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Central Bank & Organization of Financial Institutions and Activities Law
Fed Law 14/2018 Effective from 31/10/2018This law has been amended by The Decretal Federal Law No. (1) of 2020, Decretal Federal law No. (25) of 2020, Decretal Federal law No. (2) of 2021, Decretal Federal Law No. (9) of 2021, Decretal Federal Law (23) of 2022 and Decretal Federal Law (54) of 2023 respectively. You are viewing the latest version. Please find the PDFs of previous versions on the table below.Version 6 (consolidated as of 02/01/2023) pdf download Version 5 (consolidated as of 26/07/2021) pdf download Version 4 (consolidated as of 08/03/2021) pdf download Version 3 (consolidated as of 02/01/2021) pdf download Version 2 (consolidated as of 09/07/2020) pdf download Version 1 (effective from 31/10/2018) pdf download Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities
We, Khalifa Bin Zayed Al Nahyan, President of the United Arab Emirates,
Having perused the constitution;
Federal Law No (1) of 1972, Regarding Jurisdictions of Ministries and Powers of Ministers, and amendments thereto;
Federal Law No (5) of 1975, Regarding the Commercial Register;
Federal Law No (10) of 1980, Regarding the Central Bank, the Monetary System & Organization of Banking, and amendments thereto;
Federal Law No (5) of 1985, Promulgating the UAE Civil Transactions Law and amendments thereto;
Federal Law No (6) of 1985, Regarding Islamic Banks, Financial Institutions and Investment Companies;
Federal Law No (3) of 1987, Promulgating the UAE Penal Code and amendments thereto;
Federal Law No (10) of 1992, Promulgating the Evidence Law in Civil & Commercial Transactions and amendments thereto;
Federal Law No (11) of 1992, Promulgating the Civil Procedures Law and amendments thereto;
Federal Law No (18) of 1993, Promulgating the Commercial Transactions Law and amendments thereto;
Federal Law No (4) of 2000, Regarding the UAE Securities and Commodities Authority & Market and amendments thereto;
Federal Law No (4) of 2002, Regarding Criminalization of Money Laundering and amendments thereto;
Federal Law No (8) of 2004, Regarding Financial Free Zones;
Federal Law No (17) of 2004, Regarding combating of Commercial Cover-up;
Federal Law No (1) of 2006, Regarding Electronic Transactions & Commerce;
Decretal Federal Law No (4) of 2007, Regarding Establishment of The Emirates Investment Authority, and amendments thereto;
Federal Law No (6) of 2007, Regarding Establishment of The Insurance Authority & Organization of its Business, and amendments thereto;
Federal Law No (6) of 2010, Regarding Credit Information;
Federal Law No (1) of 2011, Regarding the State Public Revenues;
Decretal Federal Law No (5) of 2011, Regarding Organization of Boards of Directors, General Secretariats & Committees in the Federal Government;
Federal Law No (8) of 2011, Regarding Re-organization of the State Audit Bureau;
Decretal Federal Law No (8) of 2011, Regarding Rules for Preparation of the State Budget & Final Account;
Federal Law No (4) of 2012, Regarding Organization of Competition;
Decretal Federal Law No (5) of 2012, Regarding Combating of IT Offences;
Decretal Federal Law No (7) of 2014, Regarding Combating of Terrorist Offences;
Federal Law No (12) of 2014, Regarding Reorganization of Accounts Auditors Profession;
Federal Law No (2) of 2015, Regarding Commercial Companies;
Decretal Federal Law No (9) of 2016, Regarding Bankruptcy;
Federal Law No (20) of 2016, Regarding Pledge of Movable Properties in Guarantee of Debt.
Federal Law No (7) of 2017, Regarding Tax Procedures;
Decretal Federal Law No (9) of 2018, Regarding Public Debt;
Decretal Federal Law No (10) of 2018, Regarding Netting;
And based on the proposal of the Finance Minister and approval of the Cabinet.
Promulgated the following Decretal Law:
Article (1) Definitions
In the implementation of provisions of this decretal law, and unless the context otherwise requires, the following words and expressions shall have the meanings cited against each:
The State: The United Arab Emirates
The Government: The UAE Federal Government
The Ministry: The Ministry of Finance
The Minister: The Minister of Finance
The Central Bank: The Central Bank of the United Arab Emirates
The Regulatory Authorities in the State: The Central Bank, the Securities & Commodities Authority.
The Board of Directors: Board of directors of the Central Bank
The Governor: The Governor of the Central Bank
The Public Sector: The Federal Government, governments of Union member emirates, and their fully owned agencies and public institutions and companies, which provide public services and do not, primarily, carry on any activities relating to money and financial markets
Government Related Entities: A Juridical person wherein the Government, any of the governments of the Union member emirates, or any of their respective subsidiaries, owns more than fifty percent (50%) of its capital
Financial Free Zones: Financial free zones subject to the provisions of Federal Law No (8) of 2004, Regarding Financial Free Zones, and amending laws
Licensed Financial Institutions: Banks and Other Financial Institutions licensed in accordance with the provisions of this decretal law, to carry on a Licensed Financial Activity or more, including those which carry on the whole or a part of their business in compliance with the provisions of Islamic Shari`ah, and are either incorporated inside the State or in other jurisdictions, or have branches, subsidiaries or Representative Offices inside the State
Banks: Any juridical person licensed in accordance with the provisions of this decretal law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities
Other Financial Institutions: Any juridical person, other than Banks, licensed, in accordance with the provisions of this decretal law, to carry on a financial activity or more, of the Licensed Financial Activities
Higher Shari`ah Authority: The Authority referred to in Article (17) of this decretal law
Exchange House: A juridical person licensed in accordance with the provisions of this decretal law to carry on money exchange activity, and conduct funds transfers within and outside the State, and any other businesses determined by the Central Bank
Representative Office: An office licensed in accordance with the provisions of this decretal law, to carry on representation of a financial institution incorporated in other jurisdictions
Licensed Financial Activities: The financial activities subject to Central Bank licensing and supervision, which are specified in article (65) of this decretal law
Authorized Individual: Any natural person authorized in accordance with the provisions of this decretal law, to carry on any of the Designated Functions
Designated Functions: Functions of the Authorized Individual at, or for the benefit of, a Licensed Financial Institution of influential nature on the institution's activities
Own Funds: Central Bank’s capital and reserves referred to in Article (5) of this decretal law
Foreign Reserves: Foreign assets held by the Central Bank denominated in any reserve currency and deployed to back its liabilities
Primary Dealers: Any bank which, acting as a principal or on behalf of another Person, purchases, sells or redeems any securities issued inside the State by the Public Sector, in accordance with the terms and conditions set by the Central Bank
Standing Facilities: Monetary Policy tools made available to deposit-taking Licensed Financial Institution, to enable management of its liquidity in accordance with the controls and instructions issued by the Central Bank, in accordance with the provisions of this Decretal Law
Financial Infrastructure System: Means either (1) a Clearing and Settlement System or (2) a Retail Payment System, established, operated, licensed, or overseen by any of the Regulatory Authorities in the State
Designated System: Any Financial Infrastructure System designated by the Central Bank as systemically important, in accordance with the provisions of this decretal law
Clearing and Settlement System: Any system established for the following purposes: (1) Clearing or settlement of payment obligations or (2) Clearing or settlement of obligations to transfer specific book-entry securities, or transfer of such securities
Retail Payment System: Any fund transfer system and related instruments, mechanisms, and arrangements that typically handles a large volume of relatively low-value payments in such forms as cheques, credit transfers, direct debit, or card payment transactions
Stored Value Facilities: A non-cash facility, in electronic or magnetic form, which is purchased by a user to be used as means of making a payment for goods and services
Participant Person: In respect of a Financial Infrastructure System, shall mean any Person who is party to the arrangements for which the system has been established
Settlement Institution: In respect of a Financial Infrastructure System, shall mean a Person (1) providing settlement accounts to the Participant Persons and to any Central Counterparty, in a Clearing and Settlement System, in order to settle Transfer Orders through the system, and provide credit facilities for settlement purposes, if necessary or (2) providing settlement services for any Retail Payment System
Default Arrangements: In respect of a Financial Infrastructure System, means the arrangements in place within the system for limiting systemic and other types of risk in the event of a participant appearing to be, or likely to become, unable to meet his obligations in respect of a Transfer Order; and would include any arrangements that have been enforced by the system’s operator or its Settlement Institution for the following: (1) the Netting of obligations owed to or by a Participant Person; (2) the closing out of open financial position of a Participant Person, or (3) the realization of collateral securities to secure payment of obligations owed by the Participant Person
Transfer Order: In connection with Financial Infrastructure System, shall mean any of the following instructions:
- Instructions by a Participant to make funds at the disposal of another Participant, to be transferred, on a book-entry basis, in the accounts of the Settlement Institution for a Clearing and Settlement System;
- Putting the funds in another way under the control of a Participant pursuant to the rules and procedures of the Financial Infrastructure System;
- Instructions to discharge from liability to pay for the purposes of the operational rules of a clearing and Settlement System;
- Instructions by a Participant either to settle an obligation by way of transferring book securities, or transferring those securities;
- Instructions by a Participant which gives rise to assuming responsibility or discharge from the obligation to pay the amounts owed for retail operations.
Netting: In respect of a Clearing and Settlement System, means the conversion of the various obligations owed to or by a Participant Person towards all the other Participant Persons in the system, into one net obligation owed to or by the Participant Person
Reserve Requirements: The percentage of deposits held by deposit-taking financial institutions, which the Board of Directors may decide to keep with the Central Bank, as per the terms and conditions it may determine
Eligible Securities: Securities approved by the Central Bank, which Licensed Financial Institution may present as collateral for drawing from the Central Bank funds in accordance with the controls and instructions issued by the Central Bank, in accordance with the provisions of this Decretal Law
Currency: The State’s official national currency in the form of paper notes, metal coins and digital currency, which its unit is referred as the “Dirham”
Monetary Base: It includes the following: (1) Issued Currency; (2) Aggregate balances of current accounts of Licensed Financial Institutions with the Central Bank, including the Reserve Requirements, in addition to any other funds deposited with the Central Bank for the purpose of clearing and settlement operations; and (3) the outstanding balance of securities and financial instruments issued by the Central Bank
Grievances & Appeals Committee: The committee referred to in Article (136) of this decretal law
Person: A natural or juridical person, as the case may be
Year: The Gregorian calendar year
This article has been amended by Decretal Federal Law No. (25) of 2020, and Decretal Federal Law No. (9) of 2021 and Decretal Federal Law No. (54) of 2023 respectively. You are viewing the latest version. To view previous versions, click the version boxes below.Version 3(effective from 26/07/2021 to 01/11/2023)In the implementation of provisions of this decretal law, and unless the context otherwise requires, the following words and expressions shall have the meanings cited against each:
The State: The United Arab Emirates
The Government: The UAE Federal Government
The Ministry: The Ministry of Finance
The Minister: The Minister of Finance
The Central Bank: The Central Bank of the United Arab Emirates
The Regulatory Authorities in the State: The Central Bank, the Securities & Commodities Authority.
The Board of Directors: Board of directors of the Central Bank
The Governor: The Governor of the Central Bank
The Public Sector: The Federal Government, governments of Union member emirates, and their fully owned agencies and public institutions and companies, which provide public services and do not, primarily, carry on any activities relating to money and financial markets
Government Related Entities: A Juridical person wherein the Government, any of the governments of the Union member emirates, or any of their respective subsidiaries, owns more than fifty percent (50%) of its capital
Financial Free Zones: Financial free zones subject to the provisions of Federal Law No (8) of 2004, Regarding Financial Free Zones, and amending laws
Licensed Financial Institutions: Banks and Other Financial Institutions licensed in accordance with the provisions of this decretal law, to carry on a Licensed Financial Activity or more, including those which carry on the whole or a part of their business in compliance with the provisions of Islamic Shari`ah, and are either incorporated inside the State or in other jurisdictions, or have branches, subsidiaries or Representative Offices inside the State
Banks: Any juridical person licensed in accordance with the provisions of this decretal law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities
Other Financial Institutions: Any juridical person, other than Banks, licensed, in accordance with the provisions of this decretal law, to carry on a financial activity or more, of the Licensed Financial Activities
Higher Shari`ah Authority: The Authority referred to in Article (17) of this decretal law
Exchange House: A juridical person licensed in accordance with the provisions of this decretal law to carry on money exchange activity, and conduct funds transfers within and outside the State, and any other businesses determined by the Central Bank
Representative Office: An office licensed in accordance with the provisions of this decretal law, to carry on representation of a financial institution incorporated in other jurisdictions
Licensed Financial Activities: The financial activities subject to Central Bank licensing and supervision, which are specified in article (65) of this decretal law
Authorized Individual: Any natural person authorized in accordance with the provisions of this decretal law, to carry on any of the Designated Functions
Designated Functions: Functions of the Authorized Individual at, or for the benefit of, a Licensed Financial Institution of influential nature on the institution's activities
Own Funds: Central Bank’s capital and reserves referred to in Article (5) of this decretal law
Foreign Reserves: Foreign assets held by the Central Bank denominated in any reserve currency and deployed to back its liabilities
Primary Dealers: Any bank which, acting as a principal or on behalf of another Person, purchases, sells or redeems any securities issued inside the State by the Public Sector, in accordance with the terms and conditions set by the Central Bank
Standing Facilities: Monetary Policy tools made available to deposit-taking Licensed Financial Institution, to enable management of its liquidity in accordance with the controls and instructions issued by the Central Bank, in accordance with the provisions of this Decretal Law
Financial Infrastructure System: Means either (1) a Clearing and Settlement System or (2) a Retail Payment System, established, operated, licensed, or overseen by any of the Regulatory Authorities in the State
Designated System: Any Financial Infrastructure System designated by the Central Bank as systemically important, in accordance with the provisions of this decretal law
Clearing and Settlement System: Any system established for the following purposes: (1) Clearing or settlement of payment obligations or (2) Clearing or settlement of obligations to transfer specific book-entry securities, or transfer of such securities
Retail Payment System: Any fund transfer system and related instruments, mechanisms, and arrangements that typically handles a large volume of relatively low-value payments in such forms as cheques, credit transfers, direct debit, or card payment transactions
Stored Value Facilities: A non-cash facility, in electronic or magnetic form, which is purchased by a user to be used as means of making a payment for goods and services
Participant Person: In respect of a Financial Infrastructure System, shall mean any Person who is party to the arrangements for which the system has been established
Settlement Institution: In respect of a Financial Infrastructure System, shall mean a Person (1) providing settlement accounts to the Participant Persons and to any Central Counterparty, in a Clearing and Settlement System, in order to settle Transfer Orders through the system, and provide credit facilities for settlement purposes, if necessary or (2) providing settlement services for any Retail Payment System
Default Arrangements: In respect of a Financial Infrastructure System, means the arrangements in place within the system for limiting systemic and other types of risk in the event of a participant appearing to be, or likely to become, unable to meet his obligations in respect of a Transfer Order; and would include any arrangements that have been enforced by the system’s operator or its Settlement Institution for the following: (1) the Netting of obligations owed to or by a Participant Person; (2) the closing out of open financial position of a Participant Person, or (3) the realization of collateral securities to secure payment of obligations owed by the Participant Person
Transfer Order: In respect of a Financial Infrastructure System, shall mean any of the following instructions: (1) instructions by a Participant Person to make funds available to another Participant Person, to be transferred, on a book-entry basis, in the accounts of the Settlement Institution for a Clearing and Settlement System; or (2) instructions for discharge from obligation to pay, for the purposes of the operational rules of a Clearing and Settlement System; or (3) instructions by a Participant Person to either settle an obligation by transferring a book-entry security, or transferring those securities; or (4) instructions by a Participant Person that result in the assumption or discharge of retail operations payment obligation
Netting: In respect of a Clearing and Settlement System, means the conversion of the various obligations owed to or by a Participant Person towards all the other Participant Persons in the system, into one net obligation owed to or by the Participant Person
Reserve Requirements: The percentage of deposits held by deposit-taking financial institutions, which the Board of Directors may decide to keep with the Central Bank, as per the terms and conditions it may determine
Eligible Securities: Securities approved by the Central Bank, which Licensed Financial Institution may present as collateral for drawing from the Central Bank funds in accordance with the controls and instructions issued by the Central Bank, in accordance with the provisions of this Decretal Law
Currency: The State’s official national currency notes and coins, which its unit is referred as the “Dirham”
Monetary Base: It includes the following: (1) Issued Currency; (2) Aggregate balances of current accounts of Licensed Financial Institutions with the Central Bank, including the Reserve Requirements, in addition to any other funds deposited with the Central Bank for the purpose of clearing and settlement operations; and (3) the outstanding balance of securities and financial instruments issued by the Central Bank
Grievances & Appeals Committee: The committee referred to in Article (136) of this decretal law
Person: A natural or juridical person, as the case may be
Year: The Gregorian calendar year
Version 2(effective from 02/01/2021 to 26/07/2021)In the implementation of provisions of this decretal law, and unless the context otherwise requires, the following words and expressions shall have the meanings cited against each:
The State: The United Arab Emirates
The Government: The UAE Federal Government
The Ministry: The Ministry of Finance
The Minister: The Minister of Finance
The Central Bank: The Central Bank of the United Arab Emirates
The Regulatory Authorities in the State: The Central Bank, the Securities & Commodities Authority
The Board of Directors: Board of directors of the Central Bank
The Governor: The Governor of the Central Bank
The Public Sector: The Federal Government, governments of Union member emirates, and their fully owned agencies and public institutions and companies, which provide public services and do not, primarily, carry on any activities relating to money and financial markets
Government Related Entities: A Juridical person wherein the Government, any of the governments of the Union member emirates, or any of their respective subsidiaries, owns more than fifty percent (50%) of its capital
Financial Free Zones: Financial free zones subject to the provisions of Federal Law No (8) of 2004, Regarding Financial Free Zones, and amending laws
Licensed Financial Institutions: Banks and Other Financial Institutions licensed in accordance with the provisions of this decretal law, to carry on a Licensed Financial Activity or more, including those which carry on the whole or a part of their business in compliance with the provisions of Islamic Shari`ah, and are either incorporated inside the State or in other jurisdictions, or have branches, subsidiaries or Representative Offices inside the State
Banks: Any juridical person licensed in accordance with the provisions of this decretal law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities
Other Financial Institutions: Any juridical person, other than Banks, licensed, in accordance with the provisions of this decretal law, to carry on a financial activity or more, of the Licensed Financial Activities
Higher Shari`ah Authority: The Authority referred to in Article (17) of this decretal law
Exchange House: A juridical person licensed in accordance with the provisions of this decretal law to carry on money exchange activity, and conduct funds transfers within and outside the State, and any other businesses determined by the Central Bank
Representative Office: An office licensed in accordance with the provisions of this decretal law, to carry on representation of a financial institution incorporated in other jurisdictions
Licensed Financial Activities: The financial activities subject to Central Bank licensing and supervision, which are specified in article (65) of this decretal law
Authorized Individual: Any natural person authorized in accordance with the provisions of this decretal law, to carry on any of the Designated Functions
Designated Functions: Functions of the Authorized Individual at, or for the benefit of, a Licensed Financial Institution of influential nature on the institution's activities
Own Funds: Central Bank’s capital and reserves referred to in Article (5) of this decretal law
Foreign Reserves: Foreign assets held by the Central Bank denominated in any reserve currency and deployed to back its liabilities
Primary Dealers: Any bank which, acting as a principal or on behalf of another Person, purchases, sells or redeems any securities issued inside the State by the Public Sector, in accordance with the terms and conditions set by the Central Bank
Standing Facilities: Monetary Policy tools made available to deposit-taking Licensed Financial Institutions, to enable management of their liquidity
Financial Infrastructure System: Means either (1) a Clearing and Settlement System or (2) a Retail Payment System, established, operated, licensed, or overseen by any of the Regulatory Authorities in the State
Designated System: Any Financial Infrastructure System designated by the Central Bank as systemically important, in accordance with the provisions of this decretal law
Clearing and Settlement System: Any system established for the following purposes: (1) Clearing or settlement of payment obligations or (2) Clearing or settlement of obligations to transfer specific book-entry securities, or transfer of such securities
Retail Payment System: Any fund transfer system and related instruments, mechanisms, and arrangements that typically handles a large volume of relatively low-value payments in such forms as cheques, credit transfers, direct debit, or card payment transactions
Stored Value Facilities: A non-cash facility, in electronic or magnetic form, which is purchased by a user to be used as means of making a payment for goods and services
Participant Person: In respect of a Financial Infrastructure System, shall mean any Person who is party to the arrangements for which the system has been established
Settlement Institution: In respect of a Financial Infrastructure System, shall mean a Person (1) providing settlement accounts to the Participant Persons and to any Central Counterparty, in a Clearing and Settlement System, in order to settle Transfer Orders through the system, and provide credit facilities for settlement purposes, if necessary or (2) providing settlement services for any Retail Payment System
Default Arrangements: In respect of a Financial Infrastructure System, means the arrangements in place within the system for limiting systemic and other types of risk in the event of a participant appearing to be, or likely to become, unable to meet his obligations in respect of a Transfer Order; and would include any arrangements that have been enforced by the system’s operator or its Settlement Institution for the following: (1) the Netting of obligations owed to or by a Participant Person; (2) the closing out of open financial position of a Participant Person, or (3) the realization of collateral securities to secure payment of obligations owed by the Participant Person
Transfer Order: In respect of a Financial Infrastructure System, shall mean any of the following instructions: (1) instructions by a Participant Person to make funds available to another Participant Person, to be transferred, on a book-entry basis, in the accounts of the Settlement Institution for a Clearing and Settlement System; or (2) instructions for discharge from obligation to pay, for the purposes of the operational rules of a Clearing and Settlement System; or (3) instructions by a Participant Person to either settle an obligation by transferring a book-entry security, or transferring those securities; or (4) instructions by a Participant Person that result in the assumption or discharge of retail operations payment obligation
Netting: In respect of a Clearing and Settlement System, means the conversion of the various obligations owed to or by a Participant Person towards all the other Participant Persons in the system, into one net obligation owed to or by the Participant Person
Reserve Requirements: The percentage of deposits held by deposit-taking financial institutions, which the Board of Directors may decide to keep with the Central Bank, as per the terms and conditions it may determine
Eligible Securities: Securities approved by the Central Bank, which deposit-taking Licensed Financial Institutions may present as collateral for drawing from the Central Bank funds
Currency: The State’s official national currency notes and coins, which its unit is referred as the “Dirham”
Monetary Base: It includes the following: (1) Issued Currency; (2) Aggregate balances of current accounts of Licensed Financial Institutions with the Central Bank, including the Reserve Requirements, in addition to any other funds deposited with the Central Bank for the purpose of clearing and settlement operations; and (3) the outstanding balance of securities and financial instruments issued by the Central Bank
Grievances & Appeals Committee: The committee referred to in Article (136) of this decretal law
Person: A natural or juridical person, as the case may be
Year: The Gregorian calendar year
Version 1(effective from 31/10/2018 to 02/01/2021)In the implementation of provisions of this decretal law, and unless the context otherwise requires, the following words and expressions shall have the meanings cited against each:
The State: The United Arab Emirates
The Government: The UAE Federal Government
The Ministry: The Ministry of Finance
The Minister: The Minister of Finance
The Central Bank: The Central Bank of the United Arab Emirates
The Regulatory Authorities in the State: The Central Bank, the Securities & Commodities Authority, and the Insurance Authority
The Board of Directors: Board of directors of the Central Bank
The Governor: The Governor of the Central Bank
The Public Sector: The Federal Government, governments of Union member emirates, and their fully owned agencies and public institutions and companies, which provide public services and do not, primarily, carry on any activities relating to money and financial markets
Government Related Entities: A Juridical person wherein the Government, any of the governments of the Union member emirates, or any of their respective subsidiaries, owns more than fifty percent (50%) of its capital
Financial Free Zones: Financial free zones subject to the provisions of Federal Law No (8) of 2004, Regarding Financial Free Zones, and amending laws
Licensed Financial Institutions: Banks and Other Financial Institutions licensed in accordance with the provisions of this decretal law, to carry on a Licensed Financial Activity or more, including those which carry on the whole or a part of their business in compliance with the provisions of Islamic Shari`ah, and are either incorporated inside the State or in other jurisdictions, or have branches, subsidiaries or Representative Offices inside the State
Banks: Any juridical person licensed in accordance with the provisions of this decretal law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities
Other Financial Institutions: Any juridical person, other than Banks, licensed, in accordance with the provisions of this decretal law, to carry on a financial activity or more, of the Licensed Financial Activities
Higher Shari`ah Authority: The Authority referred to in Article (17) of this decretal law
Exchange House: A juridical person licensed in accordance with the provisions of this decretal law to carry on money exchange activity, and conduct funds transfers within and outside the State, and any other businesses determined by the Central Bank
Representative Office: An office licensed in accordance with the provisions of this decretal law, to carry on representation of a financial institution incorporated in other jurisdictions
Licensed Financial Activities: The financial activities subject to Central Bank licensing and supervision, which are specified in article (65) of this decretal law
Authorized Individual: Any natural person authorized in accordance with the provisions of this decretal law, to carry on any of the Designated Functions
Designated Functions: Functions of the Authorized Individual at, or for the benefit of, a Licensed Financial Institution of influential nature on the institution's activities
Own Funds: Central Bank’s capital and reserves referred to in Article (5) of this decretal law
Foreign Reserves: Foreign assets held by the Central Bank denominated in any reserve currency and deployed to back its liabilities
Primary Dealers: Any bank which, acting as a principal or on behalf of another Person, purchases, sells or redeems any securities issued inside the State by the Public Sector, in accordance with the terms and conditions set by the Central Bank
Standing Facilities: Monetary Policy tools made available to deposit-taking Licensed Financial Institutions, to enable management of their liquidity
Financial Infrastructure System: Means either (1) a Clearing and Settlement System or (2) a Retail Payment System, established, operated, licensed, or overseen by any of the Regulatory Authorities in the State
Designated System: Any Financial Infrastructure System designated by the Central Bank as systemically important, in accordance with the provisions of this decretal law
Clearing and Settlement System: Any system established for the following purposes: (1) Clearing or settlement of payment obligations or (2) Clearing or settlement of obligations to transfer specific book-entry securities, or transfer of such securities
Retail Payment System: Any fund transfer system and related instruments, mechanisms, and arrangements that typically handles a large volume of relatively low-value payments in such forms as cheques, credit transfers, direct debit, or card payment transactions
Stored Value Facilities: A non-cash facility, in electronic or magnetic form, which is purchased by a user to be used as means of making a payment for goods and services
Participant Person: In respect of a Financial Infrastructure System, shall mean any Person who is party to the arrangements for which the system has been established
Settlement Institution: In respect of a Financial Infrastructure System, shall mean a Person (1) providing settlement accounts to the Participant Persons and to any Central Counterparty, in a Clearing and Settlement System, in order to settle Transfer Orders through the system, and provide credit facilities for settlement purposes, if necessary or (2) providing settlement services for any Retail Payment System
Default Arrangements: In respect of a Financial Infrastructure System, means the arrangements in place within the system for limiting systemic and other types of risk in the event of a participant appearing to be, or likely to become, unable to meet his obligations in respect of a Transfer Order; and would include any arrangements that have been enforced by the system’s operator or its Settlement Institution for the following: (1) the Netting of obligations owed to or by a Participant Person; (2) the closing out of open financial position of a Participant Person, or (3) the realization of collateral securities to secure payment of obligations owed by the Participant Person
Transfer Order: In respect of a Financial Infrastructure System, shall mean any of the following instructions: (1) instructions by a Participant Person to make funds available to another Participant Person, to be transferred, on a book-entry basis, in the accounts of the Settlement Institution for a Clearing and Settlement System; or (2) instructions for discharge from obligation to pay, for the purposes of the operational rules of a Clearing and Settlement System; or (3) instructions by a Participant Person to either settle an obligation by transferring a book-entry security, or transferring those securities; or (4) instructions by a Participant Person that result in the assumption or discharge of retail operations payment obligation
Netting: In respect of a Clearing and Settlement System, means the conversion of the various obligations owed to or by a Participant Person towards all the other Participant Persons in the system, into one net obligation owed to or by the Participant Person
Reserve Requirements: The percentage of deposits held by deposit-taking financial institutions, which the Board of Directors may decide to keep with the Central Bank, as per the terms and conditions it may determine
Eligible Securities: Securities approved by the Central Bank, which deposit-taking Licensed Financial Institutions may present as collateral for drawing from the Central Bank funds
Currency: The State’s official national currency notes and coins, which its unit is referred as the “Dirham”
Monetary Base: It includes the following: (1) Issued Currency; (2) Aggregate balances of current accounts of Licensed Financial Institutions with the Central Bank, including the Reserve Requirements, in addition to any other funds deposited with the Central Bank for the purpose of clearing and settlement operations; and (3) the outstanding balance of securities and financial instruments issued by the Central Bank
Grievances & Appeals Committee: The committee referred to in Article (136) of this decretal law
Person: A natural or juridical person, as the case may be
Year: The Gregorian calendar year
Part I – The Central Bank –
Chapter One: Organization of the Central Bank and its Objectives
Article (2) Independence of the Central Bank
1)The Central Bank shall be considered a Federal public institution having its own body corporate, and enjoying financial and managerial independence, and the required juridical capacity to conduct all businesses and activities, which ensure attainment of its objectives.
2)The Central Bank shall not be subject to the provisions of laws relating to public finance, tenders and auctions, public accounts and civil service, and its own regulations in these respects, shall apply.
3)The functions of State Audit Institution as per Federal Law No. (8) of 2011, Regarding Re-organization of the State Audit Institution, shall be confined to post-audit, and it shall have no right to interfere in the running of the Central Bank business, or challenge its policies.
Article (3): The Central Bank Headquarters
Headquarters of the Central Bank and its official address, along with its main branch shall be located in the State’s capital and may, upon Board of Directors approval, establish affiliated entities and open branches, offices and agencies inside and outside the State, and appoint agents and correspondents inside and outside the State.
Article (4): Principal Objectives and Functions of the Central Bank
1) Maintain the stability of the national Currency within the framework of the monetary system.
2) Contribute to the promotion and protection of the stability of the financial system in the State.
3) Ensure prudent management of the Central Bank’s Foreign Reserves.
4) Provide appropriate environment to develop and enhance the role of the insurance industry in insuring people, property and liabilities against risks to protect the national economy, encourage fair and effective competition, provide the best insurance services at competitive prices and coverage, and localize jobs in the insurance market.
For the purpose of achieving its objectives, the Central Bank shall undertake the following functions and competences:
- a. Establish and implement monetary policy while considering the State’s general strategy.
- b. Exercise the privilege of Currency issuance.
- c. Organize Licensed Financial Activities, establish the foundations for carrying them on, and determine the standards required for developing and promoting prudential practices in accordance with the provisions of this decretal law and international standards.
- d. Issuance of appropriate regulations and standards for protection of consumers of Licensed Financial institutions.
- e. Monitor the credit condition in the State, in order to contribute to the achievement of balanced growth in the national economy.
- f. Manage foreign reserves to maintain, at all times, sufficient foreign currency assets to cover the Monetary Base as per the provisions of this decretal law.
- g. Regulate, develop, oversee and maintain soundness of the Financial Infrastructure Systems in the State, including electronic payment systems, digital currency, and Stored Value Facilities.
- h. Regulate, develop and oversee the insurance sector and business, propose and implement regulating legislation in this regard.
- i. Receive requests for establishing and opening branches and representative offices for insurance and reinsurance companies, insurance agents and the professions associated therewith, and issuing the necessary licenses for them in accordance with the regulating legislation in this regard.
- j. Protect the rights of the insured and the beneficiaries of the insurance business and monitor the financial solvency of insurance companies to provide adequate insurance coverage to protect these rights.
- k. Work to raise the performance and efficiency of insurance companies and oblige them to the rules and ethics of the profession to increase their ability to provide better services to the beneficiaries of insurance, and to achieve positive competition among them.
This article has been amended by Decretal Federal Law No. (25) of 2020. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 02/01/2021)The Central Bank aims at achieving the following objectives:
1) Maintain stability of the national Currency within the framework of the monetary system.
