatory framework of the UAE is part of a larger international AML/CFT legislative and regulatory framework made up of a system of intergovernmental legislative bodies and international and regional regulatory organisations. On the basis of international treaties and conventions in relation to combating money laundering, the financing of terrorism and the prevention and suppression of the proliferation of weapons of mass destruction, intergovernmental legislative bodies create laws at the international level, which participating member countries then transpose into their national counterparts. In parallel, international and regional regulatory organisations develop policies and recommend, assess and monitor the implementation by participating member countries of international regulatory standards in respect of AML/CFT.
Among the major intergovernmental legislative bodies, and international and regional regulatory organisations, with which the government and the Competent Authorities of the State actively collaborate within the sphere of the international AML/CFT framework are:
• The United Nations (UN): The UN is the international organization with the broadest range of membership. Founded in October of 1945, there are currently 191 member states of the UN from throughout the world. The UN actively operates a program to fight money laundering, the Global Programme against Money Laundering (GPML), which is headquartered in Vienna, Austria, is part of the UN Office of Drugs and Crime (UNODC).
• The Financial Action Task Force (FATF): The Financial Action Task Force (FATF) is an intergovernmental body established in 1989, which sets international standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. FATF also monitors the implementation of its standards, the 40 FATF Recommendations and 11 Immediate Outcomes, by its members and members of FSRBs, ensures that the ‘FATF Methodology’ for assessing technical compliance with the FATF Recommendations and the effectiveness of AML/CFT systems is properly applied.
• The Middle East and North Africa Financial Action Task Force (MENAFATF): Recognizing the FATF 40 Recommendations on Combating Money Laundering and the Financing of Terrorism and Proliferation, and the related UN Conventions and UN Security Council Resolutions, as the worldwide-accepted international standards in the fight against money laundering and the financing of terrorism and proliferation, MENAFATF was established in 2004 as a FATF Style Regional Body (FSRB), for the purpose of fostering co-operation and co-ordination between the countries of the MENA region in establishing an effective system of compliance with those standards. The UAE is one of the founding members of MENAFATF.
• The Egmont Group of Financial Intelligence Units: In 1995, a number of FIUs began working together and formed the Egmont Group of Financial Intelligence Units (Egmont Group) (named for the location of its first meeting at the Egmont-Arenberg Palace in Brussels). The purpose of the group is to provide a forum for FIUs to improve support for each of their national AML/CFT programs and to coordinate AML/CFT initiatives. This support includes expanding and systematizing the exchange of financial intelligence information, improving expertise and capabilities of personnel, and fostering better communication among FIUs through technology, and helping to develop FIUs worldwide.
2.3 AML/CFT National Strategy Framework
Money laundering and the financing of terrorism are crimes that threaten the security, stability and integrity of the global economic and financial system, and of society as a whole. The estimated volume of the proceeds of crime, including the financing of terrorism, that are laundered each year is between 2-5% of global GDP. Yet, by some estimates, the volume of criminal proceeds that are actually seized is in the range of only 2% of the total, while roughly only half of that amount eventually ends up being confiscated by competent judicial authorities. Combating money laundering and the financing of terrorist activities is therefore an urgent priority in the global fight against organised crime.
The UAE is deeply committed to combating money laundering and the financing of terrorism and illegal organisations. To this end, the Competent Authorities have established the appropriate legislative, regulatory and institutional frameworks for the prevention, detection and deterrence of financial crimes, including ML/FT. They also continue to work towards reinforcing the capabilities of the resources committed to these efforts, and towards improving their effectiveness by implementing the internationally accepted AML/CFT standards recommended and promoted by FATF, MENAFATF and the other FSRBs, as well as by the United Nations, the World Bank and the International Monetary Fund (IMF).
As part of these efforts, the Competent Authorities of the UAE have taken a number of substantive actions, including among others:
• Enhancing the federal legislative and regulatory framework, embodied by the introduction of the new AML/CFT Law and Cabinet Decision, which incorporate the FATF standards;
• Conducting the National Risk Assessment (NRA) to identify and assess the ML/FT threats and inherent vulnerabilities to which the country is exposed, as well as to assess its capacity in regard to combating ML/FT at the national level;
• Formulating a National AML/CFT Strategy and Action Plan that incorporate the results of the NRA and which are designed to ensure the effective implementation, supervision, and continuous improvement of a national framework for the combating of ML/FT, as well as to provide the necessary strategic and tactical direction to the country’s public and private sector institutions in this regard.
The National Strategy on Anti-Money Laundering and Countering the Financing of Terrorism of the United Arab Emirates is based on four pillars, each of which is associated with its own strategic priorities. These strategic priorities in turn inform and shape the key initiatives of the country’s National Action Plan on AML/CFT.
The pillars of the National Strategy, together with their strategic priorities are summarised in the table below:
National AML/CFT Strategic Pillars Strategic Priorities Legislative & Regulatory Measures Increase effectiveness and efficiency of legislative and regulatory policies and ensure compliance Transparent Analysis of Intelligence Leverage the use of financial databases and the development of information analysis systems to enhance the transparent analysis and dissemination of financial intelligence information Domestic and International Cooperation & Coordination Promote the efficiency and effectiveness of domestic and international coordination and cooperation with regard to the availability and exchange of information Compliance and Law Enforcement Ensure the effective investigation and prosecution of ML/FT crimes and the timely implementation of TFS The National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organisations has identified a number of key drivers of success in achieving the goals of the National AML/CFT Strategy. These include, among other things, ensuring:
• Effective coordination between the Financial Intelligence Unit, Law Enforcement Authorities, Public Prosecutors, Supervisory Authorities, and other Competent Authorities within the country;
• Effective compliance with the laws and regulations governing banking activities and other financial services;
• Awareness by FIs of the relevant ML/FT risks facing the UAE in general, and their sectors in particular, as informed by the results of the NRA, as well as their awareness of their statutory obligations in regard to the management and mitigation of those risks.
The present Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations Guidelines for Financial Institutions are thus intended to advance the efforts of the Committee, the Supervisory Authorities, and the other Competent Authorities of the State in this direction.