2) Contribute to the promotion and protection of the stability of the financial system in the State.
3) Ensure prudent management of the Central Bank’s Foreign Reserves.
For the purpose of achieving its objectives, the Central Bank shall undertake the following functions and jurisdictions:
a. Draw up and implement monetary policy while considering the State’s general strategy.
b. Exercise the privilege of Currency issuance.
c. Organize Licensed Financial Activities, establish the foundations for carrying them on, and determine the standards required for developing and promoting prudential practices in accordance with the provisions of this decretal law and international standards.
d. Set up appropriate regulations and standards for protection of customers of Licensed Financial institutions.
e. Monitor the credit condition in the State, in order to contribute to the achievement of balanced growth in the national economy.
f. Manage foreign reserves to maintain, at all times, sufficient foreign currency assets to cover the Monetary Base as per the provisions of this decretal law.
g. Regulate, develop, oversee and maintain soundness of the Financial Infrastructure Systems in the State, including electronic payment systems, digital currency, and Stored Value Facilities.
Chapter Two: Capital, Reserves and Accounts of the Central Bank
Article (5): Capital and Reserves
1) The capital of the Central Bank shall be Twenty Billion (20,000,000,000) Dirhams.
2) A sum of Seventeen Billion Five Hundred Million (17,500,000,000) Dirhams shall be transferred from the General Reserve Account, to increase the capital to the amount referred to in item (1) of this article.
3) The capital may be increased by a federal decree based on a proposal of the Board of Directors, presented by the Minister, and approved by the Cabinet. Such increase shall be paid either by transfer from the General Reserve Account or directly by the Government.
4) The capital of the Central Bank may only be reduced by law.
5) The Central Bank shall establish a General Reserve Account that should not exceed four (4) times the paid up capital referred to in item (1) of this article. All net profit shall, after that, automatically devolve to the Government.
6) The Board of Directors shall, at the end of each financial year, determine the Central Bank’s annual net profits after deducting administrative and operational expenses, and allocating necessary funds for depreciation of assets and reserves, provisions for bad and doubtful debts and end of service indemnity for the staff of the Central Bank, along with the contingencies and/or other purposes the Board of Directors may determine, and in general, all other financial expenses normally deducted from net profits by banks, and the resulting net profits for each financial year shall be posted to the General Reserve Account.
7) The Cabinet shall issue a resolution specifying the percentage of profits to be retained by the Central Bank until the total balance of the General Reserve Account reaches the four (4) times limit referred to in item (5) hereof.
8) Should the balance of the General Reserve Account, at end of any financial year, be insufficient to cover the losses of the Central Bank; the deficit shall be met by the Government.
Article (6): Financial Year
The financial year for the Central Bank shall commence on the first day of January and end on the thirty-first day of December of each Year.
Article (7): Organization of Operations and Accounts
Operations of the Central Bank shall be conducted, and its balance sheet and accounts shall be organized in accordance with international standards and banking rules and customs. The Central Bank’s operations with third parties shall be deemed commercial.
Article (8): Accounts Auditing
The accounts of the Central Bank shall be audited by an auditor or more, selected, periodically, by the Board of Directors. The Board of Directors shall determine the auditors’ annual remunerations.
Article (9): Required Statements and Accounts Reports
1) Within three (3) months from end of the financial year, the Central Bank shall submit to the President of the State an annual report on the following:
- a. The Central Bank’s final accounts of the year, certified by the auditors. Such accounts shall be published in the Official Gazette.
- b. Central Bank’s activities and businesses during the financial year.
- c. An overview of monetary, banking and financial developments in the State.
2) The Central Bank shall submit the following to the Minister:
Copy of the annual report referred to in item (1) of this article.
The information the Minister may request on monetary, banking and financial developments in the State, along with semi-annual reports covering all aspects related to such developments.
A quarterly statement on the Central Bank’s assets and liabilities, which shall be published in the Official Gazette.
Chapter Three: Management of the Central Bank
Section One: The Board of Directors
Article (10): Members of the Board of Directors
The Central Bank shall be managed by a Board of Directors of seven (7) members, including the Chairman and the Governor.
This article has been amended by Decretal Federal Law No. (02) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 08/03/2021)The Central Bank shall be managed by a Board of Directors of seven (7) members, including the Chairman, Deputy Chairman and the Governor
Article (11): Members Appointment
1) Members of the Board of Directors shall be appointed by a federal decree based on recommendation of the Cabinet, and shall serve for a four (4) year term renewable for similar periods. The Decree designates from among the members of the Board of Directors one or more deputy chairman.
2) The Chairman, his Deputies and the Governor, shall each have the rank of Minister.
3) The Chairman issues a decision defining the powers of his Deputies.
4) Subject to item three (3) of this article, should the Chairman be absent or his post became vacant, the Deputy Chairman shall replace him; and should both the Chairman and his Deputies be absent or their posts became vacant, the Governor shall replace them both.This article has been amended by Decretal Federal Law No. (02) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 08/03/2021)1) Members of the Board of Directors shall be appointed by a federal decree based on recommendation of the Cabinet, and shall serve for a four (4) year term renewable to similar periods.
2) The Chairman, the Deputy Chairman and the Governor, shall each have the rank of Minister. Should the Chairman be absent or his post became vacant, the Deputy Chairman shall replace him; and should both the Chairman and his Deputy be absent or their posts became vacant, the Governor shall replace them both
Article (12): Membership Conditions
1) Be of UAE nationality.
2) Have experience in economic, financial or banking affairs.
3) Not have been declared bankrupt or ceased repaying his debts.
4) Not have been convicted of a felony or a misdemeanor involving moral turpitude or dishonesty, unless rehabilitated.
5) Not an active minister, excluding the Chairman of the Board of Directors.
6) Not a member of the Federal National Council.
7) Not holding any position, a job or board of directors’ membership of any institution licensed by any of the Regulatory Authorities in the State or by any of the regulatory authorities in the Financial Free Zones.
8) Not a controller or auditor of accounts of a Licensed Financial Institution, nor owner, agent, or partner in any accounts audit firm.
This article has been amended by Decretal Federal Law No. (1) of 2020.You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 09/07/2020)A member of the Board of Directors shall satisfy the following conditions:
1) Be of UAE nationality.
2) Have experience in economic, financial or banking affairs.
3) Not have been declared bankrupt or failed to repay his debts.
4) Not have been convicted, of a felony or a misdemeanor involving moral turpitude or dishonesty, unless rehabilitated.
5) Not an active minister or member of the Federal National Council.
6) Not holding any position, a job or board of directors’ membership of any institution licensed by any of the Regulatory Authorities in the State or by any of the regulatory authorities in the Financial Free Zones.
7) Not a controller or auditor of accounts of a Licensed Financial Institution, nor owner, agent, or partner in any accounts audit firm.
Article (13): Resignation or Vacancy of Office
Should a member of the Board of Directors resign, or his seat becomes vacant for any reason whatsoever prior to the expiry of his tenure, a successor shall be appointed, in accordance with the membership conditions referred to in Article (12) of this decretal law, for the remaining term of the Board of Directors.
Article (14): Termination of Membership
1) Membership of the Board of Directors terminates upon end of the term without renewal, or through death, or resignation. Membership of the Board of Directors may also be terminated by a federal decree, based on the Cabinet approval, in any of the following cases:
- a. If the member committed grave mistakes in the management of the Central Bank, or committed serious breach of his duties.
- b. If the member absented himself from three (3) consecutive meetings of the Board of Directors without the Board of Directors’ approval, unless such absence was due to being on an official assignment, annual or sick leave, or due to any other acceptable reason.
- c. If the member no longer satisfies any of the membership conditions referred to in Article (12) of this decretal law.
- d. If the member was rendered incapable of performing his functions, for any reason whatsoever.
2) Where term of the membership of the Board of Directors has expired without renewal, members of the Board of Directors shall continue to perform their functions until such time new members are appointed.
Section Two: Competences of the Board of Directors and its Meetings
Article (15): Powers and Functions of the Board of Directors
The Board of Directors shall, within the limitations imposed by the provisions of this decretal law, exercise all powers required for achieving the objectives for which the Central Bank has been established.
The Board of Directors shall, in particular, exercise the following:
1) Approve regulations, rules, standards, instructions and business controls to perform its functions and competences, and take all measures and actions necessary to enforce the provisions of this decretal law.
2) Establish and oversee implementation of polices for deployment and management of the Central Bank’s Own Funds and assets.
3) Decide on matters relating to issuance of the Currency and its withdrawal from circulation.
4) Issue regulations relating to organization of Licensed Financial Activities and decide on related matters, including regulations and procedures relating to supervision and oversight thereof, and determine conditions and rules for granting licenses to Licensed Financial Institutions to carry on Licensed Financial Activities and authorizations to undertake Designated Functions.
5) Approve regulations, rules, standards, instructions and business controls for insurance and reinsurance companies, insurance agents and the professions associated therewith.
6) Establish policies, and approve regulations relating to prudential supervision, and the standards and guidelines relating to Licensed Financial Activities.
7) Establish regulations and standards for protection of consumers of Licensed Financial Institutions.
8) Approve regulations, controls, and procedures for countering money laundering and combating terrorism financing and unlawful organizations.
9) Take necessary actions, procedures and impose administrative penalties against any Person violating the provisions of this Decretal Law, and regulations issued in implementation thereof.
10) Approve rules and regulations for maintaining integrity and efficiency of Financial Infrastructure Systems licensed, established, developed, or operated by the Central Bank.
11) Approve risk management and compliance policies at the Central Bank.
12) Approve Central Bank’s bylaws, issue the organizational structure and the administrative, financial and technical regulations, and determine powers and competencies, within the limitations of the provisions of this Decretal Law.
13) Approve human resources policies at the Central Bank.
14) Approve rules for the Central Bank institutional governance, including a set of rules and regulations aimed at achieving performance quality and excellence, in line with the Government’s strategic plans and objectives.
15) Decide on loans and advances granted to the Government, in accordance with the provisions of this Decretal Law.
16) Approve settlements and reconciliations relating to Central Bank’s businesses.
17) Approve the Central Bank’s annual budget and any variations thereof during the year.
18) Approve the Central Bank’s annual final accounts and the amount of net annual profits.
19) Regulate the mechanism of objections related to the insurance activity.
20) Deal with all other matters deemed within its powers, and are conducive to achievement of the objectives of the Central Bank and the discharge of its functions, in accordance with the provisions of this Decretal Law.
This article has been amended by Decretal Federal Law No. (25) of 2020, and Decretal Federal Law No. (9) of 2021 respectively. You are viewing the latest version. To view previous versions, click the version boxes below.Version 2 (effective from 02/01/2021 to 26/07/2021)The Board of Directors shall, within the limitations imposed by the provisions of this decretal law, exercise all powers required for achieving the objectives for which the Central Bank has been established. The Board of Directors shall, in particular, exercise the following:
- Issue regulations, rules, standards, instructions and business controls to perform its functions and jurisdictions, and take all measures and actions necessary to enforce the provisions of this decretal law.
- Establish and oversee implementation of polices for deployment and management of the Central Bank’s Own Funds and assets.
- Decide on matters relating to issuance of the Currency and its withdrawal from circulation.
- Issue regulations relating to organization of Licensed Financial Activities and decide on related matters, including regulations and procedures relating to supervision and oversight thereof, and determine conditions and rules for granting licenses to Licensed Financial Institutions to carry on Licensed Financial Activities and authorizations to undertake Designated Functions.
- Issue regulations, rules, standards, instructions, and work controls for insurance, reinsurance, insurance agents, and the professions and activities associated therewith.
- Establish regulations and standards for protection of customers of Licensed Financial Institutions.
- Issue regulations, controls, and procedures for encountering money laundering and combating terrorism financing and unlawful organizations.
- Take necessary actions, procedures and impose administrative penalties against any Person violating the provisions of this decretal law, and regulations issued in implementation thereof.
- Approve rules and regulations for maintaining integrity and efficiency of Financial Infrastructure Systems licensed, established, developed, or operated by the Central Bank.
- Approve risk management and compliance policies at the Central Bank.
- Approve Central Bank’s bylaws, issue the organizational structure and the administrative, financial and technical regulations, and determine powers and competencies, within the limitations of the provisions of this decretal law.
- Approve human resources policies at the Central Bank.
- Approve rules for the Central Bank institutional governance, including a set of rules and regulations aimed at achieving performance quality and excellence, in line with the Government’s strategic plans and objectives.
- Decide on loans and advances granted to the Government, in accordance with the provisions of this decretal law.
- Approve settlements and reconciliations relating to Central Bank’s businesses.
- Approve the Central Bank’s annual budget and any variations thereof during the year.
- Approve the Central Bank’s annual final accounts and the amount of net annual profits.
- Regulate the mechanism of objections related to the insurance activity in accordance with the regulating legislations in this regard.
- Deal with all other matters deemed within its powers, and are conducive to achievement of the objectives of the Central Bank and the discharge of its functions, in accordance with the provisions of this decretal law.
Version 1 (effective from 31/10/2018 to 02/01/2021)The Board of Directors shall, within the limitations imposed by the provisions of this decretal law, exercise all powers required for achieving the objectives for which the Central Bank has been established.
The Board of Directors shall, in particular, exercise the following:
1) Issue regulations, rules, standards, instructions and business controls to perform its functions and jurisdictions, and take all measures and actions necessary to enforce the provisions of this decretal law.
2) Establish and oversee implementation of polices for deployment and management of the Central Bank’s Own Funds and assets.
3) Decide on matters relating to issuance of the Currency and its withdrawal from circulation.
4) Issue regulations relating to organization of Licensed Financial Activities and decide on related matters, including regulations and procedures relating to supervision and oversight thereof, and determine conditions and rules for granting licenses to Licensed Financial Institutions to carry on Licensed Financial Activities and authorizations to undertake Designated Functions.
5) Establish policies, and issue regulations relating to prudential supervision, and the standards and guidelines relating to Licensed Financial Activities.
6) Establish regulations and standards for protection of customers of Licensed Financial Institutions.
7) Issue regulations, controls, and procedures for encountering money laundering and combating terrorism financing and unlawful organizations.
8) Take necessary actions, procedures and impose administrative penalties against any Person violating the provisions of this decretal law, and regulations issued in implementation thereof.
9) Approve rules and regulations for maintaining integrity and efficiency of Financial Infrastructure Systems licensed, established, developed, or operated by the Central Bank.
10) Approve risk management and compliance policies at the Central Bank.
11) Approve Central Bank’s bylaws, issue the organizational structure and the administrative, financial and technical regulations, and determine powers and competencies, within the limitations of the provisions of this decretal law.
12) Approve human resources policies at the Central Bank.
13) Approve rules for the Central Bank institutional governance, including a set of rules and regulations aimed at achieving performance quality and excellence, in line with the Government’s strategic plans and objectives.
14) Decide on loans and advances granted to the Government, in accordance with the provisions of this decretal law.
15) Approve settlements and reconciliations relating to Central Bank’s businesses.
16) Approve the Central Bank’s annual budget and any variations thereof during the year.
17) Approve the Central Bank’s annual final accounts and the amount of net annual profits.
18) Deal with all other matters deemed within its powers, and are conducive to achievement of the objectives of the Central Bank and the discharge of its functions, in accordance with the provisions of this decretal law.
Article (16): Formation of Committees and Delegation of Authorities
1) The Board of Directors may form the committees it deems appropriate to assist in the discharge of its functions and competences in accordance with the provisions of this decretal law. Such committees may be formed from within the Board of Directors, or from outside the Board of Directors. The Board of Directors may also form committees and advisory boards, which include in their membership Persons from outside the Central Bank, and shall determine the remunerations of members of such committees and boards.
2) The Board of Directors may delegate some of its powers to the Chairman, to the Governor, or to any committee derived from the Board of Directors.
3) The Board of Directors may, annually, review the terms of reference and performance of the committees formed in accordance with item (1) of this article, and may take necessary actions to ensure compliance with professional and international standards, codes of conduct and governance.
Article (17): Higher Shari’ah Authority
1) Pursuant to this decretal law, a Shari’ah authority referred to as “Higher Shari’ah Authority” affiliated to the Central Bank shall be established with a membership of not less than five (5) members and not exceeding seven (7) members, with knowledge and experience in the jurisprudence of Islamic financial transactions.
2) The Board of Directors shall approve the authority’s charter, its functions and competencies, and the mechanism for financing the costs of its establishment and continuity of work.
3) The Governor shall issue a decision to form the authority and appoint its members.
4) Licensed Financial Institutions, which carry on the whole or part of their business and activities in compliance with the provisions of Islamic Shari’ah shall bear all expenses of the Authority referred to in item (1) of this article, including remunerations, allowances and expenses of its members according to the decision issued by the Board of Directors.
5) The Higher Shari’ah Authority shall determine the rules, standards, and general principles applicable to Shari’ah-compliant Licensed Financial Activities and business, and shall undertake supervision and oversight of the internal Shari’ah supervisory committees of Licensed Financial Institutions, referred to in Article (79) of this decretal law.
6) The Higher Shari’ah Authority shall approve Islamic monetary and financial tools issued and developed by the Central Bank to manage monetary policy operations within the State, and provide its opinion regarding the specific regulatory rules and instructions relating to the operations and activities of Licensed Financial Institutions which conduct the whole or part of their business and activities in accordance with the provisions of Islamic Shari’ah.
7) The Fatawa and opinions of the Higher Shari’ah Authority shall be binding on the internal Shari’ah supervisory committees, referred to in Article (79) of this decretal law, and on Licensed Financial Institutions which conduct the whole or part of their business and activities in accordance with the provisions of Islamic Shari’ah.
8) The Higher Shari’ah Authority may seek assistance of a specialized entity, if deemed necessary, to conduct a Shari’ah external audit of the business of any Licensed Financial Institution, which carry on the whole or part of their business and activities in accordance with the provisions of Islamic Shari’ah, and the conditions and procedures determined by the Authority, at the expense of the concerned institution.
This article has been amended by Decretal Federal Law No. (09) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 26/07/2021)1) Pursuant to this decretal law, an authority named “Higher Shari`ah Authority” shall be established with a membership not less than five (5) members and not exceeding seven (7) members, of sufficient knowledge and experience in the jurisprudence of Islamic financial transactions.
2) The Board of Directors shall issue a decision to form the authority and appoint its members. The decision shall determine the work mechanism of the authority, its functions, and responsibilities of its members and their term of office. This authority shall be affiliated to the Central Bank.
3) Licensed Financial Institutions, which carry on the whole or part of their businesses and activities in compliance with Islamic Shari`ah shall bear all expenses of the Authority referred to in item (1) of this article, including remunerations, allowances and expenses of its members and the mechanism of funding its establishment and continuity of its functioning, as determined by the Board of Directors.
4) The Higher Shari`ah Authority shall determine the rules, standards, and general principles applicable to Shari`ah-compliant businesses and Licensed Financial Activities, and shall undertake supervision and oversight of the internal Shari`ah supervisory committees of Licensed Financial Institutions, referred to in Article (79) of this decretal law.
5) The Higher Shari`ah Authority shall approve Islamic monetary and financial tools issued and developed by the Central Bank to manage monetary policy operations in the State, and provide its opinion regarding the specific regulatory rules and instructions relating to the operations and activities of Licensed Financial Institutions which conduct the whole or part of their business and activities in accordance with the provisions of Islamic Shari`ah.
6) The Fatwas and opinions of the Higher Shari`ah Authority shall be binding on the internal Shari`ah supervisory committees, referred to in Article (79) of this decretal law, as well as on Licensed Financial Institutions which conduct the whole or part of their business and activities in accordance with the provisions of Islamic Shari`ah.
7) The Higher Shari`ah Authority may seek assistance of a specialized party, if necessary, to conduct Shari`ah external audit of the business of any Licensed Financial Institution, which carry on the whole or part of their businesses and activities in accordance with the provisions of Islamic Shari`ah, and the conditions and procedures determined by the Authority, at the expense of the concerned institution.
Article (18): Appointment of Senior Central Bank Executives
The Board of Directors may, upon recommendation of the Governor, appoint senior Central Bank executives, with titles of deputy, assistant governors, or any other titles the Board of Directors deems appropriate. The decision appointing the deputies and assistants shall determine their competences, salaries, and remunerations.
Article (19): Working Full Time for the Central Bank
1) The Governor, his deputies and assistants shall devote their full time to their work at the Central Bank, and none of them may hold any paid or unpaid position, or be a member of the Board of Directors of any of the Regulatory Authorities in the State, or in the Financial Free Zones or the Board of Directors of any Licensed Financial Institution, or enter, directly or indirectly, in any contracts concluded by the Public Sector.
2) The prohibition referred to in item (1) of this article shall not apply to assignments entrusted to any of them by the Government in the Public Sector, including representation in international conferences, or representation of the Public Sector in the various committees, subject to the approval of the Board of Directors.
Article (20): Remunerations and Entitlements
The Board of Directors shall set up a regulation regarding remunerations of the Governor and his other entitlements, and the remunerations of the Chairman and members of the Board of Directors. A federal decree, in this respect, shall be issued.
Article (21): Meetings of the Board of Directors
1) The Board of Directors shall, upon invitation by the Chairman, hold an ordinary meeting, at least once every sixty (60) days.
2) The Chairman of the Board of Directors may call the Board of Directors to convene whenever the need arises.
3) The Chairman of the Board of Directors shall convene the Board of Directors upon request of, at least, three (3) members of the Board of Directors.
Article (22): Meetings Quorum
Five (5) members of the Board of Directors including the Chairman of the Board of Directors, one of his deputies, or the Governor, shall constitute quorum for any meeting.
Decisions of the Board of Directors shall be adopted by a majority vote of the members present. In case of a tie, the Chairman of the session shall have the casting vote.
This article has been amended by Decretal Federal Law No. (02) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 08/03/2021)1) Five (5) members of the Board of Directors including the Chairman of the Board of Directors, his deputy, or the Governor, shall constitute quorum for any meeting.
2) Decisions of the Board of Directors shall be adopted by a majority vote of the members present. In case of a tie, the Chairman of the session shall have the casting vote
Section Three: Powers of the Chairman and the Governor
Article (23): Powers of the Chairman
Without prejudice to the powers and competencies of the Chairman of the Board of Directors, the Governor shall be the legal representative of the Central Bank, and shall sign, on its behalf, all instruments, contracts and documents.
This article has been amended by Decretal Federal Law No. (25) of 2020. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 02/01/2021)The Chairman of the Board of Directors shall be the legal representative of the Central Bank and shall sign, on its behalf, all instruments, contracts and documents. The Chairman may delegate some of his powers and competencies to the Governor
Article (24): Responsibilities of the Governor
Without prejudice to any competencies established for the Board of Directors or the Chairman of the Board of Directors, the Governor shall conduct and manage all the affairs of the Central Bank, and issue regulations, systems and policies approved by the Board of Directors. The Governor shall be responsible for the implementation of this Decretal Law, the regulations of the Central Bank and decisions of the Board of Directors. He may delegate some of his powers and competencies to any of his deputies, assistants, or some senior staff of the Central Bank.
This article has been amended by Decretal Federal Law No. (09) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 26/07/2021)The Governor shall be responsible for the implementation of this decretal law, the regulations of the Central Bank and decisions of the Board of Directors. He may delegate some of his powers and competencies to any of his deputies, assistants, or some senior staff of the Central Bank
Section Four: Other Provisions
Article (25): Exemption from Liability
1) The Central Bank, members of the Board of Directors, members of committees formed by the Board of Directors, whether from within its membership or from outside, staff of the Central Bank and its duly authorized representatives, shall be exempt from civil liability towards third parties, in respect of the following:
- a. Exercise, or failure to exercise, the functions, powers, authorities and businesses of the Central Bank, or their own functions, competencies and powers, authorities, and all related practices;
- b. Instructions, guidelines, declarations, data, statements and opinions given by them in relation to the practice of the Central Bank’s functions, powers, authorities and businesses, or their own functions, competencies, authorities and businesses – unless bad faith, with intent to harm third parties, was established.
2) The Central Bank shall bear all charges, costs, expenses, and attorney fees relating to the defense of the Persons referred to in item (1) of this article, in lawsuits pertaining to discharge of their functions at the Central Bank.
Article (26): Confidential Information
1) Any member of the Board of Directors, any member of the committees formed by the Board of Directors, any employees or representatives of the Central Bank; any experts, technical personnel, or academics the Central Bank deals with, shall not disclose any information that is confidential, unless such disclosure is consistent with the provisions of item (3) of this article. This prohibition shall remain effective even after the expiry of membership or termination of the service or the function.
2) Confidential information shall include all information received by any of the Persons referred to in item (1) of this article, by virtue of their positions, or in the course of discharging their functions, as long as such information were not made available to the public through official or legal means.
3) Without prejudice to the provisions of Article (28) of this Decretal Law, confidential information may be disclosed where such disclosure is permitted, legally enforced, or addressed to authorities and agencies within the State or in other jurisdictions.
Article (27): Declaration of Conflict of Interest
1) A member of the Board of Directors shall, upon his appointment, declare his interests, which may conflict with his membership at the Board of Directors, and whenever a conflict of interest arises. Should any member of the Board of Directors have a personal interest in any contract or dealing to which the Central Bank is party, such member must declare those interest prior to the discussion of the subject; withdraw from the meeting when such dealing or contract is discussed, and should not participate in voting pertaining thereto, in accordance with the code of conduct and governance rules issued by the Board of Directors.
2) Every employee or representative of the Central Bank shall disclose to his manager, or his immediate superior, any interest which may be in conflict with the discharge of his functions, and he may not participate in exchange of opinions, and decisions or measures, taken in this regard.
3) The Board of Directors shall establish codes of conduct for employees and representatives of the Central Bank, as well as disclosure procedures, compliance, and governance.
Article (28): Cooperation with Local and International Authorities
1) The Central Bank may, within the scope of its jurisdiction and in accordance with the Law, cooperate with the concerned regulatory authorities in other countries, and with international institutions, in providing assistance and exchanging information, subject to the following:
- a. The request is made on basis of reciprocity.
- b. The request does not contravene any of the State’s established laws and regulations.
- c. The request is serious and important.
- d. The request is not in conflict with the public interest and public order requirements.
2) The Central Bank shall, in coordination and collaboration with the concerned regulatory authorities, within applicable laws, exercise its powers on Licensed Financial Institutions operating outside the State or in Financial Free Zones.
Article (29): Engagement of Experts, Technical Personnel and Academics
The Central Bank may seek the assistance of experts, technical personnel and academics, determine their remunerations and entitlements. The Board of Directors may also invite to its meetings whomever it wishes to hear their opinion on a specific issue, and such invitee to the meeting shall have no counted vote in deliberations.
Article (30): Publication of Draft Rules and Regulations
1) The Central Bank may publish the draft regulations and rules it intends to issue in relation to organization of businesses of Licensed Financial Institutions and Licensed Financial Activities, for their feedback, via a public notice to the concerned parties.
2) The Central Bank may invite concerned parties to provide their feedback on the draft rules and regulations referred to in item (1) of this article, within the period prescribed by the Central Bank.
3) The Central Bank may decide not to publish the draft regulations referred to in item (1) of this article, if it deems such publication contrary to public interest, or to the achievement of the Central Bank’s objectives and discharge of its functions.
Chapter Four: Monetary Policy and Financial Stability
Article (31): Objectives of Monetary Policy
1) Monetary policy aims at maintaining soundness and stability of the monetary system in the State, in order to ensure stability and required confidence in the national economy.
2) The Central Bank shall determine monetary tools and operational means for achievement of monetary policy objectives, including policies relating to management of the exchange rate of the national Currency and money markets in the State.
3) The Central Bank shall, on the basis of a proposal by the Board of Directors and approval of the Cabinet, determine the national Currency’s exchange rate regime.
4) The Central Bank may, for operational purposes, take necessary measures to manage and control the official exchange rate of the national Currency, as per the guiding principles set by the Board of Directors.
Article (32): Reserve Requirements
1) The Central Bank may, in line with monetary policy objectives and the current and forecasted status of liquidity, determine minimum Reserve Requirements for each type of deposits, or on the total of deposits held with deposit-taking Licensed Financial Institutions. The Board of Directors shall determine the manner in which ratio of the Reserve Requirements is calculated, as it deems appropriate.
2) The Central Bank shall specify all operational arrangements related to the maintenance of the Reserve Requirements referred to in item (1) of this article.
Article (33): Credit Conditions Surveillance
The Central Bank may set regulations which determine limits of credit facilities extended by Licensed Financial Institutions to their customers, compared to the total of their stable resources or to the total deposits of their customers. Such limits may be prescribed for a specific Licensed Financial Institution or for all Licensed Financial Institutions.
Article (34): Coordination between Monetary Policy and Fiscal Policy
The Central Bank and the Ministry shall establish a mechanism for coordinating monetary policy and fiscal policy for the purpose of achieving balanced growth in the national economy. Such coordination shall take place before the beginning of each financial year, and whenever necessary, and shall be in respect of volume of government expenditure, the Government’s debt, and debts of governments of emirates members of the Union, along with debts of Government Related Entities, companies and institutions which they own, hold shares in, or manage, and their plans regarding domestic and foreign public debt.
Article (35): Designating Systemically Important Licensed Financial Institutions
The Central Bank shall solely have the authority to designate any Licensed Financial Institution as systemically important. For such purpose, the Central Bank may require the designated Licensed Financial Institution to take the needed measures and procedures.
Article (36): Domestic Market Statistics
1) The Public Sector and other agencies as the Board of Directors deems necessary, shall provide the Central Bank with all the information and statistics it requires for the purpose of performing its functions under the provisions of this Decretal Law. Such information and statistics shall include all monetary and economic statistics, as well as balance of payments statistics and consumer prices. The Central Bank may publish the statistics it deems appropriate, in whole or in part.
2) The Central Bank shall obtain the approval of other Regulatory Authorities in the State regarding provision and/or publication of non- public information and statistics in relation to institutions under the supervision of those authorities.
Article (37): Research
1) The Central Bank may conduct research and analyses in areas of macro-economy, conduct of monetary policy, and banking and financial operations, as deemed of strategic importance to the State economy.
2) The Central Bank shall publish and issue regular statistical reports, quarterly and annual reviews of the Central Bank, policy briefs and working papers that contain analyses of the relevant data to ensure the soundness and effectiveness of policy decisions.
Chapter Five: Central Bank Operations
Section One: Operations with the Public Sector
Article (38): Advisor to the Government
The Central Bank shall advise the Government on matters falling within its jurisdiction, and shall provide its opinion on monetary, banking, and financial affairs as requested by the Government.
Article (39): Financial Agent for the Government
1) The Central Bank shall participate in negotiations relating to the Government’s international monetary and financial agreements, and it may be assigned implementation of provisions of such agreements.
2) The Central Bank may, directly or through Primary Dealers, sell and manage securities issued or secured by the Government or governments of emirates members of the Union, in accordance with an agreement with the concerned government.
Article (40): Bank for the Government
1) For the purposes of achieving objectives of its monetary policy, and in order to provide the Government and governments of emirates members of the Union with their needs for national Currency and/or foreign currencies, the Central Bank shall buy or sell foreign currencies to the concerned government, at prevailing exchange rates.
2) The Central Bank shall conduct banking operations and services for the Government, whether in the State or in other jurisdictions, against fees. The Central Bank may also perform banking operations and services for governments of member emirates of the Union, against fees.
3) The Government and governments of emirates members of the Union, shall open accounts in national Currency and foreign currencies with the Central Bank, and conduct transfers through such accounts.
4) Government funds in national Currency or foreign currencies shall be deposited with the Central Bank, and the latter shall pay or charge interest thereon in view of the prevailing market rates. Governments of emirates members of the Union may also deposit funds in national Currency or foreign currencies with the Central Bank, on which the latter shall pay or charge interest thereon in view of the prevailing market rates.
5) Public Sector entities, other than the Government, and governments of emirates members of the Union, may deposit their funds in national Currency or foreign currencies with the Central Bank. The Central Bank shall pay or charge interest thereon as determined by the Central Bank.
6) The Central Bank may grant advances or other credit facilities to the Government, at interest rates set in accordance with the terms and conditions of the agreement signed between the Central Bank and the Ministry in this regard, provided such advances and credit facilities are for the purpose of covering a temporary, unforeseen deficit in Government revenues, compared to its expenses. The Government may not relend or grant such advances to any other party. Granted advances shall at no time exceed ten percent (10%) of the government’s average revenues realized in the budgets of the last three (3) years. The Government shall repay these advances within a period not exceeding one (1) year from date of granting thereof. In case advances were not repaid at the specified date, the outstanding balance should be subject to an interest charge, as specified in the agreement signed between the Central Bank and the Ministry.
7) The Central Bank may subscribe to securities and debt instruments issued by the Government for maturities exceeding one (1) year, only in cases designated by the Board of Directors. The Government shall repay the amounts due, including interest, on maturity dates. In case of late or early payment an interest charge shall be imposed, as specified in the debt agreement.
Article (41): Investment and Deployment of Government Funds
Apart from the funds deposited with the Central Bank in accordance with the provisions of Article (40) of this Decretal Law, the Central Bank may not interfere in the investment and deployment of Government funds or funds of governments of emirates, members of Union, unless it has been assigned to do so per the agreement concluded between the concerned government and the Central Bank.
Section Two: Operations with Financial Institutions, Monetary Authorities, and other Central Banks
Article (42): Opening of Accounts and Maintaining Financial Balances in Digital Currency
First: The Central Bank may open the following accounts:
1) Currency or foreign currencies accounts for Licensed Financial Institutions, and accept deposits from them. The Central Bank shall pay or charge agreed interest on such deposits.
2) Accounts for monetary authorities, other Central Banks, foreign banks, international financial and monetary institutions, as well as Arab and international monetary funds. The Central Bank may pay or charge interest on such accounts, and act as agent or correspondent for these parties.
3) Accounts with monetary authorities, other Central Banks, foreign banks, international financial and monetary institutions, as well as Arab and international monetary funds.
4) The Central Bank may open any other accounts within the limits and in accordance with the rules and regulations issued by the Board of Directors.
Second: The Central Bank may maintain other forms of digital currency financial balances, whatever their type, within the limits and in accordance with the rules and regulations issued by the Board of Directors.
This article has been amended by Decretal Federal Law No. (54) of 2023. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 01/11/2023)1) The Central Bank may open the following accounts:
a. National Currency or foreign currencies accounts for Licensed Financial Institutions, and accept deposits from them. The Central Bank shall pay or charge agreed interest on such deposits.
b. Accounts for monetary authorities, other Central Banks, foreign banks, international financial and monetary institutions, as well as Arab and international monetary funds. The Central Bank may pay or charge interest on such accounts, and act as agent or correspondent for these parties.
2) The Central Bank may open accounts with monetary authorities, Central Banks, foreign banks or international financial and monetary institutions, as well as Arab and international monetary funds
Article (43): Money and Capital Markets Operations
The Central Bank may conduct the following money and capital markets operations:
1) Purchase, re-purchase, sell, and accept and place deposits of gold bullion or coins and precious metals.
2) Accept and place monetary deposits and pay or charge interest thereon, subject to the provisions of Article (62) of this Decretal Law.
3) Issue bills payable upon demand and other types of payable financial transfers, at its head office, branches, and offices of its agents or correspondents.
4) Conduct all foreign currency operations and external transfer operations with the Government, governments of emirates members of the Union, public entities, local and foreign banks, licensed Exchange Establishments, other monetary authorities and Central Banks, and other Arab and international financial institutions and funds.
5) Issue securities in the name of the Central Bank, and sell and re- purchase, discount and rediscount, redeem such securities for the purposes of managing monetary policy operations.
6) Purchase, re-purchase, sell, discount and rediscount Eligible Securities and other securities related to the management of its Own Funds and/ or Foreign Reserves as per established terms and conditions.
7) Purchase, re-purchase, and sell Shari’ah-compliant commodities and securities, in order to develop liquidity management instruments for Licensed Financial Institutions, which carry on the whole or part of their business and activities in compliance with the provisions of Islamic Shari’ah.
8) Grant collateralized loans, advances, other credit facilities, and Shari’ah- compliant funding facilities to Licensed Financial Institutions, for the purpose of managing monetary policy operations, in accordance with the terms and conditions the Central Bank deems appropriate and determines from time to time.
9) Grant collateralized loans and advances to monetary authorities, Central Banks, foreign banks, and international financial institutions, and obtain loans and advances therefrom, provided there is consistency of such operations with the Central Bank’s functions and jurisdictions. Interest or commission may be paid or charged for this purpose.
10) Obtain, guarantee or secure loans and advances or issue credit, in any currency inside the State or in other jurisdictions, in accordance with the terms and conditions the Central Bank deems appropriate for the purpose of conducting its own business.
11) Conduct all other operations deemed conducive to the achievement of Central Bank’s objectives.
Article (44): Protection of Licensed Financial Institutions
1) The Central Bank shall take all measures it deems appropriate to maintain conduct of operations of deposit-taking Licensed Financial Institutions, within the frameworks and limits set by the Board of Directors.
- For this purpose, the Central Bank shall:
- a) Request to hold a meeting of the general assembly of the licensed financial institution to discuss any issue the Central Bank deems important.
- b) Request to include any item that the Central Bank deems necessary into the agenda of the general assembly meeting of the licensed financial institution.
- c) Suspending the implementation of any decision issued by the general assembly of the licensed financial institution in the event that it violates the laws or regulations in force.
2) The Central Bank, according to its own discretion, in cases of necessity during which the deposit-taking licensed financial institution is exposed to liquidity pressures or is subject to crisis management procedures, may provide loans to that establishment, in order to contribute to strengthening and protecting the stability of the financial system and protecting the monetary system in the state.
This article has been amended by Decretal Federal Law No. (09) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 26/07/2021)The Central Bank shall take all necessary measures to ensure proper and effective conduct of operations of deposit-taking Licensed Financial Institutions, within the frameworks and limits set by the Board of Directors.
Article (45): Appointment of Primary Dealers
1) The Central Bank shall set-up rules to regulate securities issued by the Central Bank or the Government in coordination with the various stakeholders. Such rules shall include all aspects of these securities issuance, custody, trading in the State.
2) The Central Bank may appoint Primary Dealers for securities issued inside the State by the Central Bank or the Public Sector, in accordance with the terms and conditions set by the Central Bank.
3) For the purpose of listing securities issued by the Public Sector in the State’s financial markets, the Central Bank shall appoint Primary Dealers it approves who comply with the requirements of the concerned regulator.
Section Three: Investment of Central Bank’s Foreign Reserves and Own Funds
Article (46): Foreign Reserves
The Central Bank may, in accordance with the instructions and rules stipulated in the investment policy and guidelines approved by the Board of Directors, invest its Foreign Reserves in all or any of the following instruments:
1) Gold bullions, gold coins and other precious metals.
2) Currency notes and coins, call money, and placements in foreign countries.
3) Securities issued or secured by governments of foreign countries and related entities, or by international monetary and financial institutions.
4) Derivatives and other financial instruments required for the management of Central Bank’s exposure to interest rates, currencies, credit, gold, and other precious metals.
5) Any other financial assets the Central Bank deems appropriate for investment as foreign assets, subject to approval of the Board of Directors.
Article (47): Own Funds
The Central Bank may, in accordance with the investment policy and guidelines set by the Board of Directors, deploy or invest part of its Own Funds in the following:
1) Purchase and sell securities, and subscribe to loans issued or guaranteed by the Public Sector, or buy shares in any entity wherein the Government or governments of emirates members of the Union hold shares, or is granted a concession in the State.
2) Invest in projects, investment funds and financial institutions not licensed by the Central Bank.
3) Acquire real estate, equity and movable properties and all related matters.
Article (48): Appointment of External Parties to Manage Foreign Reserves and Own Funds
The Central Bank may appoint external parties to manage its Foreign Reserves and Own Funds, in accordance with the investment policy and guidelines set by the Board of Directors.
Chapter Six: Miscellaneous Provisions
Article (49): Establishment of Companies and Commercial or Financial Institutions
The Central Bank may, for the purpose of achieving its objectives and discharging its functions, as per provisions of Article 4 of this Decretal Law, establish, or partner with any other agency in establishing companies and commercial or financial institutions, or for any specific purpose, inside the State or in other jurisdictions, and may carry on any commercial activity, own moveable and immoveable property, as per the regulations issued by the Board of Directors.
Article (50): Privilege and Guarantee of Own Rights
1) Debts of the Central Bank shall enjoy the privilege Government debts have, over property of its debtors. The Central Bank’s debts shall be collected in the same manner and by the same means prescribed for collection of Government debts and property.
2) Save for the Reserve Requirements referred to in Article (32) hereof, the Central Bank shall have privilege over the property of Licensed Financial Institutions for payment of all its claims and dues of cash balances or assets which constitute guarantees for these claims and dues, upon maturity thereof.
3) The Central Bank may purchase, by agreement or by forced sale, or acquire real estate and movable property in settlement of its debts. Such property must be sold within the shortest possible period of time, unless the Central Bank decided to use it for the conduct of its business, in accordance with this Decretal Law.
4) The Central Bank must obtain sufficient guarantees to ensure the fulfillment of its rights, including mortgage, pledge or waiver.
5) In case its secured rights were not paid upon maturity thereof, the Central Bank may, after ten (10) days from the date its debtor was duly notified, proceed with sale of any pledged assets, without prejudice to Central Bank’s right to initiate other legal proceedings against the debtor, until its secured rights were fully paid.
6) Sale of pledged property pursuant to provisions of item (5) of this article shall be carried out by the competent court upon request of the Central Bank.
7) The Central Bank shall collect its dues from proceeds of the sale carried out pursuant to provisions of item (6) of this article. Should such proceeds exceed the Central Bank’s dues; the surplus shall be deposited with the Central Bank, at the debtor’s disposal, without paying any interest.
This article has been amended by Decretal Federal Law No. (09) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 26/07/2021)1) Debts of the Central Bank shall enjoy the privilege Government debts have, over property of its debtors. The Central Bank’s debts shall be collected in the same manner and by the same means prescribed for collection of the Government debts and property.
2) Save for the Reserve Requirements referred to in Article (32) hereof, the Central Bank shall have privilege over the property of Licensed Financial Institutions for payment of all its claims and dues of cash balances or assets which constitute guarantees for these claims and dues, upon maturity thereof.
3) The Central Bank may purchase, by agreement or by forced sale, or acquire immovable property in settlement of its debts. Such property must be sold within the shortest possible period of time, unless the Central Bank decided to use it for the conduct of its business, in accordance with this decretal law.
4) The Central Bank may accept, by way of mortgage, pledge or assignment, real estate and movable property, as collateral for payment of its rights.
5) In case its secured rights were not paid upon maturity thereof, the Central Bank may, after ten (10) days from the date its debtor was duly notified, proceed with sale of any pledged assets, without prejudice to Central Bank’s right to initiate other legal proceedings against the debtor, until its secured rights were fully paid.
6) Sale of pledged property pursuant to provisions of item (5) of this article shall be carried out by the competent court upon request of the Central Bank.
7)The Central Bank shall collect its dues from proceeds of the sale carried out pursuant to provisions of item (6) of this article. Should such proceeds exceed the Central Bank’s dues; the surplus shall be deposited with the Central Bank, at the debtor’s disposal, without paying any interest
Article (51): Financial Exemptions
1) The Central Bank shall be exempt from the following:
- a. Taxes, fees, and payments relating to its capital, reserves, Currency issuance, or income.
- b. Taxes, fees, and payments relating to its contribution, shares, or profits originating from companies and establishments it owns part of its capital.
2) The Central Bank and the companies and establishments it owns the majority of its shares shall be exempt from Court fees and bail bonds required by law.
Article (52): Security of Premises and Safe Transport of Funds and Valuables
The Government shall provide security for the Central Bank’s premises, and the security escort needed for the safe transport of funds and valuables, free of charge.
Article (53): Dissolution of the Central Bank
The Central Bank shall not be dissolved except by a law specifying the manner and timing of its liquidation.
Part II – Currency –
Chapter One: Currency Unit and Issuance
Article (54): Currency Unit
The official Currency of the State “The Dirham” shall be referred as (إ هـ د) in Arabic letters and as (AED) in Latin letters and is subdivided into one hundred (100) fills.
Article (55): Currency Issuance
Issuance of Currency shall be the exclusive right of the State. This right shall be exercised solely and exclusively by the Central Bank.
No Person shall issue or put into circulation Currency, Currency coins, or any instrument or token payable to bearer on demand having the appearance of, or purporting to be, or are likely to pass as, or be confused with legal tender in the State or in any other country.
This article has been amended by Decretal Federal Law No. (54) of 2023. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 02/10/2023)1) Issuance of Currency shall be the exclusive right of the State. This right shall be exercised solely and exclusively by the Central Bank.
2) No Person shall issue or put into circulation Currency notes, Currency coins, or any instrument or token payable to bearer on demand having the appearance of, or purporting to be, or are likely to pass as, or be confused with legal tender in the State or in any other country.
Article (56): Currency Legal Tender
Currency notes and digital currency issued by the Central Bank shall be legal tender for payment of any amount up to their full face value.
Currency coins issued by the Central Bank shall be legal tender in the State for payment of any amount with its full face value, and not exceeding fifty (50) Dirhams. Nevertheless, should such Currency coins be presented to the Central Bank, the latter must accept them without any limitation to its quantity.
This article has been amended by Decretal Federal Law No. (54) of 2023. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 01/11/2023)1) Currency notes issued by the Central Bank shall be legal tender for payment of any amount up to their full face value.
2) Currency coins issued by the Central Bank shall be legal tender in the State for payment of any amount with its full face value, and not exceeding fifty (50) Dirhams. Nevertheless, should such Currency coins be presented to the Central Bank, the latter must accept them without any limitation to its quantity.
Article (57): Currency Specifications, Features and Denominations
1) Currency notes issued by the Central Bank shall be of such denominations, designs, and specifications, and bear such features as shall be decided by the Board of Directors. Currency notes shall bear the signature of the Chairman of the Board of Directors.
2) The Board of Directors shall determine the weight, composition, mix ratios, allowed variation, and all other specifications of Currency coins as well as the quantities of each denomination to be minted.
3) The Central Bank shall make necessary arrangements for printing of Currency notes referred to in item (1) of this article, and minting of Currency coins referred to in item (2) of this article, along with all matters relating to such printing, minting and safekeeping of such Currency notes and coins and the relative plates and dies.
4) The Central Bank shall issue the forms, designs, and specifications of the digital currency, the conditions and controls for its possession, and other features determined by the Board of Directors.
5) The Central Bank shall publish decisions to issue Currency by the specifications, designs and all other features, in the Official Gazette.
This article has been amended by Decretal Federal Law No. (09) of 2021.and Decretal Federal Law No. (54) of 2023 respectively. You are viewing the latest version. To view the previous versions, click the version box below.Version 2(effective from 26/07/2021 to 01/11/2023)1) Currency notes issued by the Central Bank shall be of such denominations, designs, and specifications, and bear such features as shall be decided by the Board of Directors. Currency notes shall bear the signature of the Chairman of the Board of Directors.
2) The Board of Directors shall determine the weight, composition, mix ratios, allowed variation, and all other specifications of Currency coins as well as the quantities of each denomination to be minted.
3) The Central Bank shall make necessary arrangements for printing of Currency notes referred to in item (1) of this article, and minting of Currency coins referred to in item (2) of this article, along with all matters relating to such printing, minting and safekeeping of such Currency notes and coins and the relative plates and dies.
4) The Central Bank shall publish decisions to issue Currency by the specifications, designs and all other features, in the Official Gazette.
Version 1(effective from 31/10/2018 to 26/07/2021)1) Currency notes issued by the Central Bank shall be of such denominations, designs, and specifications, and bear such features as shall be decided by the Minister upon the proposal of the Board of Directors. Currency notes shall bear the signature of the Minister and the Chairman of the Board of Directors.
2) The Minister shall, upon proposal of the Board of Directors, determine the weight, composition, mix ratios, allowed variation, and all other specifications of Currency coins as well as the quantities of each denomination to be minted.
3) The Central Bank shall make necessary arrangements for printing of Currency notes referred to in item (1) of this article, and minting of Currency coins referred to in item (2) of this article, along with all matters relating to such printing, minting and safekeeping of such Currency notes and coins and the relative plates and dies.
4) The Central Bank shall publish decisions to issue Currency by the specifications, designs and all other features, in the Official Gazette.
Article (58): Gold and Silver Coins and Commemorative Coins
1) The Board of Directors shall determine conditions for sale and purchase of gold and silver coins at the Central Bank.
2) The Central Bank may issue commemorative Currency notes or coins for any wishing party, in accordance with the rules and conditions set by the Board of Directors.
3) The Board of Directors, determine the denominations, fineness, and weights, measurements, allowed variation, and all other specifications of gold and silver coins, as well as the quantities of each denomination to be minted.
4) The Central Bank shall make necessary arrangements for minting of gold and silver coins referred to in this article, along with all matters relating to such minting and safekeeping of such coins and the relative plates and dies.
This article has been amended by Decretal Federal Law No. (09) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 26/07/2021)1) The Board of Directors shall determine conditions for sale and purchase of gold and silver coins at the Central Bank.
2) The Central Bank may issue commemorative Currency notes or coins for any wishing party, in accordance with the rules and conditions set by the Board of Directors.
3) The Minister shall, upon proposal of the Board of Directors, determine the denominations, fineness, and weights, measurements, allowed variation, and all other specifications of gold and silver coins, as well as the quantities of each denomination to be minted.
4) The Central Bank shall make necessary arrangements for minting of gold and silver coins referred to in this article, along with all matters relating to such minting and safekeeping of such coins and the relative plates and dies.
Chapter Two: Currency Circulation and Withdrawal
Article (59): Currency Notes
1) New Currency notes shall be put in circulation by a Board of Directors decision specifying their denominations and quantities. Such decision shall be published in the Official Gazette and communicated to the public through appropriate media.
2) The Board of Directors may, after approval of the Cabinet, withdraw from circulation any denomination of Currency notes against payment of their face value. Such decision shall be published in the Official Gazette and communicated to the public through appropriate media.
3) The withdrawal decision shall specify the time limit allowed for exchange, which shall not be less than three (3) months from date of publication of the decision in the Official Gazette. Such time limit may, if necessary, be reduced to fifteen (15) days.
4) Currency notes not presented for exchange prior to expiry of the time limit stated in item (3) of this article shall cease to be legal tender and may not be negotiated. However, holders of such Currency notes shall have the right to redeem them, at face value, at the Central Bank, within ten (10) years from the effective date of the withdrawal decision. Currency notes not exchanged upon expiry of said ten-year period must be taken out of circulation and their value shall be credited to Central Bank account.
5) The Central Bank shall, in pursuance to the provision of item (4) of this article, destroy the Currency notes withdrawn from circulation in accordance with the instructions issued by the Central Bank in this respect.
6) The Central Bank shall be under no obligation to refund the value of any lost or stolen Currency notes, or to accept or pay for counterfeit Currency notes.
7) The Central Bank shall pay value of torn, mutilated or imperfect Currency notes, which satisfy the requirements to be prescribed by the Central Bank in this regard. Currency notes not satisfying those requirements shall be withdrawn from circulation without any compensation to bearers.
Article (60): Currency Coins
1) Currency coins of various denominations shall be put into circulation by a Board of Directors decision specifying their respective quantities. This decision shall be published in the Official Gazette and communicated to the public through appropriate media.
2) Any denomination of the Currency coins referred to in item (1) of this article may be withdrawn, by a decision of the Board of Directors, against payment of their face value. Such decision shall be published in the Official Gazette and communicated to the public through appropriate media.
3) The withdrawal decision shall specify the time limit for exchange, which shall not be less than six (6) months from date of publication of the decision in the Official Gazette.
4) Currency coins not exchanged prior to expiry of the period referred to in item (3) of this article shall cease to be legal tender and may not be negotiated and must be taken out of circulation and their value shall be credited to Central Bank account.
5) Should Currency coins lose their features, become deformed, diminished or changed in shape for any reason other than normal use, the Central Bank must withdraw such coins from circulation without compensating their holders.
Article (60) bis: Digital Currency
1) The Board of Directors shall issue a decision for the types of Digital Currency to be put in circulation and redeemed in exchange for payment of its face value, such decision shall be published in the Official Gazette and broadcasted to the public through appropriate media.
2) The Central Bank shall be under no obligation to refund the value of any digital currency that is lost, seized or tampered with, or to accept or pay for any counterfeit currency.
Article (61): Currency Mutilation, Destruction and Shredding
No Person is permitted to mutilate/deform, destroy or shred Currency, in whichever manner. The Board of Directors shall issue regulations on replacement of mutilated, destroyed or shredded Currency.
Chapter Three: Monetary Base
Article (62): Monetary Base Cover
The Central Bank shall, at all times, hold reserves of foreign assets, to cover the Monetary Base, in accordance with provisions of Article (63) of this Decretal Law. Such reserves of foreign assets shall consist of one or more than one of the following items:
1) Gold bullion and other precious metals.
2) Cash, deposits and other monetary and payment instruments denominated in foreign currencies, freely convertible in global financial markets, including digital currencies issued by central banks and other monetary authorities.
3) Securities denominated in foreign currencies and issued or guaranteed by foreign governments and their related companies, entities, institutions, and agencies, or by international monetary and financial institutions, or by multinational corporations, and are tradable in global financial markets.
This article has been amended by Decretal Federal Law No. (54) of 2023. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 01/11/2023)The Central Bank shall, at all times, hold reserves of foreign assets, to cover the Monetary Base, in accordance with provisions of Article (63) of this decretal law. Such reserves of foreign assets shall consist of one or more than one of the following items:
1) Gold bullion and other precious metals.
2) Cash, deposits and other monetary and payment instruments denominated in foreign currencies, freely convertible in global financial markets.
3) Securities denominated in foreign currencies and issued or guaranteed by foreign governments and their related companies, entities, institutions, and agencies, or by international monetary and financial institutions, or by multinational corporations, and are tradable in global financial markets.
Article (63): Foreign Reserves for the Monetary Base Cover
1) The market value of balance of the Foreign Reserves referred to in Article (62) of this Decretal Law, shall not, at any time, be less than seventy percent (70%) of the value of the Monetary Base.
2) The Board of Directors may reduce the Monetary Base cover ratio, referred to in item (1) of this article for a period not exceeding twelve (12) months.
Part III – Organization of Licensed Financial Institutions and Activities
Chapter One: General Provisions
Article (64): Prohibition of Carrying on or Promoting Financial Activities Without a License
1) Licensed Financial Activities may only be carried on, in or from within the State, in accordance with the provisions of this Decretal Law, and the rules and regulations issued in implementation thereof.
2) Promotion of any of the Licensed Financial Activities and financial products may only be carried on in or from within the State, in accordance with the provisions of this Decretal Law, and the rules and regulations issued in implementation thereof. The promotion referred to in this item shall mean any form of communication, by any means, aimed at inviting or offering to enter into any transaction, or offering to conclude any agreement related to any of the Licensed Financial Activities.
3) The Board of Directors may issue the rules, regulations, standards and directives relating to the prohibition to carry on Licensed Financial Activities without prior licensing and to the prohibition to promote Licensed Financial Activities and financial products, and shall take all necessary measures and actions in this regard.
4) The Board of Directors may exempt any activities or practices, or exempt natural or juridical persons, either generally or in particular, from the prohibition to carry on or promote Licensed Financial Activities.
Chapter Two: Licensing
Section One: Licensed Financial Activities
Article (65): Financial Activities
1) The following activities shall be considered financial activities subject to Central Bank licensing and supervision in accordance with the provisions of this Decretal Law:
- a. Taking deposits of all types, including Shari’ah-compliant deposits.
- b. Providing credit facilities of all types.
- c. Providing funding facilities of all types, including Shari’ah-compliant funding facilities.
- d. Providing currency exchange and money transfer services.
- e. Providing monetary intermediating services.
- f. Providing stored values services, electronic retail payments and digital money services.
- g. Providing virtual banking services.
- h. Arranging and/or marketing for Licensed Financial Activities.
- i. Acting as a principal in financial products that affect the financial position of the Licensed Financial Institution, including but not limited to foreign exchange, financial derivatives, bonds and sukuk, equities, commodities, and any other financial products approved by the Central Bank.
2) The Board of Directors shall:
- a. Classify and define Licensed Financial Activities and the practices relating thereto.
- b. Add activities or practices to the list of Licensed Financial Activities mentioned in item (1) of this article, or delete activities or practices from the list, or amend them, following coordination and agreement with the Regulatory Authorities in the State, through the Financial Activities Committee referred to in Article (66) of this Decretal Law.
3) In case a Licensed Financial Institution wishes to carry on activities licensed by Regulatory Authorities in the State or the regulatory authorities in other jurisdictions, other than the activities referred to in item (1) of this article, such institution must obtain approval of the Central Bank, prior to obtaining licensing from the concerned regulatory authority.
Article (66): Financial Activities Committee
1) A technical committee named the ‘Financial Activities Committee’ shall be established in the Ministry by a Cabinet resolution, chaired by the Ministry and include in its membership a representative of each of the Regulatory Authority in the State. The mentioned committee shall look into and provide opinion on any proposal to regulate a financial activity other than those mentioned in the laws of regulatory authorities. The resolution shall specify the committee’s terms of reference and the mechanism for discharge of its functions.
2) The approval of the concerned Regulatory Authority shall be obtained in case the financial activities committee suggest adding a specific financial activity not mentioned in its law to the list of activities under its licensing and regulation.
Section Two: Licensing of Financial Institutions
Article (67): Application for Licensing
1) Any Person may, in accordance with the regulations issued by the Board of Directors, submit to the Central Bank an application for a license to carry on one or more Licensed Financial Activities or the addition of one or more Licensed Financial Activities to an already issued license.
2) The Board of Directors shall issue rules, regulations and standards, and determine conditions for granting license to carry on Licensed Financial Activities, including the following:
- a. Fit and proper criteria.
- b. Resources required for carrying on the activity.
- c. Control and monitoring systems.
3) The Board of Directors may add any requirements or conditions to be fulfilled by the applicant for license, at its own discretion and as it deems appropriate for safeguarding public interest.
Article (68): Compliance with Scope of the License
1) A licensed financial institution must carry on its business within the scope of the license granted to it.
2) No Person may represent that it is a Licensed Financial Institution, if such is not the case.
Article (69): Deciding on Licensing Application or Extension of License Scope
1) Deciding on licensing application or extension thereof shall be within a period not exceeding sixty (60) working days from date of meeting all conditions and requirements for licensing. The lapse of this period without decision on the application shall be considered a rejection thereof.
2) The Central Bank may require the applicant to fulfill licensing requirements and conditions within such period as specified by the Central Bank.
3) The Central bank may reject an application for a license, or an application to add any financial activity based on the capacity of the financial sector in the State and the needs of the local market. Such decision issued in this regard shall be final and not subject to appeal before the Grievances and Appeals Committee.
4) The applicant shall be notified, officially, of the reasoned rejection decision within a period not exceeding twenty (20) working days from date of its issue.
This article has been amended by Decretal Federal Law No. (23) of 2022. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 02/01/2023)1) Deciding on licensing application or extension thereof shall be within a period not exceeding sixty (60) working days from date of meeting all conditions and requirements for licensing. The lapse of this period without decision on the application shall be considered an implicit rejection thereof.
2) The Board of Directors may reject an application for a license, or an application to add any financial activity based on the capacity of the financial sector in the State and the needs of the local market.
3) The Board of Directors may, before issuing the rejection decision, request the applicant to fulfill licensing requirements and conditions within such period as specified by the Board of Directors.
4) The applicant shall be notified, officially, of the reasoned rejection decision within a period not exceeding twenty (20) working days from date of its issue. Such notice shall include the following:
- a. Content of the rejection decision.
- b. Reasons for rejection.
- c. A statement advising the applicant of his right to submit a grievance against the rejection decision, by applying to the Grievances & Appeals Committee, in accordance with the provisions of this decretal law.
Article (70): Imposing Conditions and Restrictions on a License
1) The Board of Directors may impose conditions or restrictions, or otherwise change or cancel conditions or restrictions imposed on a license for carrying on Licensed Financial Activities.
2) The Board of Directors may, before issuing the decision mentioned in item (1) of this article, request the concerned financial institution to provide its opinion on the reasons for the decision, within such period as specified.
3) The licensed financial institution shall be notified, officially, of the reasoned decision within a period not exceeding twenty (20) working days from date of its issue. The notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the licensed financial institution of its right to submit a grievance against the decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
Article (71): Suspension, Withdrawal, or Revocation of License
1) The Board of Directors may suspend, withdraw, or revoke a license issued to a Licensed Financial Institution, in the following cases:
- a. If the Licensed Financial Institution ceased to meet, or breached one or more of the conditions or restrictions imposed on the license.
- b. If the Licensed Financial Institution breached any of the State’s established laws and regulations, or the regulations, rules, standards, instructions, and guidelines issued by the Central Bank.
- c. If the Licensed Financial Institution failed to take any measures or actions determined or prescribed by the Central Bank.
- d. If the Licensed Financial Institution ceased to carry on one or more of the Licensed Financial Activities, for a period exceeding one year.
- e. If the business or operations were ceased for a period exceeding one year.
- f. If the Central Bank considered, at its own discretion, that the full or partial withdrawal, revocation, or suspension of the license, was necessary for achieving its objectives and discharging its functions.
- g. If the concerned Licensed Financial Institution submitted an application for full or partial suspension or revocation of the license.
- h. If the Licensed Financial Institution’s liquidity or solvency was at risk.
- i. If the capital of the Licensed Financial Institution fell below the minimum required in accordance with the provisions of this Decretal Law, or the regulations, rules, or standards issued by the Central Bank.
- j. If the Licensed Financial Institution merged with another financial institution.
- k. If the Licensed Financial Institution was declared bankrupt.
- l. If the Licensed Financial Institution’s officers, employees, or representatives refused to cooperate with Central Bank officers, representatives, or examiners or abstained from providing required information, statements, documents, or records.
- m. If the license of a foreign Licensed Financial Institution was revoked, or if it was put under liquidation at its domicile, or if the businesses of its branch, companies or Representative Offices in the State were wound down.
2) The Licensed Financial Institution shall be notified, officially, of the reasoned withdrawal, cancellation or suspension decision within a period not exceeding twenty (20) working days from date of its issue. The notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the Licensed Financial Institution of its right to submit a grievance against the decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
3) The decision issued by the Central Bank shall, following decision on the grievance or appeal, if presented to the Grievances and Appeals Committee, or expiry of the period specified in item (2) of this article, be published in two local newspapers, one in Arabic and another in English, and on the Central Bank’s official website. Such decision may also be announced by any other means if necessary.
Article (72): Use of Term “Bank” or “Masraf”
1) Entities other than Banks licensed in accordance with the provisions of this decretal law may not use, in their business addresses or advertisements, the expressions “Bank”, “Masraf” or any other expression derived therefrom or similar thereto, in any language, and in any way which may mislead the public as to the nature of their business.
2) The following entities shall be not be subject to the provisions of item (1) of this article:
- a. Monetary authorities and Central Banks.
- b. Any federation or association established for protection of Banks’ interests.
- c. Any other institution exempted by the Board of Director.
Article (73): Entry to the Register
1) An electronic register named “Register of Licensed Financial Institutions” shall be created in the Central Bank, to which names of Licensed Financial Institutions and all their data and any amendments thereto, shall be entered. A decision setting the rules and conditions for entry to such register shall be issued by the Board of Directors. Decision to license such institutions and any amendments thereto, shall be published in the Official Gazette. This register shall be published on the Central Bank’s official website.
2) A Licensed Financial Institution may not commence any Licensed Financial Activity except after its name was entered to the register.
3) Proceeds of licensing and entry to the register fees shall be deposited in a special account with the Central Bank. A decision shall be issued by the Board of Directors organizing operation of the account, and setting rules for withdrawing funds from it.
Article (74): Legal Form
1) Banks shall take the form of public joint- stock companies, with incorporating law or decree so permits. Branches of foreign banks operating in the State, and specialized banks with low risks that are determined according to the conditions and rules set by the Board of Directors shall be exempt from this requirement.
2) Other Financial Institutions may take the form of joint- stock companies or limited liability companies, in accordance with the rules and conditions issued by the Board of Directors.
3) Exchange Houses and monetary intermediaries may be a sole proprietorship, or take any other legal form in accordance with the rules and conditions issued by the Board of Directors.
This article has been amended by Decretal Federal Law No. (25) of 2020. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 02/01/2021)1) Banks shall take the form of public joint- stock companies, with incorporating law or decree so permits. Branches of foreign banks operating in the State shall be exempt from this requirement.
2) Other Financial Institutions may take the form of joint- stock companies or limited liability companies, in accordance with the rules and conditions issued by the Board of Directors.
3) Exchange Houses and monetary intermediaries may be a sole proprietorship, or take any other legal form in accordance with the rules and conditions issued by the Board of Directors
Article (75): Minimum Capital Requirements
The Board of Directors shall establish regulations on the minimum capital requirement for Licensed Financial Institutions, and conditions and instances of increase or decrease of capital, and shall determine its risk-based requirements, and the necessary actions to be taken in case of capital shortfall, in addition to the measures taken by the Central Bank in this regard.
Article (76): Shareholding and Ownership in Licensed Financial Institutions
1) Without prejudice to the financial and commercial activities restricted to UAE nationals prescribed in any other law, the Board of Directors shall determine the conditions and controls for ownership of shares of Banks incorporated in the State and shareholdings contribution in their capital, and in all cases the national shareholding must not be less than sixty percent (60%).
2) The Board of Directors may determine the conditions, controls for percentage of ownership of shares and shareholdings contribution in the capital of Other Financial Institutions incorporated in the State by nationals and foreigners.
Article (77): Amendment of the Memorandum and Articles of Association
1) Licensed Financial Institutions shall request the Central Bank’s approval for amendments they wish to introduce to their memorandum or articles of association. Such amendments shall only take effect after they were entered into the register.
2) The Central Bank shall decide on the application. Should the Central Bank decided to reject the application to enter the amendment, the matter shall be submitted to the Board of Directors whose decision in that respect shall be final.
Section Three: Provisions for Islamic Licensed Financial Institutions
Article (78): Scope of Activity
1) Licensed Financial Institutions that carry on all or part of their activities and business in accordance with the provisions of Islamic Shari’ah may carry on the Licensed Financial Activities mentioned in Article (65) of this decretal law, whether for themselves or on behalf of others or in partnership with third parties, provided such business and activities are in compliance with the provisions of Islamic Shari’ah. The Board of Directors shall issue regulations specifying the activities, conditions, rules, and operating standards for these institutions, in a manner commensurate with the nature of the license granted to them.
2) Licensed Financial Institutions mentioned in item (1) of this article shall, in respect of their Shari’ah-compliant business and activities initiated on behalf of their customers and not for themselves, be exempted from:
- a. Provisions of item (1) of Article (93) of this decretal law.
- b. Provisions of item (2) of Article (93) of this decretal law, insofar as such exemption does not contradict the provisions of local legislations applicable in the relevant member Emirate of the Union.
Article (79): Internal Shari’ah Supervision
1) An independent committee referred to as “Internal Shari’ah Supervisory Committee” shall be established within each Licensed Financial Institution that conducts all or part of its activities and business in accordance with the provisions of Islamic Shari’ah. Membership of this committee shall consist of experienced specialists in jurisprudence of Islamic financial and banking transactions. The said committee shall undertake Shari’ah supervision of all business, activities, products, services, contracts, documents, and business conduct charters of the concerned institution and shall approve them and establish the necessary Shari’ah requirements applicable to them, within the framework of the rules, principles and standards set by the Higher Shari’ah Authority, in order to ensure compliance with the provisions Islamic Shari’ah. Fatawa or opinions issued by the Committee shall be binding.
2) The Internal Shari’ah Supervisory Committee shall be appointed by the general assembly of the concerned Licensed Financial Institution, in accordance with the provisions of the referenced Commercial Companies law. Names of members of the Internal Shari’ah Supervisory Committee shall be presented to the Higher Shari’ah Authority for approval, prior to presentation to the general assembly and issuance of decision approving their appointment.
3) Members of the Internal Shari’ah Supervisory Committee are prohibited from holding any executive position in the institution referred to in item (1) of this article, or provide services to it outside of the scope of the committee’s assigned scope of work, nor hold shares or have for themselves or for any of their relatives up to the second degree, any interests associated with it.
4) In cases where disagreement arises, over a Shari’ah opinion, between members of the Internal Shari’ah Supervisory Committee, or disagreement between the Internal Shari’ah Committee and the Board of Directors of the concerned financial institution, over the compliance or non-compliance of a particular matter with the provisions of Shari’ah, the disagreement shall be referred to the Higher Shari’ah Authority, whose opinion on the matter shall be final.
5) There shall be established, in each institution referred to in item (1) of this article, a division or internal section, of a size commensurate with the business and activities of the concerned institution, to undertake internal Shari’ah audit and monitor compliance of the concerned institution with the fatawa and opinions of the Internal Shari’ah Supervisory Committee. Such division or section shall report to the Board of Directors of the concerned institution, and its employees shall not have any executive powers or any responsibilities towards the business, activities and contracts which they review or audit from a Shari’ah perspective. The said division or section shall be headed by a Shari’ah controller appointed by the Board of Directors of the concerned institution.
Article (80): Report of the Internal Shari’ah Supervision Committee
1) The Internal Shari’ah Supervisory Committee shall prepare an annual report to be presented to the general assembly of the Licensed Financial Institution, which conducts on all or part of its activities and businesses in accordance with the provisions of Islamic Shari’ah. The report shall take the form specified by the Higher Shari’ah Authority, and shall indicate the extent the management of the concerned institution is compliant with the provisions of Islamic Shari’ah, in all activities, business it conducts, the products it offers, contracts it enters into, and the documentation it uses. The said report shall include the following:
- a. A statement on the extent of independence of the Internal Shari’ah Supervisory Committee when discharging its mandates.
- b. A statement on compliance with the provisions of Islamic Shari’ah during the financial year ending in regards to policies, accounting standards, financial products and services, operations and activities in general, together with the memorandum, articles of association, and financial statements of the relevant institution.
- c. A statement on the compliance of distribution of profits, bearing of losses, costs, and expenses among the shareholders and investment account holders, with the fatawa and opinions of the Internal Shari’ah Supervisory Committee.
- d. A statement on any other breaches of Shari’ah provisions and the controls established by the Higher Shari’ah Authority.
2) The Internal Shari’ah Supervisory Committee shall provide the Higher Shari’ah Authority with copy of its report, no later than two (2) months from end of the financial year, in order for the Authority to express its remarks prior to the meeting of the general assembly of the concerned institution.
Article (81): State Audit Supervision
Where a Licensed Financial Institution, which conducts all or part of its business and activities in accordance with the provisions of Islamic Shari’ah, is subject to the supervision of the State Audit Institution, pursuant to the referenced Re-organization of the State Audit Institution law, the function of the audit institution shall be restricted to post- audit, and shall not interfere in the conduct of business or policies of these institutions.
Article (82): Non-Compliance with the Provisions of Islamic Shari’ah
Where it is established that a financial institution, which conducts on all or part of its business and activities in accordance with the provisions of Islamic Shari’ah, has conducted business that is not compliant with such provisions, as per fatawa and opinions of the Internal Shari’ah Supervisory Committee, and the fatawa and opinions of the Higher Shari’ah Authority, the Central Bank shall inform the concerned institution accordingly, after consulting with the Higher Shari’ah Authority, and shall ask the institution to reconcile its position, under the supervision of the Internal Shari’ah Supervisory Committee, within thirty (30) working days from date of notification. The Central Bank shall take the appropriate corrective measures and corrective actions in case the concerned institution’s inability to reconcile its position.
Section Four: Provisions Relating to Undertaking Designated Functions Subject to Central Bank Authorization
Article (83): Designated Functions
1) The Board of Directors may issue regulations, rules, standards, conditions, and instructions, specifying Designated Functions subject to Central Bank authorization and the individuals who shall be required to obtain Central Bank authorization to undertake them, including fit and proper conditions, and cases of exemption of such conditions and standards.
2) Without prejudice to the provisions of item (1) of this article, Designated Functions subject to Central Bank authorization include those carried out by members of the boards of directors of Licensed Financial Institutions, and their chief executive officers, senior managers, executives, and Authorized Individuals.
3) No individual may undertake any Designated Functions at a Licensed Financial Institution, without obtaining Central Bank’s prior authorization.
4) Licensed Financial Institutions shall take all measures and actions, which ensure that no officer, employee, or any other individual representing them, shall exercise any of the Designated Functions without obtaining prior authorization from the Central Bank.
5) Any Authorized Individual in accordance with the provisions of this article shall abide with limits of powers stated in the authorization.
6) No individual shall introduce himself as an Authorized Individual unless he is authorized by the Central Bank.
Article (84): Application for Authorization to Undertake Designated Functions
1) A Licensed Financial Institution may submit an application to the Central Bank for authorization of any individual to undertake any of the Designated Functions or to undertake additional Designated Functions.
2) The Central Bank may require the applicant to provide all information necessary for enabling it to decide on the application.
3) A Licensed Financial Institution shall notify the Central Bank of any material changes relating to the conditions for granting authorization to undertake the Designated Functions.
Article (85): Deciding on Application for Authorization to Undertake
1) Deciding on application for authorization or extension thereof shall be within a period not exceeding twenty (20) working days from date of meeting all conditions and requirements for authorization. The lapse of this period without decision on the application shall be considered an implicit rejection thereof.
2) The Board of Directors may reject an application for authorization or addition of other Designated Functions to an Authorized Individual if it considered that such rejection would serve public interest or that conditions and requirements for authorization were not fulfilled.
3) The applicant shall be notified, officially, of the rejection decision within a period not exceeding twenty (20) working days from date of its issue. The notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. A statement advising the applicant of his right to submit a grievance against the rejection decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
Article (86): Imposing Conditions and Restrictions to an Authorization to Undertake Designated Functions
1) The Central Bank may decide to add conditions or restrictions to an authorization to undertake Designated Functions.
2) Before issuing the decision referred to in item (1) of this article, the Central Bank may request the concerned Licensed Financial Institution to provide its comments on the reasons for the decision, within such period as it specifies.
3) The Licensed Financial Institution shall be notified, officially, of the decision within a period not exceeding twenty (20) working days from date of its issue. Such notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the Licensed Financial Institution of its right to submit a grievance against the decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
Article (87): Suspension, Withdrawal, or Revocation of Authorization to Undertake Designated Functions
1) The Central Bank may suspend, withdraw, or revoke the authorization issued to an individual undertaking Designated Functions, by an official notice, in the following cases:
- a. If the Authorized Individual ceased to meet, or breached one or more of the fit and proper criteria and other conditions or restrictions imposed on the authorization to undertake Designated Functions.
- b. If the Authorized Individual violated any of the State’s established laws and regulations or the regulations, rules, standards, or guidelines issued by the Central Bank.
- c. If the Authorized Individual failed to take any measures or actions prescribed by the Central Bank.
- d. If the Central Bank considered, that full or partial withdrawal, revocation, or suspension of the authorization, was necessary for achieving its objectives and discharging its functions.
- e. If the Authorized Individual was declared bankrupt.
- f. If the Authorized Individual refused to cooperate with the officials, representatives, or examiners of the Central Bank, or failed to submit required information or records.
2) In all cases, the authorization shall be revoked in case a cancellation application was submitted by the Licensed Financial Institution where the Authorized Individual works or in case of termination of his relationship with such institution.
3) The Licensed Financial Institution, where the Authorized Individual works shall be notified, in writing, of the decision to withdraw, revoke, or suspend the authorization, within a period not exceeding twenty (20) working days from date of its issue. Such notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the concerned Licensed Financial Institution and the Authorized Individual of their right to submit a grievance against the decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
Article (88): Prohibition of Undertaking Designated Functions at Licensed Financial Institutions
1) The Central Bank may prohibit any individual from working, or undertaking Designated Functions related to Licensed Financial Activities if it considered that the concerned individual was not fit and proper to work or undertake such Designated Functions.
2) The concerned Licensed Financial Institution shall be notified, officially, of the decision to prohibit the concerned individual from working or undertaking Designated Functions at it, within a period not exceeding twenty (20) working days from date of its issue. Such notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the Licensed Financial Institution and the concerned individual of their right to submit a grievance against the decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
Chapter Three: Responsibilities of Deposit-Taking Licensed Financial Institutions
Article (89): Compliance with Central Bank’s Instructions
1) Deposit-taking Licensed Financial Institutions shall comply with all rules, regulations, standards, circulars, and directives and instructions issued by the Central Bank with regard to lending or other matters it deems necessary for achieving its objectives.
2) The Central Bank may take all necessary measures and actions, and use means, which would ensure proper conduct of business at deposit-taking Licensed Financial Institutions. Such instructions, directives, measures, procedures, or means, may either be general or individual.
Article (90): Central Bank Risk Bureau
The Risk Bureau at the Central Bank shall undertake compilation, exchange and processing of credit information from Licensed Financial Institutions or any party the Central Bank deems necessary. The said bureau shall operate within the conditions and controls determined by the Board of Directors.
Article (91): Protection of Depositors’ Interests
1) Each deposit-taking Licensed Financial Institution shall prepare a quarterly statement, in the form specified by the Central Bank, indicating all the credit and funding facilities granted by the Licensed Financial Institution to:
- a. Any member of its board of directors.
- b. Any establishment or company where the concerned institution is a partner, manager, agent, guarantor or sponsor.
- c. Any company where a member of the board of directors of the concerned institution is a manager or agent.
- d. Any company where an employee, expert or representative of the concerned institution is a manager, executive officer, agent, guarantor, or sponsor.
- e. Any Person holding controlling interest in the concerned institution, or a related company, as per provisions of Article (95) of this Decretal Law.
- f. Any subsidiary of the group, which owns the concerned institution.
- g. Any company related to the concerned institution, as per the controls set by the Board of Directors.
- h. Any Person, directly or indirectly related to any member of the board of directors of concerned institution, as per the controls set by the Board of Directors.
- i. Any other Person specified by the Board of Directors as per the rules it sets in this regard.
2) The Central Bank shall be provided with copy of the statement referred to in item (1) of this article, within a period of ten (10) days from end of each quarter of the financial year, or date of a request made by the Central Bank in this regard.
3) The Central Bank may take one or more of the actions listed hereunder, If it decided, following review of the statement referred to in item (1) of this article, that any of the credit or funding facilities extended by the Licensed Financial Institution or any exposure to a particular Person may result in damage to the interests of depositors of the concerned Licensed Financial Institution:
- a. Require the concerned institution to allocate provisions for these facilities, or reduce its exposure to a particular Person, within such period and as per such mechanism as it determines.
- b. Prohibit the concerned institution from extending further credit facilities to the concerned Person, or impose specific restrictions on facilities extended to the concerned Person, as it deems appropriate.
Chapter Four: Prohibitions
Article (92): Prohibition of Conducting Specific Operations
1) The Central Bank may prohibit Licensed Financial Institutions from conducting all or some of the following:
- a. Dealing in specific assets, investments, or monetary and financial instruments.
- b. Closing deals, or conduct specific operations or commercial transactions.
- c. Dealing with specific Persons.
2) The Board of Directors may issue rules, regulations and standards relating to the operations referred to in item (1) of this article, and take necessary measures and actions it deems appropriate.
3) The concerned Licensed Financial Institution shall be notified, officially, of Central Bank’s decision within a period not exceeding twenty (20) working days from date of its issue. The notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
4) A statement advising the Licensed Financial Institution of its right to submit a grievance against the decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
Article (93): Prohibition of Carrying on Non-Banking Activities
Banks shall not carry on any non-banking activities, particularly the following activities:
1) Carry on, for its account, commercial or industrial activities or acquire, own or trade in goods, unless the acquisition of such goods was in settlement of debts due from third parties, in which case the goods must be disposed of within the period specified by the Central Bank.
2) Purchase real estate for its own account, except in the following cases:
- a. Real estate that its value does not exceed the ratio set by the Board of Directors relative to its total capital and reserves.
- b. Real estate owned in direct settlement of debt exceeding the ratio mentioned in paragraph (a) of this item and in such a case the sale of these properties within (3) years, and this may be extended by an approval from the Central Bank based on the guidelines set by the Board of Directors.
3) Purchase or acquire or deal in shares of the Bank, in excess of the ratios set by the Board of Directors, unless the excess has devolved to it in settlement of a debt, in which case the Bank must sell the shares in excess of the said ratio, within a period of two (2) years from date of acquisition.
4) Purchase shares of commercial companies, except within the ratio of the Bank’s own funds, as set by the Board of Directors, unless acquired in settlement of a debt, in which case the excess must be sold within two (2) years from date of acquisition.
5) The Board of Directors shall issue regulations to Banks regarding limits for purchasing and dealing in securities issued by any foreign government or their related entities, or by any foreign commercial company. These limits shall not apply to securities issued or guaranteed by the Public Sector.
Article (94): Restrictions on Provision of Credit Facilities
1) As an exception to the provisions of Article (153) of the referenced Commercial Companies Law, Licensed Financial Institutions may extend credit facilities to members of their boards of directors, their employees, and relatives of such Persons as determined by the Board of Directors.
2) The Board of Directors shall determine conditions and requirements for credit facilities, which may be granted to the categories referred to in item (1) of this article.
3) A deposit-taking Licensed Financial Institution shall not offer credit facilities to its customers against their shares therein.
4) The Board of Directors shall issue regulations, to deposit-taking Licensed Financial Institutions, regarding the limits for credit facilities extended for the purpose of constructing residential or commercial buildings.
Chapter Five: Supervision and Oversight of Licensed Financial Institutions
Section One: Provisions Relating to Supervision and Oversight
Article (95): Provisions relating to Holders of Controlling Interests
1) A Person shall not hold controlling interest, or increase controlling interest in any Licensed Financial Institution, nor exercise powers, which render him a de facto holder of controlling interest, at the discretion of the Central Bank, unless he obtains Central Bank’s prior approval.
2) A Licensed Financial Institution shall also not allow any Person to hold controlling interest therein, unless it obtains Central Bank’s prior approval.
3) The Board of Directors shall issue regulations, rules, standards, conditions, instructions, and restrictions relating to interests and instances of control.
Article (96): Opening Branches Inside the State and in Other Jurisdictions
A Licensed Financial Institution shall not establish any branch or representative office inside the State or in other jurisdictions, or relocate or closedown any existing branch without Central Bank’s prior approval.
Article (97): Providing the Central Bank with Information and Reports
1) Licensed Financial Institutions shall:
- a. Provide the Central Bank with reports, information, statements and other documents, which it determined and considered necessary for achieving its objectives and discharge its functions.
- b. Appoint qualified employees and assign them the task of preparing the reports required by the Central Bank.
- c. Take appropriate measures to ensure that the Person assigned, in accordance with the paragraph (b) of this item, obtains the information required for preparation of the reports.
2) Licensed Financial Institutions are prohibited from issuing instructions or directives, or agree with any manager, officer, an employee working for it, an agent representing it, or auditor of its accounts, to decline to provide the Central Bank with the requirements referred to in item (1) of this article.
3) The Central Bank shall establish rules and guidelines for periodical compilation of information from Licensed Financial Institutions.
4) The Central Bank shall determine the nature, forms and frequency of submission of information. Licensed Financial Institutions shall provide such information in accordance with the instructions issued by the Central Bank in this regard.
5) The provisions of this article shall apply to branches of foreign Licensed Financial Institutions operating in the State.
6) The Board of Directors shall issue regulations, rules, standards, and instructions regarding provision of the requirements referred to in this article, and may take all the measures and actions against the concerned institution or any of its employees referred to in paragraph (b) of item (1) of this article.
Article (98): Reporting of Violations
1) Licensed Financial Institutions, along with their legal representatives, compliance officers, and auditors of accounts shall be responsible for, immediate reporting of any of the following to the Central Bank:
- a. Occurrence of any material or crucial developments, which may impact its activities, structure, or overall position.
- b. Occurrence of any violation to the provisions of this Decretal Law or the decisions, regulations, or instructions issued in implementation thereof.
2) The aforementioned Persons referred to in item (1) of this article shall not be considered to have breached any of their obligations if they, acting in good faith, filed a report as per provisions of this article, or provided information or opinion to the Central Bank. The Licensed Financial Institution shall not dismiss those mentioned in item (1) of this article without obtaining approval of the Central Bank.
3) The Central Bank shall establish a mechanism for accepting notifications concerning violations referred to in item (1) of this article.
Article (99): Submission of Data on Financial Position, Required by the Central Bank
1) Each Licensed Financial Institution shall be required to provide the Central Bank with the statements and reports relating to its financial position.
2) Each Licensed Financial Institution shall be required to provide the Central Bank, within a period not exceeding three (3) months from end of the financial year, or within such period as the Central Bank may specify, with the following:
- a. Copy of the audited balance sheet, showing use of assets and liabilities arising from operations of the concerned institution.
- b. Copy of the audited profit and loss account, and any related notes.
- c. Copy of report of auditors of accounts of the concerned institution.
- d. Copy of report of the board of directors of the concerned institution.
3) The Central Bank may also require the Licensed Financial Institution to provide the following:
- a. Copy of the interim profit and loss account, on semi-annual basis, or for other periods specified by the Central Bank.
- b. Any other additional reports, data or information it deems necessary.
Article (100): Merger and Acquisition
1) A Licensed Financial Institution shall not merge with or acquire any other institution, regardless of its type of activity, nor transfer any part of its liabilities to another Person, without obtaining Central Bank’s prior approval.
2) Without prejudice to the established legislation in the State concerning merger and acquisition, the Board of Directors may issue all regulations, rules, standards, conditions, instructions, and directives pertaining to merger and acquisition.
3) The Licensed Financial Institution shall be notified, officially, of the Central Bank’s decision rejecting the proposed merger or acquisition within a period not exceeding twenty (20) working days from date of its issue. The notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the concerned Licensed Financial Institution of its right to submit a grievance against the decision, by applying to the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
Article (101): Cessation of Business
A Licensed Financial Institution shall not cease to operate, fully or partially or suspend its operations, or cease to carry-on all or part of its Licensed Financial Activities without approval of the majority of its shareholders and approval of the Central Bank.
Article (102): Authority to Issue Instructions and Directives for Prudential Purposes
1) The Board of Directors shall, for the purposes of prudential supervision, issue necessary instructions and directives to a particular Licensed Financial Institution, or to a number of Licensed Financial Institutions within a specific category, relating to:
- a. Compliance with Central Bank instructions and directives relating to prudential ratios determined by the Board of Directors, regarding capital adequacy and liquidity or any other purposes.
- b. Compliance with the required provisions, or processing of specific assets.
- c. Adherence to limits of credit exposures.
- d. Adherence to limits of exposures to related parties.
- e. Satisfying any additional requirements relating to reporting.
2) The Central Bank may take any additional actions to those mentioned in item (1) of this article.
3) The Central Bank may instruct any subsidiary of a Licensed Financial Institution to take particular actions, or refrain from carrying on particular activities, in the following cases:
- a. If the Central Bank is the consolidated regulatory authority of the entities referred to in this item.
- b. If the Central Bank decided that such instruction is necessary for the exercise of effective and consolidated prudential supervision of the entities referred to in this item.
4) The instructions and directives referred to in item (3) of this article may include the following:
- a. Require the subsidiary of the concerned Licensed Financial Institution to suspend provision of particular services, or carrying on particular businesses or activities, or even closing down any of its offices or branches outside the State, if such services, businesses or activities may expose the concerned Licensed Financial Institution to additional risk, or to risks that cannot be managed effectively and appropriately.
- b. Require the subsidiary of the concerned Licensed Financial Institution to take all necessary actions to remove any impediments that may hinder effective consolidated supervision.
Article (103): Maximum Limits of Operations
The Central Bank may set maximum limits to which deposit-taking Licensed Financial Institutions shall adhere to in their operations, which include the following:
1) The maximum amount of total deduction operations or loans and advances the Licensed Financial Institution is allowed to conduct, as of a certain date.
2) The maximum amount the Licensed Financial Institution may lend to a single Person, relative to the Person’s own funds.
3) Any other limits the Central Bank may determine.
Article (104): Governance of Licensed Financial Institutions
1) The Central Bank shall establish a general framework for governance of Licensed Financial Institutions, and shall issue rules and regulations relating to organization of works of their boards of directors and shall determine the conditions to be met by nominees for membership of their boards of directors, and the requirements and conditions for appointment of their senior staff; provided that Licensed Financial Institutions listed in the State’s financial markets shall adhere to the minimum requirements of corporate governance set by the concerned regulatory authority.
2) Licensed Financial Institutions must obtain Central Bank’s prior approval for appointment, nomination of any Person for membership of their boards of directors or renewal of his membership, and appointment or renewal of the employment contract of any of their senior staff.
3) The Board of Directors may, as may be required to safeguard public interest, reject any Person’s nomination, appointment, or renewal of his membership in the board of directors of a Licensed Financial Institution, and may also reject appointment or renewal of the employment contract of any of its senior staff.
Article (105): Rulebook
The Central Bank shall prepare an electronic guide, which includes all regulations, rules, standards, decisions, and circulars issued by the Central Bank in accordance with the provisions of this decretal law. Such guide shall be published and regularly updated on the Central Bank’s website.
Article (106): Retroactive Effect of Central Bank Regulations and Decisions
The regulations, decisions, and circulars issued by the Central Bank in accordance with the provisions of this Decretal Law shall have no retroactive effect, and shall not prevent implementation of agreements concluded between Licensed Financial Institutions and their customers prior to their issuance. The Central Bank shall determine the required transitional period for Licensed Financial Institutions to reconcile their respective positions, according to the provisions of this Decretal Law.
Article (107): Examination
1) The Central Bank may, at any time, dispatch any of its staff or any third party authorized to act on its behalf to Licensed Financial Institutions and their owned companies or subsidiaries, if it deemed necessary to ensure soundness of their financial positions, and their compliance with the provisions of this Decretal Law and the regulations and decisions issued in implementation thereof, and other established laws and regulations in the State.
2) In case of the conduct of examination of companies owned by Licensed Financial Institutions and their subsidiaries, which are regulated by any of the Regulatory Authorities in the State or in other jurisdictions, the Central Bank shall coordinate with the concerned regulatory authority in this regard.
3) The Central Bank may, in coordination with the concerned agencies in the State, inspect premises of any Person suspected of carrying on any of the financial activities referred to in Article (65) of this Decretal Law, without a license. The Central Bank may, in this respect, require the suspected Person to provide all information, documents, and records relating to the unlicensed financial activities, and may seize such information, documents, and records.
4) Licensed Financial Institutions, their owned companies and subsidiaries shall provide the staff referred to in item (1) of this article with all information, records, books, accounts, documents and data relating to the subject of examination, along with any information he may ask for, on timely basis.
5) Central Bank staff may, within the framework of the examination process, summon any related Person, on the time and place they may determine, to provide information, data, documents, or records relating to the examination process.
6) The Board of Directors may issue regulations, rules, standards, directives and instructions relating to mechanisms and procedures for examination of Licensed Financial Institutions.
7) The Central Bank may take all measures and actions it deems appropriate for achieving its objectives and discharging its functions, and may particularly take the following actions, if it was found that a violation to the provisions of this Decretal Law, or the regulations and decisions issued in implementation thereof, has occurred:
- a. Impose restrictions on some of the operations or activities carried on by the concerned Licensed Financial Institution.
- b. Require the concerned Licensed Financial Institution to take necessary actions to rectify the situation immediately.
- c. Appoint a specialized expert, or a qualified Central Bank employee, to advice the concerned Licensed Financial Institution or supervise, or oversee some of its operations, for a period specified by the Central Bank. The concerned Licensed Financial Institution shall pay remunerations of such appointee if he is an expert from outside the Central Bank.
- d. Take any other action or measure, or impose any penalties it deems appropriate.
8) Licensed Financial Institutions shall be required to pay all costs of examination and investigations process outsourced, by the Central Bank, to a third party, in case its violation to the provisions of this Decretal Law, and the regulation and decisions issued in implementation thereof, has been established.
Article (108): Examination of Entities of National Licensed Financial Institutions Operating in Other Jurisdictions
The Central Bank may dispatch one or more of its examiners or experts, to undertake examination of entities of national Licensed Financial Institutions operating abroad, in collaboration and coordination with the concerned regulatory authorities in those jurisdictions;
Such would include entities of national Licensed Financial Institutions operating in Financial Free Zones in the State, in cooperation and coordination with the supervisory authorities of the concerned Financial Free Zone.
Article (109): Expert Report
The Central Bank may assign an expert or a Person qualified in the area of Licensed Financial Activities, to provide it with a report on any subject specified by the Central Bank, relating to direct and indirect businesses and activities of a particular Licensed Financial Institution, in accordance with the conditions and procedures established by the Central Bank, and at the expense of the entities referred to in this article.
Article (110): Judicial Officer Capacity
Central Bank staff designated per decision issued by the Minister of Justice, in coordination with the Governor, shall, in establishing acts occurring in violation of the provisions of this decretal law, have the capacity of judicial officers.
Article (111): Requesting Intervention in Lawsuits and Judicial Proceedings and Notification of Investigations
1) Without prejudice to the provisions of the Civil Procedures Law, the Central Bank may request intervention in any lawsuit filed before judicial authorities to which a Licensed Financial Institution is party.
2) Law enforcement and other concerned authorities shall notify the Central Bank of any investigations or proceedings initiated against Licensed Financial Institutions. The Central Bank may provide such authorities with any clarifications, statements, or information it deems appropriate in this regard.
Section Two: Financial Accounts
Article (112): Financial Year of Licensed Financial Institutions
The financial year for a Licensed Financial Institution shall begin on the first of January and end on the thirty first of December of each year, except for the first financial year, which begins from date of registration of the institution and shall end at the end of the following financial year.
Article (113): Accounts of Licensed Financial Institutions
1) Branches of foreign Licensed Financial Institutions shall maintain separate accounts for all their operations in the State, including the balance sheet and profit and loss account.
2) Branches and sections of a local or foreign Licensed Financial Institution operating in the State, shall, for the purposes of bookkeeping, constitute one financial institution.
Article (114): Auditors of Accounts of Licensed Financial Institutions
1) Each Licensed Financial Institution operating in the State shall, every year, appoint an auditor or more, from amongst the auditors approved by the Central Bank, to audit its accounts. Should the concerned Licensed Financial Institution fail to appoint the auditor, the Central Bank shall appoint an auditor for the concerned institution and determine its remuneration, which shall be paid by the concerned institution.
2) The functions of the auditors shall include preparation of a report on the balance sheet and the profit and loss accounts for the shareholders. The auditors shall state in their report whether the annual balance sheet and profit and loss accounts are true and fair, and whether the concerned Licensed Financial Institution has provided them with all the information and clarifications requested for the performance of their mission. The concerned Licensed Financial Institution shall, at least twenty (20) working days before convening of the general assembly, provide the Central Bank with copy of the auditors’ report, along with copy of the balance sheet and the profit and loss account.
3) The general assembly of a Licensed Financial Institution may not be convened prior to receipt of Central Bank’s remarks on the report. The Central Bank may, within ten (10) working days from date of receipt of the report referred to in item (2) of this article, issue a decision not to approve the profits proposed for distribution to shareholders, if a shortfall in provisions was found, or a decline in the capital adequacy ratio from the established minimum requirement was established, or any reservation indicated in the auditors’ report or from the Central Bank, and deemed to have impact on distributable profits.
4) The auditors’ report, together with the report of the board of directors of the Licensed Financial Institution shall be read to the shareholders at the annual general assembly where the concerned institution is incorporated in the State. Such institution shall provide the Central Bank, within twenty (20) work days from date of convening of the general assembly, with three (3) copies of each report. If the concerned Licensed Financial Institution was incorporated in another jurisdiction, a copy of the auditors’ report shall be forwarded to its head office, and three (3) copies thereof shall be submitted to the Central Bank within twenty (20) working days from date of its issue.
5) The auditors shall not be represented in the board of directors of the Licensed Financial Institution, which appointed it to audit its accounts, nor have one of its staff appointed as employee, or act as advisor to the same institution.
6) A Licensed Financial Institution shall not extend credit facilities, of any type, to the auditors of its accounts. An auditor approved by the Central Bank may not commence its functions at a Licensed Financial Institution, unless any obligations it may have towards such institution were settled.
7) The auditors shall be responsible for the contents of their report on the financial statements of the concerned Licensed Financial Institution. If failure to properly perform their assigned duties or violation of provisions of this Decretal Law and the regulations and decisions issued in implementation thereof was established, the Central Bank may take any necessary measures or procedures, in collaboration and coordination with the concerned authorities in the State to strike their names from the established registers. The Central Bank may, at its own discretion, take any administrative or legal actions against the negligent or violating auditors.
8) The Central Bank may, at its discretion, require the auditors of a Licensed Financial Institution, or its subsidiaries or affiliates, to submit a report, at the expense of the concerned Licensed Financial Institution, establishing their compliance with the provisions of this Decretal Law and the regulations issued in implementation thereof.
9) The Board of Directors shall issue regulations and establish a register for approved auditors, authorized to audit the accounts of Licensed Financial Institutions.
Article (115): Publication and Posting of Accounts Information
1) Each Licensed Financial institution shall publish and post the following information and statements on its website, and in each of its offices and branches in the State:
- a. Copy of its audited balance sheet and profit and loss account, and copy of the auditors’ report. Where a Licensed Financial Institution is incorporated in other jurisdictions, publication of such statements may be carried out in the manner consistent with laws of the concerned jurisdiction.
- b. List of names of members of the board of directors, senior executives and their deputies and assistants.
- c. Names of all wholly or partially owned subsidiaries, or entities related to the concerned Licensed Financial Institution.
2) The Central Bank may, require any Licensed Financial Institution to publish or post any information or statements relating to its accounts, in addition to the requirements stated in item (1) of this article, as it deems appropriate.
Section Three: Resolution and Liquidation of Licensed Financial Institutions
Article (116): Deficiency of Financial Position
Deficiency of Financial Position
1) The Board of Directors shall establish a resolution framework for deposit-taking Licensed Financial Institutions in order to minimize the effect that a deficiency in their financial position may have on the financial system in the State. This includes the effects related to a deficiency in the financial position of companies owned by those Licensed Financial Institutions or their subsidiaries.
2) The resolution framework shall include a set of triggers, both prudential as well as qualitative, which signal material risks that would result in the deficiency of the financial position of the institutions referred to in item (1) of this article. In order to achieve this, the Central Bank shall, at its own discretion, decide any of the following measures and actions for the protection of the concerned institution and its depositors:
- a. Impose a minimum ratio for liquidity of the concerned institution, commensurable with the risks associated with its activities.
- b. Require the concerned institution to provide, as per terms and conditions set by the Board of Directors, additional financial resources for support of its paid-up capital.
- c. Issue a decision to merge the concerned institution with another Licensed Financial Institution.
- d. Permit any Financial Institution to acquire the concerned institution.
- e. Form an interim committee to manage the concerned institution, and authorize such committee to take whatever actions it deems appropriate, as per conditions and controls determined by the Board of Directors, including the possibility of taking the decision to impose a moratorium on all or some of the activities of the concerned institution with immediate effect or within another timeframe as well as consequential actions.
- f. Undertake, over a period specified by the Board of Directors, direct management of the concerned institution, and shall, in this case, substitute management of the concerned institution in exercising all powers, including financial and administrative powers; and the powers and authorities of its board of directors, and its general assembly shall immediately be frozen until expiry of the period of interim management.
- g. Request competent authorities in the State to place the concerned institution under interim custody and seize its assets, property and shareholders rights.
- h. Adopt a decision to request the competent court to pass a decision to liquidate the concerned institution, prepare a plan for liquidation or transfer of its assets and liabilities, as it deems appropriate, along with all related settlements and releases and implement or oversee implementation of the liquidation plan, or adopt a resolution decision, or request the competent court to declare bankruptcy, in accordance with established laws.
- i. Where a decision to merge or liquidate of a Licensed Financial Institution incorporated in another jurisdiction and has a branch operating in the State, the same procedures applicable in the concerned jurisdiction of incorporation shall apply if they provide better protection for customers consumers in the State, unless otherwise agreed with the concerned authority.
- j. Any other measures or actions in accordance with a decision by the Board of Directors.
3) The Central Bank may coordinate with the relevant federal and local authorities before issuance of any decision by the Board of Directors, as per provisions of this article, if necessary. The Central Bank may request the competent judicial authorities to take protective and urgent measures and actions, which would ensure protection of property and interest of investors and depositors, or serve public interest.
Article (117): Publication of Resolution or Liquidation Announcement
1) In case of resolution or liquidation of a Licensed Financial Institution, such an announcement shall be published in the Official Gazette, and in, at least, two local Arabic and English daily newspapers, and for a period not less than three (3) business days.
2) The announcement shall include the following:
- a. A grace period, not be less than three (3) months, allowed to customers consumers of the concerned Licensed Financial Institution to take necessary actions to protect their rights.
- b. Details of the entity assigned for the resolution and its functions or the liquidator and his functions.
3) If the resolution or liquidation occurred as a result of the Licensed Financial Institution being struck-off the Licensed Financial Institution Register, the Chairman of the Board of Director or his deputized representative shall specify, in the decision to strike- off name of the concerned institution, the date of closing down of the concerned institution, and the entity assigned for resolution or liquidation of any outstanding operations on such date.
Article (118): Surveillance of Licensed Financial Institutions under Resolution or Liquidation
The Central Bank shall continue surveillance of operations of any Licensed Financial Institution under resolution or liquidation, until final closure of its offices.
Article (119): Non-Prejudice to Provisions of Other Laws Relating to Resolution or Liquidation
Chapter Six: Consumers’ Protection
Article (120): Confidentiality of Banking and Credit Information
1) All data and information relating to customers’ accounts, deposits, safe deposit boxes and trusts with Licensed Financial Institutions and related transactions shall be considered confidential in nature, and may not be perused, or directly or indirectly disclosed to any third party without the written permission of owner of the account or deposit, his legal attorney or authorized agent, and in legally authorized cases.
2) Such prohibition shall remain valid, even until end of the business relationship between the customer and the Licensed Financial Institution for any reason.
3) Chairmen and members of boards of directors, managers and employees of Licensed Financial Institutions, and experts, consultants and technicians assigned to perform functions therein, are prohibited from disclosing any information or data on their customers; their accounts or deposits or transactions relating thereto, or enable third parties to peruse them, except in legally authorized cases.
4) Such prohibition shall apply to all agencies and Persons, and whoever, by virtue of his profession, position or nature of work, is able to, directly or indirectly, peruse such information and data.
5) The Central Bank shall establish rules and conditions organizing exchange of banking and credit information, in its capacity as the competent Regulatory Authority in the State in this regard.
6) The provisions of item nos. (1) and (2) of this article shall be without prejudice to the following:
- a. The powers legally vested on security and judicial authorities, the Central Bank and its employees.
- b. The duties assigned to auditors of accounts of the concerned institutions.
- c. The obligation of the concerned institutions to issue, upon request of the beneficiary, a certificate of the reasons for declining to cash a check.
- d. The obligation of the concerned institutions to issue a certificate of partial payment of value of a check, where the consideration for payment is less than the value of the check, pursuant to the provisions of the referenced Commercial Transactions Law.
- e. The right of the concerned institutions to disclose whole or part of the data relating to the customer’s transactions, in order to establish its right in a legal dispute in respect of such transactions, with its customer.
- f. Provisions of established laws and international agreements in the State, in addition to anti-money laundering, terrorist financing and illegal organizations provisions.
Article (121): Protection of Consumers of the Licensed Financial Institutions
1) The Central Bank shall establish regulations relating to protection of consumers of Licensed Financial Institutions, in line with the nature of activities the latter carry on and the services and products they provide.
2) The Central Bank may establish a unit that enjoys independent legal personality, to receive and decide on complaints of customers of licensed financial institutions. The Board of Directors shall issue a resolution establishing this unit, specifying its tasks, charter, powers and the human resources and financial regulations applicable thereto.
3) The Central Bank and Licensed Financial Institutions shall work together to raise public awareness of the types of banking services and financial products, and their inherent risks, through all means of communication and media, in accordance with the rules set by the Central Bank in this regard.
4) Licensed Financial Institutions may not charge interest on accrued interest- compound interest- in relation to facilities extended to customers, and shall, in this regard, follow the rules and controls prescribed in regulations issued by the Central Bank.
This article has been amended by Decretal Federal Law No. (09) of 2021 and Decretal Federal Law No. (23) of 2022. You are viewing the latest version. To view the previous version, click the version box below.Version 2(effective from 26/07/2021 to 02/01/2023)1)The Central Bank shall establish regulations relating to protection of customers of Licensed Financial Institutions, in line with the nature of activities the latter carry on and the services and products they provide. The Central Bank may establish a unit that enjoys independent legal personality, and is in charge of receiving and handling complaints of clients of licensed financial institutions. The Unit’s system of work, its powers, regulations and regulations related to human resources and its financial affairs shall be issued by a decision of the Board of Directors.
2)The Central Bank and Licensed Financial Institutions shall work together to raise public awareness of the types of banking services and financial products, and their inherent risks, through all means of communication and media, in accordance with the rules set by the Central Bank in this regard.
3)Licensed Financial Institutions are not permitted to charge interest on accrued interest charged on any credit or funding facilities granted to customers.
Version 1(effective from 31/10/2018 to 26/07/2021)1) The Central Bank shall establish regulations relating to protection of customers of Licensed Financial Institutions, in line with the nature of activities the latter carry on and the services and products they provide.
2) The Central Bank and Licensed Financial Institutions shall work together to raise public awareness of the types of banking services and financial products, and their inherent risks, through all means of communication and media, in accordance with the rules set by the Central Bank in this regard.
3) Licensed Financial Institutions are not permitted to charge interest on accrued interest charged on any credit or funding facilities granted to customers.
Article (121) bis: Credit Facilities Guarantees
1) Licensed Financial Institutions must obtain adequate guarantees for all types of facilities provided to natural persons and sole proprietorships customers, commensurable with the customer’s income, or the guarantee, if any, and the size of required facilities, as determined by the Central Bank.
2) A claim or a lawsuit or a plea shall not be admissible before competent judicial authorities or arbitration tribunals if filed by a licensed financial institution in respect of credit facilities extended to a natural person or a sole proprietorship, in case such institution had failed to obtain the guarantees referred to in paragraph (1) hereinabove.
3) The Central Bank may impose the administrative or financial sanctions it deems appropriate on licensed financial institutions that violate the provision of paragraph (1) hereinabove, in accordance with Article (137) of this Decretal Federal Law.
Article (122): Deposits Guarantee Scheme
The Board of Directors may issue regulations for protection of deposits and the rights of depositors of Licensed Financial Institutions in coordination with the Ministry. Such regulation may include establishment of a compensation fund and determination of its structure.
Article (123): Financial Inclusion
The Board of Directors shall establish necessary regulations and mechanisms to ensure that every natural Person shall have the right to access all or part of the banking and financial services and products from Licensed Financial Institutions suited to his/her need.
Part IV – Financial Infrastructure –
Chapter One: Funds Transfer and Settlement of Securities
Article (124): Clearing and Settlement Operations
1) The Central Bank may:
- a. Establish, develop, and/or operate one or more clearing or settlement systems for transfer of funds, and settlement of securities issued by the Central Bank or the Public Sector and other obligations between Participant Persons in such systems, and may conduct such on its own or in partnership with any other party, or by outsourcing to third parties.
- b. Link the systems referred to in paragraph (a) of this item, to similar systems inside and outside the State.
- c. Establish and/or operate central securities depository for securities issued by the Central Bank or the Public Sector and data repository systems for monetary and financial transactions in the State, and link such systems to similar systems inside and outside the State.
2) The Central Bank shall coordinate with concerned other regulatory authorities and bodies in the State, in relation to the establishment of data repository systems for monetary and financial transactions referred to in paragraph (c) of item (1) of this article.
3) The Board of Directors shall issue the regulations related to the systems referred to in item (1) of this article, the rules of participation in these systems, and the rules to execute related operations.
Articles (124 Bis1) and (124 Bis2) have been added as per the Decretal Federal Law No. (23) of 2022.Article (124) bis. (1): Application for Licensing Financial Infrastructure System or Extension of License Scope
1) Any juridical person may, in accordance with the regulations issued by the Board of Directors, submit to the Central Bank an application for licensing a Financial Infrastructure System, or extension of the scope of a previously issued license.
2) The Board of Directors shall issue the rules, regulations, standards and conditions relating to licensing a Financial Infrastructure System, including:
- a. Fit and proper criteria;
- b. The resources required for the system
- c. Control and monitoring systems
3) The Board of Directors may, at its own discretion and as it deems appropriate to safeguarding public interest, add any requirements or conditions to be fulfilled by the applicant.
Article (124) bis. (2): Deciding on Application for Licensing Financial Infrastructure System or Extension of License Scope
1) Deciding on licensing of Financial Infrastructure System or extension of its scope shall be within a period not exceeding sixty (60) working days from date of meeting all licensing conditions and requirements. Expiry of this period without decision on the application shall be considered an implicit rejection thereof.
2) The Central Bank may require the applicant to fulfill licensing requirements and conditions within such period as specified by the Central Bank.
3) The Central Bank may reject an application for licensing of a Financial Infrastructure System or extension of its scope, at its own discretion and based on the capacity of the financial sector in the State, and the needs of the local market. The Central Bank’s decision in this regard shall be final and not subject to appeal before the Appeals and Grievances Committee.
4) The applicant shall be notified, officially, of the reasoned rejection decision within a period not exceeding twenty (20) working days from date of its issue.
Article (125): Retail Payment Operations and Related Electronic Services
The Central Bank shall solely:
1) Have the authority to issue regulations, rules, and procedures relating to electronic banking operations, digital money, Stored Value Facilities, and shall regulate Retail Payment Systems and related electronic banking and financial services.
2) Take all measures and procedures it deems appropriate to reduce risks to the State’s financial and economic systems associated with operations and systems referred to in item (1) of this article.
Chapter Two: Powers and Functions of the Central Bank Pertaining to Financial Infrastructure Systems
Article (126): Designation of Systems
1) The Central Bank may designate any Financial Infrastructure System as systemically important if it considers, at its own discretion, that any malfunction or inefficiency in the operation of such system would negatively impact processing of the daily operations of financial institutions operating in the State, or the stability of the financial system in the State.
2) For a Financial Infrastructure System to be designated, it shall meet one of the following conditions:
- a. The concerned system is operating in the State;
- b. The concerned system has the capacity to accept clearing and settlement of financial Transfer Orders denominated in national Currency, without prejudice to the provisions of Article (28) of this decretal law; or
- c. The concerned system has the capacity to provide transfer, clearing or settlement of financial Transfer Orders, for retail payment activities, denominated in any currency.
3) Should the Central Bank intend to designate any of the Financial Infrastructure Systems it licenses as systemically important, it shall:
- a. Notify the operator of the system, or its Settlement Institution, officially, of its intention to designate this system as systemically important, clarify grounds of such intention, in addition to other terms and conditions attached to such designation.
- b. Allow such period as specified in the notice referred to in paragraph (a) of this item, which shall not be less than ten (10) working days from date of notification, within which the system’s operator or its Settlement Institution may provide their opinions, or make representations, as to why the system should not be designated.
- c. Issue its decision on designation of the system, within a period not exceeding twenty (20) working days from date of receipt of responses from concerned parties, or expiry of the period stated in the notice, without response.
4) The operator of the Designated System or the Settlement Institution may submit a grievance against the designation decision referred to in item (3) of this article by applying to the Grievances and Appeals Committee, in accordance with the provisions of Part V of this Decretal Law.
5) The Clearing and Settlement Systems established, developed, and/ or operated, in accordance with the provisions of Article (124) of this Decretal Law shall be deemed as Designated Systems.
6) Should the Central Bank intend to designate any of the Financial Infrastructure Systems licensed by any of the other Regulatory Authorities in the State or in other jurisdictions as systemically important, it shall submit its opinion in this regard to the concerned regulatory authority. Should the concerned regulatory authority have no objection to such designation, it shall:
- a. Notify the operator of the system, or its Settlement Institution, officially of the intention to designate this system as systemically important, clarify grounds of such intention, in addition to other terms and conditions attached to such designation.
- b. Allow such period as specified in the notice referred to in paragraph (a) of this item, which shall not be less than ten (10) working days from date of notification, within which the system’s operator or its Settlement Institution may provide their opinions, or make representations, as to why the system should not be designated.
- c. Issue its final approval or disapproval decision on the Central Bank’s request to designate the concerned system, within a period not exceeding twenty (20) working days from date of receipt of responses from concerned parties, or expiry of the period stated in the notice, without response.
7) The Central Bank may revoke designation of a particular Financial Infrastructure System it licenses or request such action from the concerned regulatory authority, if it considered, at its own discretion, that the system is no longer of systemic importance. The concerned regulatory authority, the operator of the system, or its Settlement Institution shall be notified, officially, of such decision, as the case may be.
Article (127): Oversight of Systems
1) The Central Bank shall solely have oversight powers over operations of systems which it licenses and shall ensure their soundness, in accordance with relevant international standards. For such purpose, the Central Bank may require the operators of systems or their Settlement Institutions to take required measures and procedures.
2) The Central Bank shall be responsible for monitoring the implementation of required additional oversight measures and procedures on Designated Systems, licensed by any of the other Regulatory Authorities, in the State or in other jurisdictions in collaboration and coordination with the concerned regulatory authority, and may request in this regard from the concerned regulatory authority:
- a. Require operators of the Designated Systems or their Settlement Institutions to comply with the instructions it issues in this respect and any relevant international standards.
- b. Ensure proper and regular functioning of Designated Systems.
- c. Ensure soundness of financial positions of operators of Designated Systems and their Settlement Institutions, when deemed necessary.
- d. Require the operators of the Designated Systems or their Settlement Institutions to provide it, with the information it deems appropriate for achievement of its objectives and discharge of its functions.
3) The Central Bank may appoint any person it deems fit amongst experts and advisers specialized in financial infrastructure to assist the Central Bank in performing its duties and functions in accordance with the provisions of Part IV of this decretal law, and to keep up with best international standards and practices in this area.
Article (128): Suspension or Revocation of a License
1) The Central Bank may suspend or revoke the license granted to a Financial Infrastructure System, in accordance with the provisions of Article nos. (124) and (125) of this decretal law, by way of an official notice to the operator or the Settlement Institution of the concerned system and take necessary actions in this respect, as the case may be, if it considered that the system is no longer capable of conducting its operations. The Central Bank shall allow such period as specified in the notice referred to in this item, which shall not be less than twenty (20) working days from the date of notice, within which the concerned system operator or its Settlement Institution may object to the Central Bank’s decision to suspend or revoke the license and provide their justifications for such objection, in accordance with the provisions of Part V of this decretal law.
2) The Central Bank, if it considers that any Designated System licensed by any of the Regulatory Authorities in the State or in other jurisdictions is no longer capable of conducting its operations, may request the concerned regulatory authority, by way of an official notice, to suspend or revoke the license of this system and take necessary actions in this respect, as the case may be. The concerned regulatory authority shall have the right to approve or reject the request of the Central Bank. In case of approval, the procedures and controls in force by the concerned authority shall be applicable.
3) In all cases, the suspension or revocation of a license granted to a Designated System in accordance with the provisions of this article, shall not affect any transaction cleared or settled in the concerned system prior to the effective date of suspension or revocation.
This article has been amended by Decretal Federal Law No. (09) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 26/07/2021)1) The Central Bank may suspend or revoke a license granted to a Financial Infrastructure System, in accordance with the provisions of article nos. (124) and (125) of this decretal law, via an official notice to the operator or the Settlement Institution of the concerned system and take necessary actions in this respect, as the case may be, if it considered that the system is no longer capable of conducting its operations. The Central Bank shall allow such period as specified in the notice referred to in this item, which shall not be less than twenty (20) working days from date of notification, within which the concerned system operator or its Settlement Institution may object to the Central Bank’s decision to suspend or revoke the license and provide their justifications for such objection, in accordance with the provisions of Part Four of this decretal law.
2) The Central Bank, if it considers that any Designated System licensed by any of the Regulatory Authorities in the State or in other jurisdictions is no longer capable of conducting its operations, may request the concerned regulatory authority, via an official notice, to suspend or revoke the license of this system and take necessary actions in this respect, as the case may be. The concerned regulatory authority shall have the right to approve or reject the request of the Central Bank. In case of approval, the procedures and controls in force by the concerned authority shall be applicable.
3) In all cases, the suspension or revocation of a license granted to a Designated System in accordance with the provisions of this article, shall not affect any transaction cleared or settled in the concerned system prior to the effective date of suspension or revocation.
Article (129): Authority to Issue Regulations and Instructions
1) The Board of Directors shall issue regulations, instructions, rules, directives, and codes of conduct as it deems appropriate for the implementation of the provisions of Part IV of this decretal law, and to achieve the objectives of the Central Bank and discharge its functions, including:
- a. Regulations, conditions and rules relating to licenses, granted by the Central Bank in accordance with the provisions of Article nos. (124) and (125) of this Decretal Law, to operators of Financial Infrastructure Systems or the Settlement Institutions for such systems and their Participant Persons.
- b. Regulations, rules and standards relating to the designation and oversight of Financial Infrastructure Systems, as per the provisions of Article nos. (126) and (127) of this Decretal Law, monitoring operations of such systems and enforcing compliance requirements on Participant Persons thereof.
2) The Central Bank may exempt operators of Financial Infrastructure Systems it licenses, the Settlement Institutions of such systems or Participant Persons, in a general or specific manner, from the provisions of any of the regulations, instructions, rules, directives, and controls issued by it.
Article (130): Determining Violations
1) The Board of Directors shall issue regulations specifying types of violations pertaining to Financial Infrastructure Systems licensed by the Central Bank, and any of the following instances shall be considered a violation to the terms and conditions relating thereto:
- a. Violation of operational requirements of systems and related settlement rules and procedures.
- b. Failure of an operator of a system or its Settlement Institution to comply with a Central Bank request for information or documents.
- c. Failure to comply with Central Bank’s decisions and instructions, and failure to take a particular action, which the Central Bank considers necessary to render the system compliant with the criteria it sets.
- d. Failure, on the part of an operator of a system or its Settlement Institution to report any action taken under the systems Default Arrangements, in respect of a Participant Person.
- e. Failure, on the part of a Participant Person, to notify the system operator, its Settlement Institutions, and the Central Bank of issuance of judgement to declare it bankrupt or place it under liquidation.
- f. Operating a system without obtaining a license in accordance with the provisions of Article nos. (124) and (125) of this Decretal Law.
- g. Failure of an operator of a system or its Settlement Institution to comply with any request from the Central Bank or any other government agency, relating to default, within a specified time period.
- h. Failure of an operator of a system to notify the Central Bank of issuance of judgment regarding declaration of bankruptcy or liquidation of any Participant Person.
- i. Providing the Central Bank with incorrect or misleading information.
- j. Adding an incorrect entry to any registration book or in any document related to a particular system, or causing alteration, deletion or obliteration of such entry.
- k. Any other related action to the clearing and settlement operations or to the retail payment operations the Central Bank considers a violation.
2) The Central Bank may take whatever actions it deems appropriate to correct any violations referred to in item (1) of this article, and determine settlement thereof.
3) The Central Bank shall officially notify the violating Person, in accordance of item (1) of this article, of any actions that shall be undertaken against it. The violating Person shall be allowed a period not exceeding ten (10) working days from date of notification to submit a grievance against the Central Bank decision. In case the grievance was rejected, the violating Person may escalate the matter to the Grievances and Appeals Committee in accordance with the provisions of this Decretal Law. The decision of the Grievances and Appeals Committee shall be final. Should the violating Person not respond to Central Bank’s decision within the period prescribed in this item, the decision of the Central Bank shall be final and binding.
Chapter Three: Finality of Transactions and Proceedings
Article (131): Finality of Payment and Settlement
1) All transactions conducted through a Financial Infrastructure System, which meets one of the designation conditions referred to in item (2) of Article (126) of this Decretal Law shall be final, irrevocable and irreversible, in any of the following cases:
- a. Transfer of funds from or to the account of a Participant Person.
- b. Settlement of a payment obligation.
- c. Settlement of an obligation to transfer, or the actual transfer of book- entry securities.
2) No transfer or settlement pertaining to the transactions referred to in item (1) of this article shall be cancelled, set aside, re-paid, or reversed, nor shall it be rectified, whether by a court judgement order, or by law.
Article (132): Precedence of Implementation of a Financial Infrastructure Systems’ Rules and Procedures, over the General Insolvency and Bankruptcy Rules and Procedures
1) None of the following operations and procedures carried out through Financial Infrastructure Systems, which meet one of designation conditions referred to in item (2) of Article (126) of this Decretal Law, shall be regarded, as to any extent, invalid on the grounds of commencement of realization of assets of a Person under liquidation, insolvency, financial restructuring, or bankruptcy:
- a. A Transfer Order.
- b. Any disposition of property in pursuance of such Transfer Order.
- c. The Default Arrangements of such systems.
- d. The rules of such systems as to the settlement of Transfer Orders not dealt with under their Default Arrangements.
- e. Any arrangements for the purpose of realizing collateral security in connection with participation in such systems, other than its Default Arrangements.
2) The relevant insolvency officer or any Person appointed to manage the insolvency procedures in cases of bankruptcy or liquidation, shall not take any actions or procedures contrary to the provisions of this Decretal Law, or preclude or interfere with Default Arrangements of systems referred to in item (1) of this article.
3) An obligation arising out of a Transfer Order, which is the subject of an action taken under Default Arrangements of systems referred to in item (1) of this article, shall not be proved in a bankruptcy or liquidation procedures, until completion of the transfer or payment order.
4) A debt or other liability, which by virtue of item (3) of this article may not be proved, shall not be taken into account for the purposes of any set-off, offset, or net out of debt or obligations until the completion of the action taken under the Default Arrangements of such systems.
Article (133): Netting of Obligations of Insolvent or Bankrupt Parties
1) The operator of a Financial Infrastructure System, which meets any of the designation conditions referred to in item (2) of Article (126), may effect Netting of all obligations owed to or by a Participant Person in this System, which incurred before the point of time where the competent court has made an order for bankruptcy or liquidation of the concerned Participant Person.
2) In case Netting has been effected as provided in item (1) of this article, then:
- a. The obligations that are netted shall be disregarded in the bankruptcy or liquidation proceedings and
- b. Any net obligation owed to or by the Participant Person that has not been discharged is payable to the Participant Person and may be recovered for the benefit of his creditors or is provable in the bankruptcy or liquidation, as the case may be.
3) Netting operations processed by the concerned system’s operator in accordance with item (1) of this article shall not be cancelled during a bankruptcy or liquidation process, nor any financial transfers already paid in accordance with paragraph (a) of item (2) of this article.
Article (134): Preservation of Rights in Underlying Transactions
1) Except to the extent that it expressly provides, this Decretal Law shall not operate to limit, restrict or otherwise affect:
- a. Any right, title, interest, privilege, obligation or liability of a Person resulting from the underlying transaction in respect of a Transfer Order that has been entered into a Financial Infrastructure System, which meets any of the designation conditions referred to in item (2) of Article (126).
- b. Any investigation, legal proceedings or remedy in respect of any such right, title, interest, privilege, obligation or liability.
2) Nothing in item (1) of this article shall be construed to require:
- a. The unwinding of any Netting done by the operator of the concerned system, whether pursuant to its Default Arrangements or otherwise;
- b. The revocation of any Transfer Order given by a Participant Person which is entered into the concerned system; or
- c. The reversal of a payment or settlement made under the operating rules of the concerned system.
Article (135): Obligation of Participant Person to Notify of Insolvency
1) A Participant Person in a Financial Infrastructure System, which meets any of the designation conditions referred to in item (2) of Article (126) shall notify the operator of the system or its Settlement Institution, the concerned regulatory authority, and the Central Bank, as soon as practicable if there comes to his knowledge any of the following events occurring in the State or in other jurisdictions:
- a. Presentation of a plea for declaration of his bankruptcy or liquidation;
- b. Issuance of a judgement for declaration of his bankruptcy or liquidation; or
- c. The making of owners, shareholders, or management of a Participant Person voluntary winding up statement in his respect.
2) A Participant Person failing to notify of a relevant event referred to in item (1) of this article within the required timeframe is not in contravention if:
- a. He took reasonable steps to comply with the provisions of item (1) of this article or
- b. The agencies referred to in item (1) of this article were already aware of the relevant event by the time the Participant Person was required to notify the operator under the provisions of this article.
Part V – Grievances and Appeals –
Article (136): Grievances and Appeals Committee
1) Under the provisions of this Decretal Law, an independent committee named “Grievances and Appeals Committee” shall be established. The Cabinet shall issue a resolution, based on a proposal by the Board of Directors, establishing the committee’s formation, duration, system of work, and all procedures and rules related to adjudication of grievances and appeals, including fees due for consideration.
2) In the formation of the committee, the presence of one or more judges and two experts with competence in financial and banking matters should be taken into consideration.
3) A nominated committee member may not be a member of the Board of Directors, nor holder of any position at the Central Bank or at any of the Licensed Financial Institution.
4) The chairman of the committee or any of its members shall have no interest with any party to the dispute, otherwise he shall be required to disclose such interest, and in such case another member shall be temporarily appointed to hear the presented dispute.
5) With the exception of the regulations, directives, instructions, policies, and regulatory and supervisory decisions of a general nature, the Committee, shall solely and exclusively have jurisdiction to decide on grievances and appeals against any decisions related to financial and banking activities issued by the Central Bank in accordance to the provision of this Decretal Law, and may, for such purposes take all or some of the following actions:
- a. Require any Person to appear in front of the Committee to present any evidence, testimony, information or statement.
- b. Hear the testimony of any witnesses under oath.
- c. Commission any experts it deems appropriate to provide opinion on any matter relating to the dispute.
- d. Take whichever actions and procedures it deems appropriate for discharge of its mandate.
6) Appeals against decisions that fall within the competence of the committee in accordance with the provisions of this article are not accepted before the grievance or appeal thereon before the committee, and the grievance is decided according to the circumstances.
7) If the Committee decided to reject or not accept the grievance of appeal, the Committee may impose on the applicant a fine, not exceeding (200,000) two hundred thousand Dirhams.
8) The Committee may suspend the appealed decision, if necessary, until it reached a decision on the dispute.
9) The grievance or appeal against any decision before the committee shall not be accepted after the lapse of (15) fifteen working days from the date on which the concerned person is notified of it, or if his knowledge of it is proven with certainty.
10) A decision issued by the Committee on the grievance or appeal shall be final and shall only be challenged at the Higher Federal Court within a period of (20) twenty work days from date of its notification. The Higher Federal Court may, upon request of the appellant, suspend the decision issued by the Committee until it reached its decision on the subject, if it considered that the appeal is based on genuine grounds and that implementation of the Committee’s decision shall have irreversible consequences.
This article has been amended by Decretal Federal Law No. (25) of 2020, and Decretal Federal Law No. (9) of 2021 respectively. You are viewing the latest version. To view previous versions, click the version boxes below.Version 2(effective from 02/01/2021 to 26/07/2021)1) Under the provisions of this Decretal Law, a committee within the Central Bank, named “Grievances & Appeals Committee” shall be established. The Cabinet shall issue a resolution, based on a proposal by the Board of Directors, establishing the committee’s formation, duration, system of work, and all procedures and rules related to adjudication of grievances and appeals, including fees due for consideration.
2) In the formation of the committee, the presence of one or more judges and two experts with competence in financial and banking matters should be taken into consideration.
3) A nominated committee member may not be a member of the Board of Directors, nor holder of any position at the Central Bank or at any of the Licensed Financial Institution.
4) The chairman of the committee or any of its members shall have no interest with any party to the dispute, otherwise he shall be required to disclose such interest, and in such case another member shall be temporarily appointed to hear the presented dispute.
5) The Committee shall have the jurisdiction to decide on grievances and appeals against any decisions related to financial and banking activities issued by the Central Bank related to licensing, authorization of individuals, and licensing and designation of Financial Infrastructure Systems, and may, for such purposes take all or some of the following actions:
- a. Require any Person to appear in front of the Committee to present any evidence, testimony, information or statement.
- b. Hear the testimony of any witnesses under oath.
- c. Commission any experts it deems appropriate to provide opinion on any matter relating to the dispute.
- d. Take whichever actions and procedures it deems appropriate for discharge of its mandate.
6) If the Committee rejected the grievances or appeal on the grounds that it was filed by a party of no capacity or interest, the Committee may impose on the applicant a fine, not exceeding two hundred thousand (200,000) Dirhams.
7) The Committee may suspend the appealed decision, if necessary, until it reached a decision on the dispute.
8) A decision issued by the Committee on the grievance or appeal shall be final and shall only be challenged at the Higher Federal Court within a period of twenty (20) work days from date of its notification. The Higher Federal Court may, upon request of the appellant, suspend the decision issued by the Committee until it reached its decision on the subject, if it considered that the appeal is based on genuine grounds and that implementation of the Committee’s decision shall have irreversible consequences
Version 1(effective from 31/10/2018 to 02/01/2021)1) An independent committee, named “Grievances & Appeals Committee” shall be established in accordance with the provisions of this decretal law under the chairmanship of a Court of Appeal judge, and membership of two (2) judges from the same court, in addition to two (2) experts nominated by the Board of Directors.
2) The Cabinet shall issue a resolution naming the chairman and members of the committee, based on the nomination of the Higher Judicial Council, with respect to the chairman of the committee and its member judges.
3) The Cabinet shall issue a resolution, based on a proposal by the Board of Directors, establishing the committee’s charter, which would include:
- a. All rules and procedures relating to settlement of grievances and appeals, including payable fees.
- b. Remunerations of members of the committee.
4) Membership of the committee shall be for a term of four (4) years, renewable to similar period(s). In case the seat of a member became vacant before expiry of the membership term, for whatever reason, a successor shall be appointed for the remaining term, in the same manner in which the previous member was selected.
5) A nominated committee member may not be a member of the Board of Directors, nor holder of any position at the Central Bank or at any of the Licensed Financial Institution.
6) The chairman of the committee or any of its members shall have no interest with any party to the dispute, otherwise he shall be required to disclose such interest, and in such case another member shall be temporarily appointed to hear the presented dispute.
7) The Committee shall have the sole and exclusive jurisdiction to decide on grievances and appeals against any decisions by the Central Bank related to licensing, authorization of individuals, and licensing and designation of Financial Infrastructure Systems, and may, for such purposes take all or some of the following actions:
- a. Require any Person to appear in front of the Committee to present any evidence, testimony, information or statement.
- b. Hear the testimony of any witnesses under oath.
- c. Commission any experts it deems appropriate to provide opinion on any matter relating to the dispute.
- d. Take whichever actions and procedures it deems appropriate for discharge of its mandate.
8) If the Committee rejected the grievances or appeal on the grounds that it was filed by a party of no capacity or interest, the Committee may impose on the applicant a fine, not exceeding two hundred thousand (200,000) Dirhams.
9) The Committee may suspend the appealed decision, if necessary, until it reached a decision on the dispute.
10) A decision issued by the Committee on the grievance or appeal shall be final and shall only be challenged at the Higher Federal Court within a period of twenty (20) work days from date of its notification. The Higher Federal Court may, upon request of the appellant, suspend the decision issued by the Committee until it reached its decision on the subject, if it considered that the appeal is based on genuine grounds and that implementation of the Committee’s decision shall have irreversible consequences
Part VI – Administrative and Financial Sanctions and Penalties –
Chapter One: Administrative and Financial Sanctions
Article (137)
1) Without prejudice to other sanctions stated in any other laws in the State, and upon establishment of a violation by any Licensed Financial Institution or by any Authorized Individual of any of the provisions of this Decretal Law or the regulations, decisions, rules, standards or instructions issued by the Central Bank in implementation thereof, or any measures taken by the Central Bank, including procedures for encountering money laundering, combating terrorist financing, and illegal organizations, the Central Bank shall, at its own discretion, decide to impose one or more of the following sanctions or take any of the following measures:
- a. Issue, by any means, a caution to the violator.
- b. Require the violating Licensed Financial Institution to take the necessary actions and measures that the Central Bank deems appropriate to rectify the violation.
- c. Prohibit violating Licensed Financial Institution from conducting some operations, or carrying on some Licensed Financial Activities, or impose any restrictions, conditions or limitations on all or certain operations and activities.
- d. Impose conditions or restrictions on the license of the violating Licensed Financial Institution.
- e. Reduce or suspend the ability of the violating Licensed Financial Institution to draw on the Central Bank’s funds through the Standing Facilities.
- f. Require the violating Licensed Financial Institution to deposit funds with the Central Bank without return and for the period Central Bank deems appropriate, in addition to the credit balance referred to in Article (32) of this Decretal Law.
- g. Impose a fine of four hundred (400) basis points over the prevailing base interest rate of the Central bank on any shortfall in the Reserve Requirements referred to in Article (32) of this Decretal Law.
- h. Require the violating Licensed Financial Institution to return to customers the funds it obtained as a result of its violation of the provisions of this Decretal Law and any excess funds including revenue and profits shall devolve to the Central Bank.
- i. Impose a fine between one time and ten times the value of unjust enrichment as determined by the Central Bank, which the violating Licensed Financial Institution has, unlawfully acquired, as a result of the violation.
- j. Impose a fine on the violating Licensed Financial Institution not exceeding (200,000,000) two hundred million Dirhams.
- k. Delink the violating Licensed Financial Institution from one or all Financial Infrastructure Systems.
- l. Withdraw the license of the violating Licensed Financial Institution and strike off its name from the Register.
- m. Impose conditions or restrictions on the authorization of the violating Authorized Individual.
- n. Impose a fine on the violating Authorized Individual not less than (100,000) one hundred thousand Dirhams and not exceeding (2,000,000) two million Dirhams.
- o. Prohibit the violating Authorized Individual from undertaking any Designated Function at the Licensed Financial Institution he works for, or any other Licensed Financial Institution.
- p. Any other financial or administrative measures or sanctions issued by a decision of the Board of Directors. The decision specifies the authority entrusted with imposing these sanctions or measures.
2) Decisions to impose the sanctions referred to under item (1) if this article shall be made by the Governor except for the sanction stipulated in item (I) herein shall be made by the Board of Directors.
3) In all cases, the violator shall be notified, officially, of the reasoned decision within fifteen (15) working days from date of its issue. Such notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the violator of its right to submit a grievance against the decision in front of the Grievances and Appeals Committee, in accordance with the provisions of this Decretal Law.
This article has been amended by Decretal Federal Law No. (09) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 26/07/2021)1) Without prejudice to other sanctions stated in any other laws in the State, and upon establishment of a violation by any Licensed Financial Institution or by any Authorized Individual of any of the provisions of this decretal law or the regulations, decisions, rules, standards or instructions issued by the Central Bank in implementation thereof, or any measures taken by the Central Bank, including procedures for encountering money laundering, combating terrorist financing, and illegal organizations, the Central Bank shall, at its own discretion, decide to impose one or more of the following penalties or take any of the following measures:
- a. Issue by any means, a caution to the violator.
- b. Require the violating Licensed Financial Institution to take necessary actions and measures that the Central Bank deems appropriate to rectify the violation.
- c. Prohibit violating Licensed Financial Institution from conducting some operations, or carrying on some Licensed Financial Activities, or impose any restrictions, conditions or limitations on all or certain operations and activities.
- d. Impose conditions or restrictions on the license of the violating Licensed Financial Institution.
- e. Reduce or suspend the ability of the violating Licensed Financial Institution to draw on the Central Bank’s funds through the Standing Facilities.
- f. Require the violating Licensed Financial Institution to deposit funds with the Central Bank without return and for the period Central Bank deems appropriate, in addition to the credit balance referred to in Article (32) of this decretal law.
- g. Impose a fine of four hundred (400) basis points over the prevailing base interest rate of the Central bank on any shortfall in the Reserve Requirements referred to in Article (32) of this decretal law.
- h. Require the violating Licensed Financial Institution to return to customers the funds it obtained as a result of its violation of the provisions of this decretal law and any excess funds including revenue and profits shall devolve to the Central Bank.
- i. Impose a fine between one (1) time and ten (10) times the value of unjust enrichment as determined by the Central Bank, which the violating Licensed Financial Institution has, unlawfully acquired, as a result of the violation.
- j. Impose a fine on the violating Licensed Financial Institution not less than two million (2,000,000) Dirhams and not exceeding two hundred million (200,000,000) Dirhams.
- k. Delink the violating Licensed Financial Institution from one or all Financial Infrastructure Systems.
- l. Withdraw the license of the violating Licensed Financial Institution and strike off its name from the Register.
- m. Impose conditions or restrictions on the authorization of the violating Authorized Individual.
- n. Impose a fine on the violating Authorized Individual not less than one hundred thousand (100,000) Dirhams and not exceeding two million (2,000,000) Dirhams.
- o. Prohibit the violating Authorized Individual from undertaking any Designated Function at the Licensed Financial Institution he works for, or any other Licensed Financial Institution.
2) Decisions to impose the sanctions referred to under paragraphs (a, b, c, e, f, g, and h) shall be made by the Governor and decisions concerning other sanctions shall be made by the Board of Directors.
3) In all cases, the violator shall be notified, officially, of the reasoned decision within fifteen (15) working days from date of its issue. Such notice shall include the following:
- a. Content of the decision.
- b. Reasons for the decision.
- c. Effective date of the decision.
- d. A statement advising the violator of its right to submit a grievance against the decision in front of the Grievances & Appeals Committee, in accordance with the provisions of this decretal law
Chapter Two: Penalties
Article (138)
Without prejudice to any harsher punishment provided for in any other law, the offences referred to in the following articles shall be punishable by the respective penalties stated therein.
Article (139)
An employee or representative of the Central Bank or any member of the committees formed within the Central Bank, or any member of the Board of Directors, who discloses any confidential information in breach of provisions of Article (26) of this Decretal Law, shall be punished by imprisonment for a term not exceeding three (3) months and a fine not exceeding one hundred thousand (100,000) Dirhams, or by either of these two punishments.
Article (140)
Whoever issues Currency in contravention to the provisions of this Decretal Law, shall be punished by imprisonment for a term not exceeding twenty (20) years and a fine not exceeding one hundred million (100,000,000) Dirhams, or by either of these two punishments.
Article (141)
Whoever, publicly and intentionally mutilates, destroys or tears up Currency, shall be punished by imprisonment and a fine of not less than (10,000) ten thousand dirhams, or by one of these two penalties.
This article has been amended by Decretal Federal Law No. (54) of 2023. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 01/11/2023)Whoever, publicly and intentionally mutilates, destroys or tears up Currency, shall be punished by a fine, which shall be the greater of one thousand (1,000) Dirham and ten (10) times the value of the mutilated, destroyed or torn Currency.
Article (142)
1) Whoever contravenes the provisions of item (1) of Article (68) of this Decretal Law shall be punished by imprisonment and with a fine not less than two hundred thousand (200,000) Dirhams and not exceeding ten million (10,000,000) Dirhams, or by either of these two punishments.
2) Whoever contravenes the provisions of item (2) of Article (68) of this Decretal Law shall be punished by imprisonment for a period not exceeding six (6) months and with a fine not less than one hundred thousand (100,000) Dirhams and not exceeding five million (5,000,000) Dirhams, or by either of these two punishments.
Article (143)
Whoever violates the conditions and restrictions imposed on a license to carry on Licensed Financial Activities, shall be punished by a fine not less than two hundred thousand (200,000) Dirhams and not exceeding ten million (10,000,000) Dirhams.
Article (144)
Whoever contravenes the Central Bank’s instructions regarding deficiency in the financial position, referred to in Article (116) of this Decretal Law, shall be punished by imprisonment for a term not less than one (1) year, and a fine of not less than one million (1,000,000) Dirhams and not exceeding ten million (10,000,000) Dirhams, or by either of these two punishments.
Article (145)
Article (146)
Whoever violates any of the provisions of Article (83) of this decretal law, shall be punished by imprisonment for a term of not less than one (1) year and a fine of not less than five hundred thousand (500,000) Dirhams with a further fine of fifty thousand (50,000) Dirhams per day in case of continuing breach, which cumulatively shall not exceed five million (5,000,000) Dirhams, or by either of these two punishments.
Article (147)
Whoever commits any of the following violations shall be punished by imprisonment for a term not exceeding two (2) years and a fine of not less than five hundred thousand (500,000) Dirhams and not exceeding five million (5,000,000) Dirhams, or by either of these two punishments:
1) Provides incorrect or incomplete facts, information, or data in any statements or documents presented to the Central Bank.
2) Conceals any facts from the statements, information, minutes, papers, or other documents submitted to the Central Bank or to its representatives, employees, and auditors.
3) Destroys, mutilates or alters any document relating to a matter, which is the subject of an investigation by the Central Bank or sends, or causes to be sent out of the State such a document.
4) Obstructs, resists, or causes the delay of the conduct of an investigation by the Central Bank or the furnishing of information to the Central Bank.
5) Acts complicitly with another Person to commit any of the acts referred to in items (1) to (4) of this article.
Article (148)
Whoever intentionally discloses the confidential banking and credit information referred to in Article (120) of this Decretal Law shall be punished by imprisonment and a fine of not less than one hundred thousand (100,000) Dirhams and not exceeding five hundred thousand (500,000) Dirhams.
Article (149)
1) Where a violation was committed by a juridical Person, the official in charge of management shall be punished by the same penalties prescribed for actions committed in violation of the provisions of this decretal law, whenever his knowledge of the violation was established, or if the violation was a result of his negligence or failure to perform his duties.
2) The juridical Person shall be jointly liable with the official in charge of actual management with respect to the imposed financial fines and compensation, in case the violation was committed, in the name of the juridical person and on its behalf, by one of its employees.
Article (150)
Whoever commits any of the violations relating to Financial Infrastructure Systems referred to in Article (130) of this Decretal Law shall be punished by imprisonment and a fine of not less than one hundred thousand (100,000) Dirhams and not exceeding ten million (10,000,000) Dirhams, or by either of these two punishments.
Part VII – General Provisions –
Article (151): Scope of Application of the Decretal Law
The provisions of this Decretal Law apply to the Central Bank, financial institutions, financial activities, and Persons subject to it; and does not apply to the Financial Free Zones and the financial institutions regulated by the authorities of these zones.
Article (152) Enforceability of Applicable Regulations
Current regulations, decisions and circulars, issued in accordance with the provisions of Federal Law No (10) of 1980, Regarding the Central Bank, the Monetary System & Organization of Banking, and amendments thereto, and Federal Law No (6) of 1985, Regarding Islamic Banks, Financial Institutions and Investment Companies shall remain in force, until regulations, decisions and circulars are issued in replacement thereof, within a period not exceeding three (3) years from the date this decretal law comes into force.
Article (153): Reconciliation of Positions
All agencies and persons subject to the provisions of this Decretal Law shall reconcile their respective positions with its provisions, within the period determined by the Board of Directors.
Article (154) Conflict with Other Laws
Any provision contravening or conflicting with the provisions of this decretal law shall be annulled; and Federal Law No (10) of 1980 Regarding the Central Bank, The Monetary System & Organization of Banking, along with Federal Law No (6) of 1985, Regarding Islamic Banks, Financial Institutions and Investment companies shall be annulled.
Article (155): Fees and Charges
The Central Bank may impose fees and charges for providing the service, issuing licenses and authorizations, as deemed appropriate, in accordance with the nature and scope of functions, activities, and controls determined by the Board of Directors. A decision to such effect shall be issued by the Board of Directors and shall be published in the Official Gazette and the Central Bank’s official website.
Article (156): Enforceability of Judgments of Foreign Judicial Authorities
Judgments and decisions issued by foreign judicial and law enforcement authorities in respect of national Licensed Financial Institutions and branches of foreign Licensed Financial Institutions operating in the State shall apply, in accordance with applicable legal proceedings of effective laws in the State.
Article (157): Interpretation of the Technical Terms Referred to in this Decretal Law
1) If there is a reference in any legislation in force in the country to the “UAE dirham”, “currency”, “cash”, “money”, or any similar term, this includes digital currency in accordance with the provisions of this decree law unless the context requires otherwise.
2) Virtual assets as defined in the applicable laws in the Country, shall not be considered as Currency according to this decree law. Where virtual assets and currencies are used as a means or tool for payment or exchange, any regulations, rules and controls issued by the Central Bank in this regard shall be followed
3) The Central Bank may issue a glossary interpreting the technical terms referred to in this decretal law. This glossary shall be published on its official website.
This article has been amended by Decretal Federal Law No. (54) of 2023. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 31/10/2018 to 01/11/2023)The Central Bank may issue a glossary interpreting the technical terms referred to in this decretal law. This glossary shall be published on its official website.
Article (158): Decretal Law Publication and Application
This decretal law shall be published in the Official Gazette, and shall come into force on the day following date of its publication, without prejudice to the provisions of Article (152) hereof.
Insurance Activities Law
Federal Decree-Law No. (48) of 2023 Regulating Insurance Activities
We, Mohammed bin Zayed Al Nahyan, President of the United Arab Emirates,
Having perused:
-
The Constitution;
-
Federal Law No. (1) of 1972, regarding the jurisdictions of Ministries and Powers of Ministers, and amendments thereto;
-
Federal Law No. (6) of 2007, Regulating Insurance Business, and amendments thereto;
-
Federal Decree-Law No. (14) of 2018, regarding the Central Bank and organization of Financial Institutions and Activities, and amendments thereto;
-
Federal Decree-Law No. (32) of 2021, on Commercial Companies; and
-
Based on the Proposal submitted by the State’s Vice-President, the Deputy Prime Minister and the Minister of Presidential Court, and the Cabinet approval thereof,
Promulgated the following Decree-Law:
Chapter One: Preliminary Provisions
Article (1): Definitions
In implementation of the provisions of this Decree-Law, and unless the context requires otherwise the following words and expressions shall bear the meanings assigned thereto respectively,:
The State
:
The United Arab Emirates.
The CBUAE
:
The Central Bank of UAE.
Board
:
The CBUAE’s Board of Directors.
Chairman
:
The Chairman of the Board.
Governor
:
The Governor of the Central Bank.
Financial Free Zone
:
Any financial free zone established in the State under the provisions of Federal Law No. (8) of 2004, on Financial Free Zones, or any other repealing law.
Insurance Company (Insurer)
:
An insurance company established in the State as well as a foreign insurance company licensed to carry out insurance business in the State, either through a branch or through an Insurance Agent.
Reinsurance Company
:
A reinsurance company licensed to engage in reinsurance business, either in the State or abroad.
Companies
:
Insurance and Reinsurance Companies.
The Insured
:
A Person that enters into an insurance policy with the Insurance Company for their benefit or the benefit of the named Insured or the Beneficiary.
Beneficiary
:
A Person who initially acquired the Insurance Policy rights or to whom such rights are legally transferred.
Insurance Policy
:
A contract between the Insurer and the Insured setting out the insurance terms, rights and obligations of both parties or the rights of the insurance Beneficiary, and the annexes attached to the policy constitute an integral part thereof.
Insurance Agent
:
A Person licensed or authorized by the CBUAE, and is approved by the Insurance Company and authorized to carry out insurance activities on its own behalf or on behalf of a branch thereof.
Insurance Broker
:
A legal person licensed by the CBUAE and acts as independent intermediary in insurance and reinsurance operations between an insurance or re- insurance applicant on the one side and any Company on the other side, and receives, in consideration of its efforts, a commission from the Company with which insurance or reinsurance is concluded.
Surveyor and Loss Adjuster
:
A Person licensed or authorized by the CBUAE to inspect and assess the damage incurred in the subject of insurance.
Insurance Consultant
:
A Person licensed or authorized by the CBUAE to examine insurance requirements for their clients and give advice in respect of the suitable insurance coverage, assistance in preparing insurance requirements and receives their remuneration from their clients.
Actuary
:
A Person licensed or authorized by the CBUAE to determine the value and price of Insurance Policies, and to assess the technical provisions, accounts and all matters related thereto.
Health Insurance Claims Management Company
:
A legal Person licensed by the CBUAE to carry out health insurance claims management business.
Insurance- Related Professionals
:
Any Person licensed or authorized by the CBUAE to operate as an Insurance Agent, Insurance Broker, Surveyor and Loss Adjuster, Insurance Consultant, Actuary or Health Insurance Claims Manager, or any other profession related to insurance as determined and regulated by a resolution of the Board.
Branch
:
A branch of the Company that carries out insurance activities in the name of the Company.
Premium
:
An amount of money paid or payable by the Insured under the Insurance Policy and is called “Contribution” in Takaful insurance.
Authorized Manager
:
A natural Person appointed by a foreign insurance Company to manage its branch in the State.
Senior Employee
:
Any Person who occupies an executive position equivalent to the duties of a Director-General, Authorized Manager or the deputy or assistant of either one, or any department director, internal audit director or branch manager.
Technical Provisions
:
Provisions which the Insurer must deduct and retain to cover the Insured’s accrued financial obligations vis-a-vis the Insured, pursuant to the provisions of this Decree-Law.
Solvency Margin
:
A surplus in the value of the Company’s existing assets over its liabilities to such an extent that enables it to fulfil all its obligations and pay the required insurance claims once they become due without impeding the Company’s business or weakening its financial position.
Minimum Guarantee Fund
:
An amount equal to one third of the required Solvency Margin or the amount determined by the Board, whichever is greater.
Auditor
:
A Person authorized to carry out accounting and audit business in the State.
Takaful Insurance
:
A collective contractual scheme intended to achieve solidarity and cooperation among a group of contributors to address certain risks, where each one pays an amount of money called “contribution” to be deposited in a Takaful insurance fund, through which compensation is to be paid to eligible persons when a risk is sustained.
Higher Sharia’ah Authority (HAS)
:
The authority established under Federal Decree-Law No. (14) of 2018, referred to hereinabove.
Person
:
A natural and legal Person.
Commercial Register
:
The Register established with the competent authority under Federal Decree-Law No. (37) of 2021, on the Commercial Register, or any other superseding law.
Article (2): Scope of Application
1)
The provisions of this Decree-Law shall apply to the following categories:
a.
Companies and Insurance-Related Professions; and
b.
Holding companies that control or acquire (15%) of the volume of insurance business in the State, or whose insurance activity and related services represent more than (50%) of their revenues. The Board shall issue the controls governing the operation of such Companies in the insurance activity.
2)
The provisions of this Decree-Law shall not apply to Companies operating in the financial Free Zones, save as specifically provided for in this Decree-Law.
Article (3): Insurance Concept
An insurance is a contract whereby the Insurer undertakes to pay the Insured or the eligible Beneficiary an amount of money, an arranged revenue or any other monetary compensation in case the insured incident or risk has occurred, in return for Premiums or any other regular payments to be paid by the Insured to the Insurer.
Chapter Two: Insurance Business
Article (4): Insurance Types
The insurance business shall be divided into the following two types:
1) Insurance of Persons and fund accumulation operations; and
2) Property and liability insurance.
The resolutions, regulations and instructions issued by the Board shall determine the insurance activities that fall under each insurance type.
Article (5): Compulsory Insurance
The Board may impose compulsory insurance against some risks under regulations whereby the controls and conditions of insurance and other provisions related thereto are identified.
Article (6): Insurance Services Fees
1)
The CBUAE shall charge fees for supervision and control, in addition to any other fees for the services provided by the CBUAE under the provisions of this Decree- Law, including the services of issuing licenses and permits.
2)
The Board shall issue a resolution determining the fees referred to in Clause (1) above, and shall publish the same in the Official Gazette.
Article (7): Establishment of Funds
The CBUAE may establish funds with an independent legal personality for the purpose of protecting policyholders, Beneficiaries and aggrieved persons. A resolution shall be issued by the Board specifying the method of forming such funds and their objectives, mechanism of finance, risks covered by them and benefits they provide when such risks occur, methods of their termination and the provisions of their liquidation.
Chapter Three: Competences of the Board and the Governor
Article (8): Competences of the Board
The Board shall adopt the policies, regulations and rules necessary for regulating insurance business, pursuant to this Decree-Law, including the following:
1)
The Solvency Margin and the Minimum Guarantee Fund controls according to the adopted international standards in this regard;
2)
Basis of calculating the Technical Provisions;
3)
Reinsurance standards and controls;
4)
Basis of investing the Company’s assets;
5)
Identifying the Company’s assets that meet the accrued insuring obligations;
6)
Accounting policies to be adopted by the Company and the required Forms to prepare and present financial statements;
7)
Basis of developing accounting books and records of the Companies, Agents, and Brokers, along with determining the data to be recorded in such books and records;
8)
Records which the Company commits itself to maintain and the description of such records, as well as data and documents that must be provided to the CBUAE;
9)
Conditions, controls and ethics for carrying out the insurance and reinsurance activity and the Insurance-Related Professions;
10)
Anti-money laundering and combating terrorism financing and the financing of illegal organizations in insurance activities, in cooperation with the relevant authorities;
11)
Insurance policy rates it deems appropriate and the technical grounds thereof;
12)
Controls and conditions for licensing the Companies and the Insurance- Related Professionals;
13)
Minimum capital for the Companies and the Insurance- Related Professionals;
14)
Rules and controls necessary to protect clients of the Companies and Insurance-Related Professionals and provide them the appropriate Insurance Coverage;
15)
Conditions, rule and controls for approving Auditors of the Companies and the Insurance-Related Professionals and their obligations;
16)
Setting out and determining the Emiratization targets in the insurance sector, monitoring compliance with such targets and imposing penalties and fines on the Companies and the Insurance-Related Professionals that do not comply with the same, and to that end, it may coordinate with the relevant authorities or may entrust them with any of such functions; provided that the Board shall set a mechanism for the retention and disposition of amounts of these fines, and the CBUAE shall submits an annual report to the Cabinet on the Emiratization targets and the actions that have been taken to achieve such targets;
17)
Regulating Takaful Insurance business, including the provisions and procedures for appointing and approving the Sharia’ah Supervisory Committee and the conditions required to be fulfilled by its members;
18)
The financial reporting system and the external audit of the Companies and the Insurance-Related Professionals;
19)
Regulations, rules, standards, directives and instructions related to inspection operations and procedures of the Companies and the Insurance-Related Professionals; and
20)
Regulations, rules and standards related to the competency of the Senior Employee.
Article (9): Competences of the Governor
1)
The Governor shall issue the policies, regulations, directives and rules approved by the Board, and shall issue the resolutions and directives necessary for implementing the same.
2)
The Governor shall be responsible for applying the provisions of this Decree-Law and the CBUAE’s regulations and the Board’s resolutions issued in pursuance thereof.
3)
The Governor may delegate his competences set forth herein to any of his deputies, assistants or other Senior Employees of the CBUAE; provided such delegation be in writing and for a specific period.
Chapter Four: Insurance Companies
Article (10): Carrying out Insurance Business
Any of the following Persons licensed by the CBUAE may carry out insurance business in the State:
- a. An Insurance Company incorporated as a public joint-stock company in the State; and
- b. A branch of a foreign Insurance Company.
Article (11): Prohibition of Combination of Insurance Operations
1)
It is prohibited for Insurance Companies to combine persons and fund accumulation insurance operations and property and liability insurance operations.
2)
Existing companies licensed to carry out the two types of insurance before the issuance of the Federal Decree-Law No. (6) of 2007, referred to hereinabove, shall remain operational.
3)
The Companies referred to in Clause (2) above shall comply with the following controls:
a.
Complete separation between persons and funds accumulation insurance operations and property and liability insurance operations in terms of technical, financial, technological, administrative and legal procedures and the relevant technical, administrative and financial systems and staff, except for the Company’s Director General; and
b.
Preparing all financial reports and statements required by virtue of this Decree- Law and the Board’s instructions and resolutions on a consolidated aggregate basis, and on the basis of the separation between persons and funds accumulation insurance operations and property and liability insurance operations.
4)
Notwithstanding the provisions of Clause (2) above, the Cabinet may, at the proposal of the Board, issue a resolution obligating Insurance Companies to adjust their situations pursuant to the provisions of Clause (1) above, or may issue a resolution that such Companies remain carrying out the two types of insurance while being prohibited from issuing new Insurance Policies combining the property and liability insurance and the persons and funds accumulation insurance operations, in accordance with the controls and requirements set by the Cabinet in this regard.
Article (12): Insurance with a Company Abroad
1)
Insurance brokerage for funds or properties existing in the State or for the liabilities arising therefrom may only be carried out by an Insurance Company licensed under the provisions of this Decree-Law.
2)
The Company may reinsure inside and outside the State.
3)
No Person may conclude an Insurance Policy with an Insurance Company outside the State to cover any money or property within the State or liabilities arising therein. No legal person in the State may insure its personnel in the State with an Insurance Company outside the State.
4)
Notwithstanding the provisions of Clause (3) above, insurance may be made with an Insurance Company outside the State in case the required Insurance Coverage is not available in the State, or Insurance Companies abstain from, or unable to provide such coverage, or for any other reasons decided by the CBUAE, in accordance with the controls and conditions determined by the Board in this regard.
Article (13): Insurance Policy Language
1)
The Insurance Policy shall be concluded in the State in Arabic, and an accurate translation into any other language may be attached therewith. In case of discrepancy in the interpretation of the policy, the Arabic text shall prevail.
2)
The policy’s clauses exempting the Insurance Company from liability shall be written in bold with a different colour, and must be endorsed by the Insured.
3)
Insurance Policies may be electronically issued, in accordance with the terms and conditions established by virtue of a resolution by the Board.
4)
Notwithstanding the provision of clause (1) above, the Governor may exclude certain Insurance Policies from the condition of being concluded in Arabic, provided that a translated copy in Arabic be submitted if so requested by the CBUAE.
Chapter Five: Governance of Companies
Article (14): General Framework of Governance
The CBUAE shall set the general framework for governance of the Companies, as well as the regulations and rules for organizing the work of their boards of directors. the CBUAE shall also set the conditions that must be fulfilled by board candidates and the conditions for appointing their Senior Employees; provided that the Companies whose securities are listed on financial markets of the State shall comply with the governance requirements issued by the Securities and Commodities Authority (SCA).
Article (15): Conditions of Appointment of Board Member, Director General or Authorized Manager of the Company
A Person to be appointed as a Board Member, Director General or Authorized Manager of the Company must:
1)
Have never been convicted of a felony or misdemeanor involving moral turpitude and breach of trust or of insolvency, unless rehabilitated; and
2)
Have never been punished with any administrative sanction determined by a decision of the Board, on the grounds of committing a violation of any of the provisions of this Decree-Law or Federal Decree Law No. (32) of 2021, referred to hereinabove, in his capacity as a Director General or Board Member of a Company or beneficial owner thereof or controlling over its capital, including liability for causing loss, bankruptcy or liquidation of the Company.
Article (16): Prohibitions
1)
It is prohibited for the Company’s chairman, Board Members, Director General and Authorized Manager or who acts on their behalf to:
a.
Engage in managing other competing Insurance Company or any company that carries out the same or similar Insurance activity;
b.
Compete the Company’s business or carrying out any action or activity that conflicts with the Company’s interest;
c.
Practice as an Insurance Agent or Broker; or
d.
Receive a commission for any insurance operation.
2)
It is prohibited for any Person who assumes the management of the Company or any employee thereof to be a representative of any shareholder of the Company.
Article (17): Conditions for Appointment of Senior Employee
1)
In order for a Senior Employee to be appointed, such senior employee must fulfil the same conditions set forth in Article (15) above, in addition to the fulfillment of the qualifications, efficiency and expertise requirements necessary for carrying out insurance operations. The Company shall provide the CBUAE with a detailed statement containing the academic qualifications, practical experience and documents supporting the above.
2)
The Board shall issue a resolution defining the academic qualifications, the practical experience and the documents referred to in Clause (1) above.
Article (18): Vacant Position
The Company shall notify the CBUAE in case the position of any of the Company’s Board Members, Director General, Senior Employee or Authorized Manager becomes vacant. The Company’s board of directors or the Company, as the case may be, shall fill the vacant position within a period not exceeding (30) days from the date of being vacant, after obtaining the approval of the CBUAE.
Article (19): Providing the CBUAE with Meeting Minutes
The Company’s board of directors shall provide the CBUAE with copies of the board’s minutes of meetings and decisions related to the election of the Company’s chairman, vice-chairman and members authorized to sign on behalf of the Company and their specimen signatures, within (7) seven business days from the date such decisions are issued.
Article (20): Resignation of Board Members
Should the Chairman and Board Members submit their resignations or should the vacant positions reach one quarter of the Company’s board members, the Governor shall:
1)
Form an interim committee comprising experienced and specialized individuals and appoint a chairman and vice-chairman among its Members to assume the management of the Company;
2)
Call for a general assembly meeting within a period not exceeding (3) three months following date of forming the committee, renewable for a similar period only once, in order to elect a new board of directors of the Company. The Company shall bear the committee’s remunerations, as decided by the Governor.
Article (21): Protection of the Company
1.
The CBUAE shall take whatever measures it deems appropriate for the proper operation of the Company’s business, in accordance with the controls determined by the Board. To that end, the CBUAE may:
a.
Request to hold a general assembly meeting to discuss any subject the CBUAE deems critical;
b.
Request to include any item the CBUAE deems necessary to be included on the Company’s general assembly meeting agenda, even while the general assembly meeting is being held; and
c.
Hold the execution of any decision issued by the Company’s general assembly if it contravenes the laws or regulations in force.
2)
If the Company’s general assembly is unable to take a decision on the appointment of its Auditor, or if the appointed auditor rejects the appointment for any reason whatsoever, the CBUAE may appoint an Auditor for a period of one fiscal year and determine their fees at the Company’s expense.
3)
If the Company’s general assembly is unable to appoint members of the Sharia’ah Supervisory Committee, in Companies where such committee is required, or if this appointment is not possible for any reason, the CBUAE may appoint the members of the Committee and determine their remunerations at the Company’s expense.
Article (22): Publication of the Call to the General Assembly Meeting
1)
The Company may only publish an invitation to hold the general assembly meeting in newspapers after the approval of the CBUAE of the publication. The Company may only include any additional items on the general assembly meeting’s agenda after the approval of the CBUAE.
2)
Subject to the provisions of Clause (1) above, a Company whose securities are listed on financial markets may only publish an invitation to the general assembly meeting in newspapers after the approval of SCA.
Article (23): Technical Provisions and Reserves Required to be Maintained
The Company, in implementation of the instructions issued by the Board, shall maintain the following:
1)
Solvency margin and the Minimum Guarantee Fund, as per the type of insurance carried out by the Company;
2)
Technical Provisions estimated at the end of each fiscal year; and
3)
Reserves to be maintained in the State.
Article (24): Appointment of Actuary
The Company licensed to carry out insurance business shall appoint or approve an actuary, pursuant to the provisions of Article (65) hereunder, within one month from date of being granted the license, and shall so notify the CBUAE within one month from the date of appointment or approval of the Actuary.
Article (25): Insurance Pool
Insurance Companies may together establish one or more insurance pool(s) to provide an Insurance Coverage of any branch of insurance or any specific operation for the benefit of the pool, pursuant to the bylaw of each pool; provided that the CBUAE’s prior approval is obtained.
Chapter Six: Obligations of the Company
Article (26): Payment of Compensation
The Insurance Company shall pay the compensation set out in the Insurance Policy to the Insured or to the Beneficiary, as the case may be, as soon as the insured incident occurs or the insured risk materializes. Following which, the Insurance Company shall subrogate the Insured for the indemnity it paid for damage in lawsuits of the Insured vis-à-vis the party causing the damage for which the Insurance Company’s liability has arisen.
Article (27): Insurance of Vehicles
The Insurance Company shall conclude the Insurance Policy for all motor vehicles licensed in the State when so requested by concerned parties. The Board shall set the insurance rates as commensurate with the severity of risks.
Article (28): Provision of Data and Information
1)
The Companies and the Insurance-Related Professionals shall provide any data or information requested the CBUAE concerning them or about any Company related or associated therewith in any manner whatsoever, within the period of time set by the CBUAE.
2)
The Company’s Board of directors shall invite the CBUAE to attend the general assembly meeting before at least (15) fifteen days from date of its convention. the CBUAE may assign one of its employees to represent it for such purpose.
3)
the CBUAE may assign one or more of its employees to verify or audit any of the Company’s transactions, records or documents, within the normal business hours of the Company. The Company shall put any of the aforesaid at the disposal of the so assigned employee and shall cooperate with him to enable him to fully perform his duties.
4)
CBUA may, based on the audit result, assign Experts, Consultants, Actuaries or Auditors to audit/check the Company’s operations, evaluate its positions and submit a report thereon. The Company shall cooperate with them in a manner that enables them to fully perform their duties. The company shall bear their remunerations, as determined by the CBUAE for any one of them.
5)
It is prohibited for Expert, Consultant, Actuary or Auditor to disclose to any third party whatsoever any information received under Clause (4) above without obtaining the CBUAE’s written approval, except for the disclosure that is based on a court order.
Article (29): Financial Reports
1)
The Company shall provide the CBUAE with a detailed annual report on its operations signed by the Chairman, the Authorized Manager or authorized signatories of the Company, including the annual financial statements, financial reports reflecting detailed profits and losses of the type of insurance carried out by the Company and each branch thereof and the Auditor’s report, within a period not exceeding (3) three months from the end of the fiscal year. the CBUAE shall be delivered a copy of the report, at least (15) fifteen business days before inviting to the general assembly meeting.
2)
The Company shall not present the accounts and financial statements referred to in Clause (1) above to the general assembly meeting except after obtaining the CBUAE’s approval.
3)
The Chairman or Director General shall promptly notify the CBUAE if the Company is exposed to serious financial or administrative situations compromising the rights of the Insured or Beneficiaries.
Article (30): Insurance Policy Forms
1)
The Company shall provide the CBUAE with forms of the Insurance Policies and their approved annexes, including the general and special terms and conditions, the technical grounds of such policies and the Premiums rates annexed thereto, and shall provide the CBUAE with schedules of the redemption values of life Insurance Policies and funds accumulation operations and the premiums rates annexed thereto.
2)
Should the public interest requires or in case of imperfection that may compromise the interests of Policyholders, the CBUAE may request the Company to introduce an amendment to the forms of Insurance Policies and their approved annexes, within the period determined the CBUAE for such purpose.
3)
The Company shall provide the Insured and the Beneficiaries with copies of the Insurance Policies and the annexes thereof after the amendment is introduced, within the time limit set the CBUAE.
Article (31): Disclosure and Transparency
The Companies shall comply with the principles of disclosure and transparency while dealing with the Insured and the Beneficiaries and in all policies, documents, leaflets, advertisements, publicity, articles and scientific materials issued by them, which are regulated by a resolution by the Board.
Article (32): Auditor
1)
The Company’s Auditor shall submit a prompt report to the CBUAE, with a copy thereof to the Company’s Chairman in any of the following cases:
a.
If they found out that the financial position of the Company does not enable it to fulfill its obligations vis-a-vis the Insured or Beneficiaries or hinders its capacity to fulfil the financial requirements set forth in this Decree-Law and the resolutions, regulations, statutes and instructions issued thereunder related to the financial position of the Company;
b.
If they found out that there is material imperfection in the Company’s performance of its financial procedures, including entering data in its accounting records, and the existence of material deficiencies in the internal controls that could pose a threat to its financial position and stability;
c.
If they refuse or have reservations in respect of any certificate or statement issued by the Company related to its income or financial statements;
d.
If they fail to express their opinion on the Company’s financial statements due to material misstatements or fraud;
e.
If they find out that the Company does not comply with the laws, resolutions, regulations, and instructions related to the Company’s financial statements; and
f.
If they decide to resign or their reappointment to the Company is rejected.
2)
The CBUAE may request the Auditor to directly provide it, within a specific period, with the information needed to monitor the Company’s operations.
3)
When the Auditor recommends that the financial statements filed thereto by the board of directors not to be approved, the Company’s general assembly meeting shall decide the following:
a.
To return the financial statements to the Company’s board of directors and ask the latter to correct the statements according to the Auditor’s observations and are deemed approved after the observations are rectified.
b.
To refer the matter to the CBUAE to appoint a committee of expert Auditors and fix their remunerations to be charged by the Company to adjudicate the subject matter of the dispute between the Company’s board of directors and its Auditor. Having been presented again to, and approved by the general meeting, the Committee’s decision shall be binding and the financial statements shall be adjusted as per the committee’s decision.
Chapter Seven: Measures, Sanctions and Grievance
Article (33): Measures and Sanctions
1)
The CBUAE may conduct a periodic examination of the Companies to ensure the soundness of their financial positions and their compliance with the provisions of this Decree-Law and the technical bases of carrying out insurance and reinsurance operations. To that end, the CBUAE may verify that the Company complies with the following:
a.
Its fulfillment of its obligations and that the CBUAE shall not be held liable for its failure to do so or its inability to continue in business;
b.
The Company does not commit any violation of the provisions of this Decree-Law or the resolutions, or instructions issued in pursuance thereof;
c.
The adequacy of measures taken by the Company on the reinsurance of risks assumed by the same;
d.
Compliance with the license conditions necessary to carry out insurance business;
e.
The Company’s total losses shall not exceed (50%) fifty percent of its paid-up capital; and
f.
The Company shall not cease to conduct its business without legitimate justification.
2)
Where the Company fails to comply with any provisions of Clause (1) above, the CBUAE may impose whatever measures or sanctions it deems appropriate, and it may impose one or more of the following actions:
a.
Serving a notice describing the nature of violation, procedures for remedying it and a mechanism for regularization.
b.
Requesting the Company or the headquarters of a foreign insurance company, as the case may be, to take the necessary measures to regularize the administrative situations therein, including deposing the Company’s Director General, Authorized Manager or any Senior Employee thereof.
c.
Deposing the Company’s Chairman and any Board Member proved to be responsible for the current status of the Company.
d.
Forming a neutral committee of experts to replace the Company’s Board of Directors for a period not exceeding (6) six months, renewable for similar period(s), if necessary, and in all cases the total periods may not exceed (24) twenty four months, defining its functions and appointing its members, chairman and vice- chairman. The Company shall bear the committee’s remuneration, as determined by the CBUAE. The procedures for electing and forming a new board of directors shall be proceeded pursuant to the provisions of Federal Decree-Law No. (32) of 2021, referred to hereinabove, at least (30) thirty days before the expiry of the committee’s work.
e.
Taking the necessary actions to merge the Company into another company, subject to the approval of the company into which it will be merged.
f.
Preventing the Company from concluding new Insurance Contracts or preventing it from carrying out one or more type of insurance.
g.
Setting out a threshold limit for the total amounts of Premiums that the Company receives from the Insurance Policies it issues.
h.
Maintaining assets in the State equivalent in value to all net obligations arising from its business in the State, or a certain percentage of its value determined by the CBUAE.
i.
Restricting the Company’s carrying out of its investment activities related to the Solvency Margin ratio, or obliging it to liquidate its investments in any of such activities for such purpose, unless the same would cause harm to the Company, as determined by the specialized expert.
j.
Appointing an independent supervisory member from outside the CBUAE to attend the Company’s board meetings and participate in discussions, without having a vote, during decision-making. The Board shall determine his duties and remunerations.
k.
Suspension of the Company’s license.
l.
Revocation of the Company’s license.
m.
Restructuring of the Company.
n.
Liquidation of the Company.
o.
Imposing a fine on the Company not exceeding (AED 100,000,000) one hundred million dirhams.
3)
The provisions of Clauses (1) and (2) above shall apply to the Insurance-Related Professionals, as commensurate with the nature of their professions.
4)
The measures set out in Clause (2) above shall be imposed by virtue of a resolution of the Governor, other than the measures referred to in Paragraphs (e), (l), (m) and (n), which shall be imposed by a resolution of the Board.
Article (34): List of Violations and Fines
The Board shall issue a list of violations committed by the Companies and the Insurance- Related Professions, pursuant to the provisions of this Decree-Law and the fines imposed thereon.
Article (35): Filing Grievances Against CBUAE’s Decisions
1)
A grievance committee shall be established by the CBUAE to consider grievances filed against decisions, measures and administrative sanctions issued pursuant to the provisions of this Decree-Law. The Board shall issue the necessary decisions on the formation of the committee, rules of procedure, remunerations of its members, experts to be engaged and all matters related thereto.
2)
Save as regulatory and supervisory policies, resolutions, regulations, directives and instructions. The committee referred to in Clause (1) above shall decide on grievances against the CBUAE’s decisions, pursuant to the provisions of this Decree-Law and the resolutions issued in pursuance thereof.
3)
A grievance against the CBUAE’s decision shall be made within (20) twenty business days from the date of notification of the decision in accordance with the mechanism determined by the Board. The committee shall not accept grievances submitted after this time limit.
4)
Decisions falling within the competence of the Committee, pursuant to the provisions of this Article, may not be challenged before courts before a grievance against them is filed and decided.
5)
No grievance may be filed before the committee set out in Clause (1) above against decisions issued by the CBUAE, pursuant to the provisions of Clause (2) of Article (41) hereunder.
Article (36): Inspection
1)
The CBUAE may assign any of its employees or any other licensed or authorized Person to inspect the Company or any other company owned by such Company or is affiliated thereto, in order to ensure the soundness of its financial position and its compliance with the provisions of this Decree-Law and the resolutions, regulations, and instructions issued in pursuance thereof, as well as other laws and regulations in force in the State.
2)
The CBUAE shall coordinate with the relevant regulatory authority in case of the inspection of companies owned by the Insurance and Reinsurance Companies, Insurance-Related Professionals or associated Companies, which are subject to the regulatory authorities.
3)
The CBUAE may, in coordination with the relevant authorities in the State, inspect premises of any Person suspected to carry out any insurance and reinsurance business or the Insurance-Related Professions. To that end, the CBUAE may obligate the suspected Person to provide all information, documents and records related thereto and to seize them.
4)
The Companies and the Insurance-Related Professionals and companies owned by and affiliated to the same shall provide the inspector with whatever data, information, records, books, accounts and documents related to the subject of the inspection on the dates specified by him.
5)
The inspector may collect the necessary information and clarifications from any Person with whom the Company or the owner of the Insurance- Related Profession has a relationship with regard to the subject of the inspection.
6)
The inspector may summon any Person at the time and place specified by them to provide information, data, documents or records related to the inspection.
7)
The CBUAE may assign one of its employees or a specialized expert to guide the Company and the Insurance-Related Professions or supervise some operations within a specific period determined by the CBUAE. If the expert is from outside the CBUAE, the Company and the Insurance-Related Professions shall pay his remuneration determined as determined by the CBUAE.
8)
The Company and the Insurance-Related Profession shall bear all expenses of inspection and investigation that another person is assigned to carry out, pursuant to the provisions of Clause (1) above, if it is proved that it violates the provisions of this Decree-Law and the statutes and resolutions issued in pursuance thereof.
Article (37): Facilitation of Inspection
It is prohibited for the Companies and Insurance-Related Professionals or any of their managers or employees to:
1)
Prevent, obstruct, or hinder any employee or any other Person assigned the CBUAE from carrying out inspection or audit under the provisions of this Decree-Law;
2)
Conceal any data, records or books requested by the CBUAE or whoever is assigned to carry out inspection or audit; and
3)
Issue any statements or give any inaccurate or misleading data, records or books.
Chapter Eight: Funds of Insurance Companies
Article (38): Bank Deposit Amount
Every Insurance Company shall make a cash deposit in a bank operating in the State, as a security for implementing its obligations set forth in this Decree-Law, the amount of which shall be determined as follows:
1)
(AED 4,000,000) four million dirhams for person and fund accumulation insurance referred to in Clause (1) of Article (4) above.
2)
(AED 6,000,000) six million dirhams for property and liability insurance referred to in Clause (2) of Article (4) above.
By virtue of a resolution of the Board, the amount of the deposit referred to in Clauses (1) and (2) above may be increased. The deposit shall be made to the order of the Governor.
Article (39): Disposition of the Bank Deposit
The deposit may only be disposed of for the payment of debts arising from insurance operations carried out by the Company; provided that a prior written authorization of the Governor or his representative is obtained.
If the value of the deposit diminishes below the prescribed limit if it is disposed of, the Company shall replenish the deposit amount within a period not exceeding (30) thirty days from the date of the CBUAE’s request to replenish the deposit amount.
Article (40): Mathematical Reserve of the Company
The Company that carries out the type of insurance referred to in Clause (1) of Article (4) above must keep in the State funds whose value is at least equivalent to the full amount of the mathematical reserve of contracts concluded in the State or implemented therein. The Board may reduce the percentage of reserve the Company is required to keep.
Such funds must be completely separated from the funds of other insurance operations. When calculating the aforementioned reserve, the deposit referred to in Clause (1) of Article (38) above shall be taken into account, so that whichever value is greater shall be applicable.
Chapter Nine: License
Article (41): Approval and License
1)
It is prohibited to establish a company in the State, open a branch of a foreign Insurance Company , or add a new branch without the approval of the CBUAE.
2)
It is prohibited for an person to carry out insurance business without having the relevant license issued by the CBUAE, which may, as it deems appropriate for the need of the national economy, approve or reject the issuance of the license, and in case of rejection, the CBUAE shall be reasoned
3)
The Board shall revoke the license if it has been issued based on false information.
4)
It is prohibited for any unlicensed Company to conclude an Insurance Policy. Any Insurance Policy concluded by an unlicensed Company shall be null and void, and a bona fide affected party may claim compensation.
5)
The Board shall set the controls and requirements necessary for implementing the provisions of Clauses (1) and (2) above.
Article (42): Reinsurance Controls
The Company may not reinsure with another company unless the other company is licensed to carry out the insurance type entrusted to reinsure it according to the regulations issued by the Board.
Article (43): Fiscal Year
The fiscal year of the Company shall commence on 1st January and end on 31st December every year. However, the first fiscal year shall commence from the date of its registration in the Commercial Register and end on 31st December of the following year.
Chapter Ten: Suspension and Revocation of the Company’s License
Article (44): Cases of the Company’s Suspension
The Governor may suspend the Company from carrying out one or more types of insurance for a period not exceeding one year, while notifying both the Company and the relevant authority of the suspension decision, in any of the following cases:
1)
In case the Company violates the provisions of this Decree-Law or the resolutions, regulations, or instructions issued thereunder;
2)
In case the Company lacks of any of the conditions required to be fulfilled in the license under the provisions of this Decree-Law;
3)
In case the Company fails to carry out business in any type of insurance covered by the license, or ceases to carry out such business for one year;
4)
In case the Company is unable to fulfill its financial obligations; and
5)
In case the Company refrains from implementing a final court judgement related to the Insurance Policy;
The Company that has been suspended from carrying out one or more types of insurance shall implement its obligations that had been arisen before the suspension decision is issued.
Article (45): Removal of Suspension or License Revocation Reason
1)
Should the Company, within a period not exceeding one year from the date on which the suspension decision is issued, removes the suspension reason, the Governor shall issue a decision approving it to continue in insurance business, and the CBUAE shall notify the relevant authority and the Company of the decision.
2)
In the event that the time limit referred to in Clause (1) above expires and the Company fails to remove the suspension reason, the Board shall delicense the type of insurance subject of the suspension, and the CBUAE shall so notify the company and the relevant authorities.
Article (46): Impacts of Suspension or Revocation of the License
1)
The procedures related to the suspension of business or revocation of the license for one or more types of insurances under the decisions issued by the Board in this regard.
2)
The issuance of a decision to suspend the business or revoke the license for one or more types of insurance shall:
a.
Prohibit the conclusion of Insurance Policies for one or more types of insurance subject of suspension or Revocation; and
b.
Consider all rights and obligations arising from Insurance Policies concluded before the suspension of business or revocation of the license effective and the Company shall be liable for the same.
Article (47): Relicensing the Company
If the license revocation reason is removed, the Company may, within a period not exceeding one year from the date on which the revocation decision is issued, submit an application to the CBUAE for re-licensing, accompanied by the documents proving the removal of the license revocation reason. The Board may issue its decision on approval or rejection, provided that the decision is reasoned, and the CBUAE shall notify the Company and the relevant authorities of the decision.
Article (48): Rejection of Relicensing Application
1)
Should the Board rejects the relicensing application for all types of insurance, or if the Company fails to submit a relicensing application, within the time limit referred to in Article (47) above, the Company shall go into liquidation within a period not exceeding one month from the date of expiry of such period or from the date of being notified of the rejection decision. If the Company fails to do so, it shall be liquidated in accordance with the provisions of this Decree-Law.
2)
The Company’s license shall be deemed revoked if a liquidation decision is issued pursuant to the provisions of this Decree-Law, a final court judgement of its liquidation is rendered or is declared bankrupt under the legislation in force in this regard.
Chapter Eleven: Foreign Insurance Companies and Representation Offices of Foreign Insurance Companies
Article (49): Branch of Foreign Insurance Company
1)
A foreign Insurance Company’s branch shall appoint a manager to manage the branch, who is authorized by a document attested by the relevant authorities to exercise all the powers necessary to manage such branch, including:
a.
Issuing Insurance Policies and annexes thereof and paying the claims arising therefrom;
b.
Representing the Company’s branch before the CBUAE, competent court and other relevant authorities; and
c.
Receiving communications, notices and all correspondence served to the Company.
2)
Before the carrying out Insurance Business, a foreign Insurance Company’s branch shall submit an application to the CBUAE for licensing the branch; provided that the manager’s appointment decision and the document referred to in Clause (1) above shall be attached to the application.
3)
The foreign Insurance Company’s branch shall notify the CBUAE of the Authorized Manager’s name within one month from his appointment date, and shall appoint a substitute within one month from the date on which position becomes vacant.
Article (50): Bank Guarantee
The foreign Insurance Company’s branch shall submit an irrevocable letter of bank guarantee in favor of the CBUAE, in an amount of not less than (AED 100,000,000) one hundred million dirhams in case it is carrying out insurance activity, and an amount of not less than (AED 250,000,000) two hundred fifty million dirhams in case it is carrying out reinsurance activity, in accordance with the instructions issued by the Board in this regard.
Article (51): Final Account
The Foreign Insurance Company’s branch shall provide the CBUAE with the combined final account, and shall publish it in two local daily newspapers, one of which is issued in Arabic.
Article (52): Representation Offices of Foreign Insurance Companies
1)
Representation offices of foreign Insurance Companies may not carry out their activities related to insurance in the State before obtaining license from the CBUAE.
2)
the CBUAE shall issue a decision regulating the functions of such offices.
3)
The license shall be either accepted or rejected by virtue of a decision of the Board, and the CBUAE shall notify the relevant authorities accordingly.
Chapter Twelve: Insurance Companies of Persons and Fund Accumulation Operations
Article (53): Policies Issued by Insurance Companies
The companies engaged in insurance business for persons and fund accumulation operations may not differentiate between the policies issued of the same type; in terms of insurance rates, or the proportion of profits distributed to policyholders or other requirements, unless such differentiation arises from a life expectancy variations for policies where the lifetime has an effect, except for:
1)
Reinsurance policies;
2)
Insurance Policies of amounts that enjoy certain discounts according to the price lists communicated to the CBUAE; and
3)
Insurance Policies that include special conditions on the life of members of a single family or a group of individuals related by a single profession or job or any other social relation.
Article (54): Insurance Policy Rate Discount
The CBUAE may, based on the Company’s request, agree to the issuance of policies at discounts compared to the normal prices, if there are reasons justifying the same.
Article (55): Assessment of Value of Liabilities
The Companies that carry out the insurance of persons and fund accumulation operations shall examine the financial position of this type of insurance and assess the value of its obligations at least once every (3) three years by an Actuary, as of the business commencement date.
This assessment shall cover all insurance operations concluded by the Company inside and outside the State separately. If the activity is carried out by a branch of a foreign Company, the assessment shall be limited to the operations whose contracts were concluded in the State or carried out therein.
Article (56): Examination of Financial Position
The assessment referred to in Article (55) above shall be conducted whenever the Company wishes to examine its financial position to determine the percentages of profits to be distributed to shareholders or policyholders, or whenever it wishes to announce this position.
The CBUAE may request that this assessment be made at any time before (3) three years, provided that a period of not less than one year has lapsed from the date of the last examination.
Article (57): Data of the Actuary’s Report
The financial directives of Insurance Companies issued by the Board, pursuant to this Decree-Law, shall set the data required to be included in the Actuary’s report on the result of the assessment and examination referred to in Articles (55) and (56) above.
Article (58): Attachments of the Actuary’s Report
The Company shall send to the CBUAE a copy of the Actuary’s report on the result of the examination and assessment referred to in Articles (55) and (56) above, within six months from the expiry of the period for which the examination was conducted, accompanied by the following:
1)
A statement of valid Insurance Policies concluded by the Company inside or outside the State on the date of conducting the examination. If the activity is carried out by a branch of a foreign Company, the statement shall be limited to the policies concluded or implemented in the State.
2)
A declaration by persons in charge of the Company’s management that all data and information necessary to access a correct report have been provided to the Actuary.
Following the expiry of the six-month period, as referred to in this Article, an additional period may be given to the Company to submit this report, provided that this period does not exceed three (3) months.
Article (59): Reexamination of Financial Position
If it becomes clear to the CBUAE that the Actuary’s report does not reflect the true financial position of the Company, the CBUAE may request a reexamination at the Company’s expense by an Actuary selected by the CBUAE for this purpose.
Article (60): Distributable Funds
1)
Companies that engage in the insurance of persons and fund accumulation may not deduct, whether directly or indirectly, any part of their funds corresponding to their obligations arising from the Insurance Policies to distribute it as dividend to shareholders or Policyholders, or to pay any amount beyond their obligations under the Insurance Policies it issued. The distribution of dividend shall be limited to the amount of money in excess, as determined by the Actuary in their report, after conducting the examination referred to in Article (57) above.
2)
For the purpose of applying the provisions of this Article, the Company’s funds in the State and abroad may be considered as an integral unit, without prejudice to the provisions of Article (23) above.
Article (61): Savings Bonds
The Companies that engage in the insurance of Persons and fund accumulation may not issue savings bonds for a period exceeding thirty (30) years. If the duration of a bond is (25) twenty-five years or more, the value of its redemption after the twenty fifth year (25) may not be less than the amount of the full mathematical reserve. The Premiums to which savings bondholders are committed must be of equal or declining value.
Article (62): Data of Savings Bonds
Savings bonds shall provide for the termination conditions that the Company invokes vis-à-vis a bondholder due to their delay in paying the Premiums.
However, the contract may be terminated before the lapse of (3) three months from the due date of the Premium and the bondholder failing to pay the premium. In case the bond is nominal, such period shall apply from the date of notifying the bondholder by way of a registered letter.
Such bonds shall provide for the devolution of rights thereto to the Beneficiaries due to the bondholder’s death, without imposing additional amounts or new requirements.
The CBUAE shall determine other data that must be included in the savings bonds.
Article (63): Assessment of Insurance Policy Value
In the event of the bankruptcy of the Company engaged in the insurance of Persons or fund accumulation, the amounts due to each of policyholder not yet expired shall be assessed to equate the mathematical reserve thereto on the day of announcing the bankruptcy verdict or the liquidation decision calculated according to the technical basis of the Premiums at the time of concluding the policy.
Article (64): Insurance Companies Operating in Financial Free Zones
Insurance Companies licensed to operate in the Financial Free Zones may not carry out any activity outside such zones in the State, except for reinsurance.
Article (65): Insurance-Related Professions
No Person may practice as an Insurance Agent, Insurance Broker, Surveyor and Loss Adjuster, Insurance Consultant, Actuary, health insurance claims manager or any other professions related to insurance without obtaining the license or permit to practice the profession and being registered in the register designated for such purpose, and in accordance with the conditions determined by the Board, which include determining the liability of Insurance-Related Professionals and organizing their business and the conditions of their registration in the register.
Chapter Thirteen: Transfer of Insurance Policies and Cessation of Operations
Article (66): Transfer of Insurance Policies from Company to Company
The Company may transfer the Insurance Policies it has concluded in the State, including the rights and obligations related to any type of insurance carried out by the Company, to another Company or Companies that carry out the same type of insurance.
Article (67): Insurance Transfer Application
1)
The transfer application shall be submitted to the CBUAE, accompanied by the documents related to the transfer agreement, and the transfer application shall be published in two local daily newspapers, one of which is published in Arabic, at the expense of the transfer applicant, or as per the mechanism determined the CBUAE; provided that the announcement shall refer to the right of policyholders, the Beneficiaries or any interested party to file any objection to the CBUAE to such transfer, within (10) business days from the date of the announcement; provided that the subject of their objection and the grounds thereof are determined.
2)
The CBUAE shall issue its approval of the transfer if no interested party objects thereto within the period referred to in Clause (1) above. The decision shall be published in the Official Gazette within one month from the date of its issuance, and it may be invoked vis-à-vis the Insured, the Beneficiaries and the Company’s creditors, and the funds shall be transferred to the Company to which the policies have been transferred, subject to the provisions relating to the transfer of ownership and assignment of funds; provided that the transferred funds are exempted from the registration fees under the provisions relating to the transfer of ownership and assignment of funds.
3)
If an objection is submitted within the period referred to in Clause (1) above, the transfer application shall be decided on only after an agreement is reached between the interested parties or a final judgement is rendered on such objection. However, the CBUAE may issue a decision approving the transfer; provided that a guarantee is submitted by the Company to the CBUAE equivalent to its obligations vis-à-vis the objector, including the expenses that may be incurred for retaining any of the Company’s assets.
Article (68): Cessation of Insurance Operations
The provisions of Articles (66) and (67) above shall be applicable if any Company wishes to cease carrying on one or more types of insurance, or is desirous to free up its funds that are required to be present in the State for such type or types of insurance, after the Company provides a proof that it has fulfilled its obligations for all policies concluded within the State or carried out therein, pertaining to such type or types of insurance for which it decided to cease its operations
Chapter Fourteen: Takaful Insurance Company
Article (69): Takaful Insurance Business
1)
The provisions of this Decree-Law and the resolutions, regulations, and directives issued thereunder shall apply to Takaful Insurance Companies, in so far as they do not contradict the nature of their business, and they may not engage in insurance business in such a manner that violates the provisions and principles of Islamic Sharia’ah, provided it must be reflected in its memorandum of association and articles of association.
2)
The Board shall issue a regulation setting out aspects of activities, conditions, rules and standards of the Takaful Insurance Company’s business in a manner that is appropriate with the nature of the license granted thereto.
Article (70): Takaful Insurance Fund
Takaful Insurance Company shall establish a fund that enjoys independent legal personality, in accordance with the controls and procedures identified under a resolution by the Board, which shall be subject to the control and supervision of the CBUAE, where its contribution amounts and investment returns are deposited, in addition to the Takaful reinsurance contributions or its equivalent and their revenues. The fund shall bear all expenses and costs of insurance operations, and shall be liable for compensation under the provisions of Takaful Insurance Policies.
Article (71): Higher Shari’ah Authority
1)
The Higher Sharia’ah Authority shall set the Sharia’ah rules, standards and principles for Takaful Insurance Companies business, and shall control and supervise the internal Sharia’ah supervisory committees referred to in Article (72) hereunder.
2)
Takaful Insurance Companies shall bear the expenses of the Higher Sharia’ah Authority, including the provisions, remunerations and expenses of its members, pursuant to the articles of association of the Higher Sharia’ah Authority.
3)
Takaful Insurance Companies and the internal Sharia’ah supervisory committees shall comply with fatwas and opinions issued by the Higher Sharia’ah Authority.
Article (72): Internal Sharia’ah Supervisory Committee
1)
An independent internal Sharia’ah supervisory Committee shall be formed in every Takaful Insurance Company called “the Internal Sharia’ah Supervisory Committee”, comprising experts and specialists in Islamic financial transactions jurisprudence. Such committee shall supervise and approve all business, activities, products, services, contracts, documents, and charters of the Company’s business, and shall set the necessary Sharia’ah controls for the same under rules, principles and standards set by the Higher Sharia’ah Authority, in order to ensure their compliance with the provisions of Islamic Sharia’ah. Fatwas or opinions issued by the Committee shall be binding on the Company.
2)
The general assembly of the Takaful Insurance Company shall appoint members of the internal Sharia’ah Supervisory Committee, pursuant to provisions of Decree Law No. (32) of 2021, referred to hereinabove, and the names of the members of the Internal Sharia Supervisory Committee shall be presented to the Higher Sharia’ah Authority for approval before being submitted to the general assembly and a decision is issued approving the appointment.
3)
Members of the Internal Sharia’ah Supervisory Committee may not hold any executive position in a Takaful Insurance Company, or provide services beyond the scope of the Committee’s work, or be shareholders in it or have or their relatives up to the second degree have any interests related thereto.
4)
Should a disagreement arise over a Sharia’ah opinion between members of the Internal Sharia’ah Supervisory Committee, or in case of a disagreement regarding a Sharia’ah matter between the Internal Sharia’ah Supervisory Committee and the relevant Company’s board of directors, the matter shall be referred to the Higher Sharia’ah Authority, whose opinion shall be final in this regard.
5)
An internal department shall be established in every Takaful Insurance Company to carry out internal Sharia’ah auditing and monitor the Company’s compliance with fatwas and opinions of the Internal Sharia’ah Supervisory Committee. This department shall report directly to the Company’s Board of Directors, and its employees shall have no powers or executive responsibilities vis-à-vis the business, activities and contracts reviewed or supervised by them from a Sharia’ah viewpoint.
Article (73): Report of Internal Sharia’ah Supervisory Committee
1)
The Internal Sharia’ah Supervisory Committee shall prepare an annual report, as per the form determined by the Higher Sharia’ah Authority, presenting the extent of the compliance by the management of Takaful Insurance Company with the application of the provisions of Islamic Sharia’ah in the business and activities it carries, the products it provides, the contracts it concludes, and the documents it uses.
2)
The Internal Sharia’ah Supervisory Committee’s report shall be submitted to the Supreme Sharia’ah Authority for approval before being presented to the general assembly.
Chapter Fifteen: Provisions of Control, Ownership of the Company and its Merger
Article (74): Controlling Stakes
1.
No Person may, whether solely or jointly with related parties, own a controlling stake or increase the controlling stake in the Company or exercise powers rendering him to be perceived as an owner of a controlling stake, without obtaining the approval of the CBUAE.
2.
In case it is established that a Person has violated the provision of Clause (1) above, the CBUAE may impose one or more of the following measures:
a.
Serving a violation notice and giving the violating party or a time limit for regularization, in accordance with the mechanism determined by the CBUAE;
b.
Depriving the violating party of dividends or benefits, to the extent of the violation. ;
c.
Preventing the violating party from voting in the Company’s general assembly or running for membership of the Company’s board of directors until regularization is done or implementation of the procedure determined the CBUAE;
d.
In case the violating party is a member of the Company’s board of directors, suspending or revoking its membership;
e.
Preventing the violating party from disposing of the proportion that exceeds the controlling stake without obtaining the prior written approval of the CBUAE; and
f.
Any other measures decided by the Board.
3.
The Board shall issue the regulations and directives pertaining to determining related parties with their shareholding in the Company’s capital, and restrictions to shares and situations of control, pursuant to the provisions of Federal Decree-Law No. (32) of 2021, referred to hereinabove, or any other superseding law.
Article (75): Ownership of Insurance Company’s Shares
An Insurance Company may not, whether directly or through related parties, own shares of another Insurance Company or bonds convertible to shares, except in accordance with the controls and directives issued by the Board in this regard.
Article (76): Controls of Merger and Acquisition
1)
A Company may not merge with, or acquire any other Company, regardless of its activity, and may not transfer any part of its obligations to another Person unless after obtaining the prior approval of the CBUAE.
2)
Without prejudice to the legislation in force in the State on merger and acquisition, the Board may issue the regulations, , directives and rules related to merger and acquisition.
Chapter Sixteen: Unbalanced Financial Position
Article (77): Restructuring
1)
The Board shall set a framework for restructuring and liquidating the Companies, including the controls, conditions and rules in this respect to reduce the consequences that may be caused from the imbalance in its financial position.
2)
The CBUAE may request from the relevant authorities in the State to temporarily seize the Company that suffers from an imbalance in its financial position and take possession of its assets, property and rights of its shareholders, issue a decision requesting the competent court to liquidate or dissolve the Company in question, and develop a plan to liquidate or transfer its assets, liabilities, settlements and clearances, as the CBUAE deems appropriate, and implement or supervise the implementation of the liquidation plan, or take a decision on the restructuring or submit a request for a bankruptcy declaration to the competent court, pursuant to the legislation in force in this regard.
3)
The CBUAE may coordinate with the relevant authorities in the State before the Board issues any decisions in accordance with the provisions of this Article, whenever it deems necessary. The CBUAE may request the competent judicial authorities to take precautionary and summary measures and procedures and any other measures that would protect policyholders, creditors, shareholders and their interests, or as dictated by public interest.
Article (78): Restructuring Committee
1)
For the purposes of restructuring the Company pursuant to the provisions of paragraph (m), Clause (2) of Article (33) above, the Board may issue a decision dissolving the Company’s board of directors and forming a neutral committee to restructure the Company in accordance with Paragraph (d), Clause (2) of Article (33) above. The committee shall submit a monthly report, to the CBUAE on the progress of the restructuring procedures, or whenever requested by the CBUAE.
2)
For such purpose, the restructuring includes managing the Company and organizing its distressed financial affairs by negotiating with all its creditors to determine the Company’s debts and its repayment method by adopting a plan for the restructuring.
3)
The committee referred to in Clause (1) above shall publish an announcement in the Official Gazette for (3) three consecutive business days in two local daily newspapers, one of them published in Arabic, at the expense of the Company, which shall include an invitation to all creditors to submit statements of the amount of their debts, along with supporting documents, within a period not exceeding (30) thirty days from the date of publishing the last announcement. No statements submitted by any creditor may be accepted following the lapse of such period.
Article (79): Cases of Suspending Attachment or Enforcement Against the Company’s Property
1)
Subject to the provisions set forth in any other legislation, the enforcement of any attachment on the Company’s property or assets, whether precautionary or executory attachment, or any disposition of, or enforcement against such property or assets shall be suspended from the date of issuance of the restructuring decision until any of the following cases is established:
a.
Lapse of the of the committee’s tenure referred to in Clause (1) of Article (78) above;
b.
Issuance of a decision by the Board, pursuant to the provisions of the Decree-Law, rejecting the restructuring plan; Creditors’ rejection of the restructuring plan, pursuant to provisions of this Decree- Law; and
c.
Issuance of a decision by the Board to discontinue the restructuring procedures, pursuant to the provisions of this Decree-Law.
2)
The statute of limitation for inadmissibility of the lawsuit shall be suspended, as regard to the procedure referred to in Clause (1) above.
Article (80): Report of the Committee
1)
The committee referred to in Clause (1) of Article (78) of this Decree- Law shall prepare its report on the restructuring plan within a period not exceeding fifteen (15) days from the date the debts are established and invite creditors to approve the plan under an announcement to be published in two local daily newspapers, one of which is published in Arabic, provided that the plan is approved by creditors representing at least three-fourths of non-preferred creditors and unsecured by a pledge.
2)
In the event that the creditors approve the plan, in accordance with the provisions of Article (a) of this Article, the committee shall submit this plan to the CBUAE, which shall accordingly be submitted to the Board for approval.
3)
In the event that creditors reject the plan prepared in accordance with the provisions of Clause (1) above, the Committee shall submit a report accordingly to the CBUAE, which shall submit it along with its recommendations to the Board.
4)
The Board may take an appropriate decision on the submitted plan in accordance with the provisions of Clause (1) above. In the event that the Board approves the plan, the restructuring procedures shall be proceeded with, and in case of rejection, the Board decides to take the appropriate action, pursuant to the provisions of Clause (2) of Article (33) of this Decree-Law.
5)
After completing the restructuring, a new Board of Directors of the company will be elected, pursuant to the provisions of the legislation in force in the State.
Article (81): Discontinuance of Restructuring Procedures
If the Board determines that the Company is distressed, despite the implementation of the restructuring plan or its ineffectiveness, it may decide to discontinue the restructuring procedures and take the appropriate action, in accordance with the provisions of Clause (2) of Article (33) above.
Article (82): Appointment of Liquidator
1)
Without prejudice to the provisions of Federal Decree-Law No. (32) of 2021 referred to hereinabove, the provisions contained in this Decree- Law and the regulations and resolutions issued thereunder shall apply to the Company’s liquidation. The liquidation shall be carried out by one or more liquidators appointed by the general assembly by way of a special resolution. If the liquidation is based on a court judgment, the court shall indicate the method of liquidation and shall appoint the liquidator. The liquidator’s appointment decision shall specify his fees and powers, along with an obligation to provide a guarantee, if necessary. If the liquidator’s fees are not determined in the appointment decision, they shall be determined by the competent court.
2)
The decision appointing the liquidator shall be announced by registration in the Commercial Register, and such announcement shall be published in two local daily newspapers, one of which is published in Arabic, within a period not exceeding seven (7) days from the date of the announcement. Such appointment may be invoked vis-à-vis third parties only from the announcement date.
3)
The authority of the Company’s board of directors shall end when the Company goes into liquidation. In the course of liquidation, the Company shall retain legal personality to the extent necessary for the liquidation proceedings. The powers of the Company’s organizational units and affiliates shall be restricted to the liquidation proceedings that do not fall within the powers of liquidators.
Article (83): Challenging the Liquidator Appointment Decision
1)
Any party in interest may challenge the decision issued by the Company’s general assembly appointing the liquidator before the competent court, within (40) forty days from the date announcing the appointment decision.
2)
The challenge referred to in Clause (1) above shall not suspend the liquidation proceedings, unless otherwise decided by the court.
Article (84): Removal of Liquidator
The liquidator shall be removed the same way he was appointed, and any decision or judgment removing a liquidator shall include the appointment of a replacement. The liquidator’s removal shall be published in two local daily newspapers, one of which is published in Arabic. Such removal may be invoked vis-à-vis third parties only from the announcement date.
Article (85): Consequences of Liquidation Decision
The issuance of the liquidation decision shall have the following consequences:
1)
The liquidator adds the phrase (under liquidation) next to the name of the Company in all its documents and correspondence;
2)
Discontinuation of any delegation of authority or signatory power issued by any entity, and the liquidator shall be exclusively competent to grant any delegation of authority or signatory power required by the liquidation proceedings;
3)
Suspension of the statute of limitation that leads to the inadmissibility of the lawsuit with regard to any rights or claims due or existing in favor of the Company for a period of one year starting from the date of issuance of the liquidation decision;
4)
Stay of cases and proceedings brought by or against the Company for a period of six (6) months, unless the court decides to proceed with such cases before the expiry of this time period, without prejudice to the provisions of Clause (5) of this Article; and
5)
Stay of any procedural or executive transactions against the Company, unless such transactions are based on the request of a pledgee and related to the pledged property, in such case, such transactions shall be discontinued or their acceptance shall be prevented for a period of (6) six months from the date on which the liquidation decision is issued.
Article (86): Decisions and Procedures Necessary for the Liquidation Process
The liquidator may issue the decisions he deems appropriate and undertake the procedures he deems necessary to complete the liquidation process, including:
1)
Managing the Company’s business to the extent required by the liquidation procedures;
2)
Making a record of all the Company’s assets, in agreement with the Company’s board of directors, which shall hand over to the liquidator, the Company’s property, books and documents;
3)
Appointing any experts and competent persons to help him complete the liquidation procedures, or appointing special committees and delegating to them any of the tasks and powers vested in him; and
4)
Appointing one or more lawyers to represent the Company under liquidation in any lawsuits or proceedings related thereto.
Article (87): Procedures Protecting the Company’s Rights
1)
The liquidator may take all actions that he deems necessary to protect the Company’s rights, including:
a.
Revoking any disposition or terminating any contract concluded by the Company, or recovering any amount it has paid during the three months preceding the issuance of the liquidation decision, if it involves giving preference to a certain person over the Company’s creditors. The period shall be one year if the Company is related to, or affiliated that person. Preference is deemed to have materialized if the disposition or procedure has been done without receiving consideration, whether fully or partially, or if it involves valuing property or rights differently than its real value or contrary to its value prevailing in the market.
b.
Revoking any disposition or terminating any contract concluded by the Company with any Person who is related to, or affiliated with the Company, or recovering any amount paid by the Company to any of them, within the (3) months prior to the issuance of the liquidation decision.
c.
Agreeing with any of the Company’s debtors on how to pay or pay in installments any amounts or obligations owed.
d.
Terminating the employment of any of the Company’s employees and paying their dues.
e.
Terminating any contract concluded by the Company with any Person before the expiry of its term.
2)
The liquidator shall undertake any of the procedures referred to in Clause (1) above by notifying the concerned person under a written notice. However, this procedure may be challenged before the competent court, having territorial jurisdiction where the Company’s head office is located, within (30) days as from the notification of such Person.
Article (88): Nullity of Pledges and Collaterals
1)
All pledges and collaterals created over any property or rights of the Company during the (3) three months preceding the date of the issuance of the liquidation decision shall be null and void. Such period shall be one year if the pledges or collaterals are in favor of a Person who is related to, or affiliated with the Company.
2)
Any attachment over any of the Company’s property or right before the issuance of the liquidation decision shall be null, unless this decision is issued based on a pledgee’s request and is related to the pledged property.
Article (89): Person Related to the Company
For the purposes of Articles (87) and (88) of this Decree-Law, a person is deemed related to the Company in any of the two following cases:
1)
If the person is a member of the Company’s board of directors, a manager at the Company or has a joint business interest with either one; or
2)
If the person is a spouse or a relative of a member of the Company’s board of directors or a manager thereat or his spouse up to the second degree or has a joint business interest with either one.
Article (90): Acts of the Liquidator
Without prejudice to the provisions of the legislation in force in the State, the liquidator may repay the Company’s debts and may sell its property, whether movable or real property, at public auction or by any other means, unless it stipulated in the instrument pertaining to his appointment that the sale must be carried out in a specific way. However, the liquidator may sell the Company’s assets as a whole only by a special decision of the general assembly.
Article (91): Notification of Creditors
1)
Without prejudice to the provisions relating to the Insured and the Beneficiaries of the Insurance Policies, the liquidator shall, within (30) thirty days from the date of the issuance of the liquidation decision, publish a noticeable and prominent announcement in two local daily newspapers, one of which is published in Arabic, to notify creditors to submit their claims against the Company, whether payable or unpayable debts, within two (2) months if they are residents in the State and three (3) months if they reside abroad.
2)
The announcement shall be republished in the same manner promptly after the expiration of a period of (14) fourteen days from the date of publication of the first announcement. The statute of limitations for claims shall be calculated from the date of publication of the first announcement.
3)
If the liquidator or the competent court is satisfied that there is a legitimate excuse for a creditor’s failure to submit his claim within the period referred to in Clause (1) above, such period may be extended for further (3) three months maximum.
4)
The period of time running from the issuance of the liquidation decision to the publication of the first announcement referred to in Clause (1) above shall not be calculated within the period prescribed for the inadmissibility of the lawsuit pertaining to any rights or claims of creditors against the Company under liquidation.
Article (92): Notices Issued by the Liquidator
1)
Without prejudice to the provisions of Clause (2) below, the liquidator shall, within three (3) months from the date of issuance of the liquidation decision, issue the below notices, unless he finds justifiable reasons to exceed such period; provided that the total period does not exceed six (6) months:
a.
A notice with acknowledgment of receipt to each Insured or Beneficiary of the Insurance Policy of the amount of their rights and obligations.
b.
A notice of claim with acknowledgment of receipt to each debtor of the amount of his debts and obligations vis-à-vis the Company.
2)
An objection to the notice referred to in Clause (1) above may be filed to the liquidator within (30) days from the date of notification. If no objection is made during such period, the Insured, Beneficiary, or debtor shall be considered to have acknowledged the content of the notice.
3)
The statute of limitation for hearing a lawsuit shall be interrupted by way of the submission of a claim pursuant to the provision of Clause (2) above.
4)
If the claim notice issued by the liquidator to a debtor, pursuant to the provisions of Paragraph (b) of Clause (1), becomes final, the liquidator may make a settlement with the debtor or execute the notice against him under the provisions of the legislation in force in this regard.
Article (93): Decisions Issued by the Liquidator
1)
The liquidator shall issue his decisions on the claims and objections it receives, pursuant to the provisions of Article (92) above, within a period not exceeding (6) six months from the date of submission.
2)
If the liquidator fails to issue his decision within the period referred to in Clause (1) above, the claims and objections shall be deemed to be rejected.
3)
Any interested party may challenge the liquidator’s decision issued pursuant to the provisions of Clauses (1) and (2) above before the competent court having jurisdiction where the Company’s head office is located, within a period of (30) thirty days from the date of being notified of the decision or from the date of the expiry of the period referred to in Clause (1) above, whichever is shorter.
Article (94): Precautionary Attachment
Notwithstanding the provisions of any other legislation, the liquidator may file a motion to the competent court to impose a precautionary attachment over any property belonging to the Company’s debtors; or to take any precautionary or summary measures against them, pursuant to the provisions of the legislation in force, considering the following:
1)
The liquidator shall be exempted from depositing a security for such motion; and
2)
The liquidator shall have issued a notice of claim to the debtor upon filing the aforementioned motion, or shall issue it within (8) eight days subsequent to the issuance of the decision. This notice shall be an alternative to the substantive action required to be filed pursuant to the provisions of the Federal Civil Procedure Law.
Article (95): Filing a Lawsuit Against the Company
1)
After the liquidation decision is issued, a creditor, debtor, Insured or Beneficiary may not institute a lawsuit against a Company under liquidation, unless in accordance with the grounds and procedures referred to in this Decree-Law.
2)
Without prejudice to the provisions of Clause (1) of this Article, a Person affected by the liquidator’s actions or procedures may challenge the same before the competent court having jurisdiction where the Company’s head office is located, pursuant to the provisions of the legislation in force in this regard. The court may confirm, nullify or amend such actions and procedures, and may order the liquidator to take actions as may be required.
Article (96): Repayment of Debts
Debts owed by the Company under liquidation shall be paid according to the following order:
1)
Rights of employees and workers payable for the last (4) four months;
2)
Liquidator’s fees, expenses incurred and the loans obtained for the purposes of completing the liquidation;
3)
Rights of the Insured and the Beneficiaries of the Insurance Policies, and the liquidator shall allocate the Company’s assets, which represent the technical provisions required to be retained under the provisions of this Decree-Law, to pay such obligations, and any amount collected by the Company under the reinsurance arrangements shall constitute part of the technical provisions;
4)
Rights of other creditors, as per their order of priority under the provisions of the legislation in force in this regard; and
5)
Shareholders’ rights.
Article (97): Submitting a Provisional Account for Liquidation Proceedings
1)
The liquidator shall submit to the general assembly, every (6) six months, a provisional account for the liquidation proceedings, and shall provide the information or data requested by shareholders on the liquidation status, and shall complete his mission within the period specified for the liquidation in his appointment decision. If no period is specified, each shareholder may refer the matter to the competent court to specify the liquidation period.
2)
The liquidation period may be extended only by a decision of the general assembly after reviewing a report by the liquidator stating the reasons why the liquidation failed to complete timely. If the period of liquidation is specified by the court, it may be extended only with leave from the court.
Article (98): Final Account of Liquidation
1)
Upon the completion of liquidation, the liquidator shall submit to the general assembly a final account on the liquidation proceedings, and such proceedings shall be completed upon ratification of the final account.
2)
The liquidator shall announce the completion of the liquidation by registering it in the Commercial Register and publishing it in two local daily newspapers, one of which is issued in Arabic, which may only be invoked vis-à-vis third parties from the date of this announcement. Upon the completion of the liquidation, the liquidator shall submit a request for striking the Company off the Commercial Register.
Article (99): Communication of Notifications and Reports
1)
Any notification or decision issued by the liquidator under the provisions of this Decree- Law shall be notified to the relevant Person in person or to his legal representative, or may be sent by registered mail with acknowledgment of receipt to his last address kept with the Company under liquidation.
2)
Any notification sent pursuant to this Article shall be deemed to have been duly delivered to the recipient should such Person refuses to receive it. eports
3)
If the notification is not possible, pursuant to the provisions of Clause (1) above, the liquidator shall carry out notification through publication in two local daily newspapers, one of them published in Arabic, for at least two times, and the relevant Person shall bear the publication expenses, and this publication shall be considered notification to him.
Chapter Seventeen: General Provisions
Article (100): Emirates Insurance Federation
1)
Pursuant to the provisions of this Decree-Law, a professional union shall be established called (Emirates Insurance Federation), which shall have the legal personality and legal capacity necessary to carry out all actions and dispositions that ensure achieving its objectives.
2)
All Companies and Insurance-Related Professionals must become a member of the Emirates Insurance Federation, in accordance with the controls and procedures to be determined by a resolution of the Board. The Federation shall establish committees for various insurance activities practiced by the members.
3)
The CBUAE shall supervise the business of the Emirates Insurance Federation and approve its articles of association, which define its tasks, responsibilities and relationship with the CBUAE, and shall establish its committees related to various insurance activities, and the provisions relating to its general assembly, and composition of its board of directors and meetings thereof, fees of membership, annual subscription, rules for practicing the profession, disciplinary procedures against its members, and other provisions regulating its affairs
4)
The Emirates Insurance Federation shall replace all the Emirates Insurance Society, established under Federal Law No. (6) of 2007, referred to hereinabove, and all contracts, rights and obligations related to the Emirates Insurance Society shall devolve to the Federation.The Emirates Insurance Society’s staff shall be transferred to the Emirates Insurance Federation, without prejudice to the acquired rights to any of them.
5)
The legislation, policies, statutes and regulations applicable to the Emirates Insurance Society shall apply to the Emirates Insurance Federation, in a manner that does not conflict with the provisions of this Decree-Law, until the replacing ones are issued.
Article (101): Claims and Settlement of Insurance Claims
1)
The Company shall process Insurance Claims in accordance with the provisions of the Insurance Policies and the legislation in force, by applying the following procedures:
a.
Issuing a decision on any Insurance Claim, in accordance with the directives of the rules of professional practice and ethics.
b.
In the event that any Insurance Claim is rejected, in whole or in part, the Company shall state the reasons for its decision in writing.
2)
If a dispute arises out over an Insurance Claim or if the stakeholder objects to the clarifications provided by the Company, the stakeholder may file a complaint to the Banking and Insurance Dispute Settlement Unit, established pursuant to Article (121) of Federal Decree-Law No.(14) of 2018, referred to hereinabove.
3)
A complaint shall be filed according to the procedures approved by the Banking and Insurance Disputes Settlement Unit.
4)
One or more committees shall be established in the Banking and Insurance Disputes Settlement Unit to settle disputes arising from insurance contracts, insurance business and services. The Board shall issue the necessary decisions determining its competences, powers, rules of procedure, remunerations of its members and the fees it collects, in addition to the decisions related to its formation. The committee shall be headed by a judge with one or more judges selected the by CBUAE as members.
5)
The Company may not challenge the decisions of the committee referred to in Clause (4) above on disputes whose value does not exceed (AED 50,000) fifty thousand dirhams. Such decisions shall be final and enforceable immediately upon their issuance. If the dispute value exceeds (AED 50,000) fifty thousand dirhams, the Company may challenge the committee’s decisions before the Court of Appeal within (30) days, from the date of its issuance or knowledge thereof, otherwise, the challenge shall be inadmissible.
6)
Without prejudice to the provisions of Clause (5) above, the concerned party may challenge the decisions of the committee referred to in Clause (4) above before the Court of Appeal, within (30) days from the date of issuance of the decision or knowledge thereof; otherwise, the challenge shall be inadmissible.
7)
Cases arising from insurance contracts, business and services shall be inadmissible if they are not submitted to the committees formed in accordance with the provisions of Clause (4) above.
8)
The committee’s decisions shall have the force of a writ of execution, and a challenge shall stay the execution of a decision on disputes whose value exceeds (AED 50,000) fifty thousand dirhams.
Article (102): Confidentiality of Data and Information
1)
All data and information related to insurance business and transactions related thereto shall be of a confidential nature. Insurance Company’s employees and Insurance-Related Professionals and their employees are prohibited from giving and disclosing data and information of the Insured or Beneficiaries or enable others to access thereto in cases other than the ones authorized by law. Such prohibition shall survive the termination of the relationship between the Company and the Insured or Beneficiaries for any reason whatsoever.
2)
The prohibition referred to in Clause (1) above shall apply to all entities, Persons and any Person who, due to their work, have access, directly or indirectly, to data and information.
3)
The CBUAE, in its capacity as the competent regulatory authority in the State, shall set the rules and conditions regulating the exchange of data and information being the.
4)
The provisions of Clauses (1) to (3) of this article shall not violate the following:
a.
Competences legally conferred on security and judicial authorities and the CBUAE and its employees;
b.
Duties entrusted to auditors of the relevant establishments;
c.
The right of the entities mentioned in this Clause to disclose all or some data of transactions of their clients necessary under the legislation in force in the State to evidence their rights in a legal dispute that arose between them and their clients in this regard; and
d.
The provisions set forth in the applicable laws and the ratified international conventions, in addition to the special provisions regulating money laundering and combating the financing of terrorism and illegal organizations.
Article (103): Retention of Data and Information
1)
Notwithstanding the provisions of any other legislation, electronic data shall be probative if it complies with the legislative controls related thereto.
2)
The Companies shall keep, for the legally prescribed period, a soft copy of the original books, records, statements, documents, correspondence, telegrams, notices, and other papers related to its business. such electronic copy shall have the same probative force of the original, pursuant to the legislation regulating that.
Article (104): Intervention in Proceedings and Notification of Investigations
1)
Subject to the provisions of the Federal Civil Procedure Law, the CBUAE may request to intervene in any lawsuit filed before judicial authorities to which one of its parties is a Company or Insurance- Related Profession.
2)
All entities concerned with the implementation of the provisions of this Decree-Law and other entities shall notify the CBUAE of any investigations or measures taken against any Company or Insurance- Related Profession. The CBUAE may provide such authorities with any clarifications, data or information that it may deem appropriate in this regard.
Article (105): Penalty for Carrying Out Insurance Business without License
Without prejudice to any severer penalty set forth in any other law, any Person that breaches the prohibition set forth in Clauses (1), (2) and (4) of Article (41) or the provisions of Article (65) of this Decree- Law, shall be punished by imprisonment and a fine of not less than (AED 1,000,000) one million dirhams, or by one of these two punishments.
Article (106): Submission of Data and Information by Government Authorities
All government agencies and Companies to which such agencies contribute and which benefit from insurance business shall submit any data or information related to insurance operations it concludes , as required the CBUAE within the period specified for the same.
Article (107): Cooperation with Local and International Authorities
The CBUAE may cooperate with regulatory authorities in other States to exercise its powers set forth in this Decree-Law over the Companies and the Insurance-Related Professionals abroad, in accordance with the following controls:
1)
Observing the principle of reciprocity;
2)
Ensuring that the substance of cooperation does not conflict with the public interest requirements, and public order;
3)
Ensuring coordination with the relevant entities in the State; and
4)
Complying with the provisions of the legislation in force in the State.
Article (108): Publication of Decisions
The CBUAE shall publish the decisions related to issuance, suspension, revocation, or relicensing decisions related to merger, acquisition, restructuring, liquidation or dissolution of the Companies in the Official Gazette and in two daily local newspapers, one of which is issued in Arabic, at the expense of the Company, as well as on the CBUAE’s official website.
Article (109): Publication of Draft Regulations and Rules
The CBUAE shall publish draft regulations and rules governing the business of the Companies and Insurance-Related Companies under a notice to be addressed to all relevant entities to express an opinion thereon, within the period determined by the CBUAE.
Article (110): Contribution and Ownership Percentages
1)
The Board shall set the conditions and controls for UAE citizens’ and foreigners’ ownership of the Companies’ shares and the percentages of contribution to the capital thereof.
2)
The Board shall determine the conditions and controls for UAE citizens’ and foreigners’ ownership of insurance-related professions’ legal persons and the percentages of contribution thereto.
Article (111): Capacity of Judicial Officer
The CBUAE’s employees identified by a resolution of the Minister of Justice, in coordination with the Governor, shall have the capacity of judicial officer to evidence acts committed in violation of the provisions of this Decree-Law.
Article (112): Reconciliation of Situations
Any Person that is governed by the provisions of this Decree-Law shall adjust their situation in compliance with the provisions of this Decree-Law within a period not exceeding (6) six months from the effective date thereof, and may be extended for a similar period under a resolution of the Cabinet, at the proposal of the Board.
Article (113): Application of the Commercial Companies Law
The provisions of Federal Decree-Law No. (32) of 2021, referred to hereinabove, shall be applicable to insurance business, in so far as they do not contravene the provisions of this Decree-Law.
Article (114): Repeals
1)
Federal Law No. (6) of 2007 Regulating Insurance Business abovementioned shall be repealed, and any provision contravening or conflicting with the provisions of this Decree-Law shall be repealed.
2)
The regulations, resolutions and circulars issued pursuant to the provisions of the abovementioned Federal Law No. (6) of 2007 shall remain effective, in so far as they do not conflict with the provisions of this Decree-Law, until the replacing regulations, resolutions and circulars are issued.
Article (115): Publication and Entry into Force of the Decree-Law
This Decree-Law shall be published in the Official Gazette, and shall enter into force after (30) thirty days from its publication date.
Khalifa Bin Zayed Al Nahyan
President of the United Arab Emirates
Issued by Us at the Presidential Palace- Abu Dhabi
Dated: 17th Rabi’ Al-Awwal 1445 AH,
Corresponding to: October 2nd 2023 AD
AML/CFT
Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations Laws
Decree Federal Law No. (20) of 2018 on Anti-money Laundering and Combating the Financing of Terrorism and Illegal Organisations
DFL 20/2018 Effective from 23/10/2018The Decree Federal Law No. (20) of 2018 on Anti-money Laundering and Combating the Financing of Terrorism and Illegal Organisations has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. Please find the PDFs of versions on the table below.Version 2 (consolidated as of 13/09/2021) Version 1 (effective from 23/10/2018) Article (1)
In application of the provisions of the present Decree-Law, the following terms and expressions shall have the following meanings assigned to them unless the context requires otherwise:
State: United Arab Emirates
Ministry: Ministry of Finance
Minister: Minister of Finance
Central Bank: Central Bank of the UAE
Governor. Governor of Central Bank
Committee: National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organizations
Unit: Financial intelligence Unit
Supervisory Authority: Federal and local authorities which are entrusted by legislation to supervise financial institutions, designated non-financial businesses professions, Virtual Asset Service Providers and non-profit organizations or the competent authority in charge of approving the pursuit of an activity or a profession in case a supervisory authority is not assigned by legislations.
Law-enforcement Authorities: Federal and local authorities which are entrusted under applicable legislation to combat, search, investigate and collect evidences on the crimes including AML/CFT crimes and financing illegal organizations.
Competent Authorities: The competent government authorities in the State entrusted with the implementation of any provision of this Decree Law.
Predicate Offence: Any act constituting a felony or misdemeanor under the applicable laws of the State whether this act is committed Inside or outside the State when such act is punishable In both countries.
Money Laundering: Any of the acts mentioned in Clause (1) of Article (2) of the present Decree-Law.
Financing of Terrorism: Any of the acts mentioned in Articles (29, 30) of Federal Law no. (7) of 2014.
Illegal Organizations: Organizations whose establishment is criminalized or which exercise a criminalized activity.
Financing Illegal Organizations: Any physical or legal action aiming at providing funding to an illegal organization, or any of its activities or its members.
Crime: Money laundering crime and related predicate offences, or financing of terrorism or Illegal organizations.
Funds: Assets, whatever the method of acquisition, type and form, tangible or intangible, movable or Immovable, electronic, digital or encrypted, Including local and foreign currencies, legal documents and instruments of whatever form, including electronic or digital form that proves ownership of such assets, shares or related rights and economic resources that are assets of any kind, including natural resources, as well as bank credits, cheaques, payment orders, shares, securities, bonds, bills of exchange, letters of credit, and any interest, profits or other incomes derived or resulting from these assets, and can be used to obtain any financing or goods or services.
Virtual Assets: A digital representation of the value that can be digitally traded or transferred, and can be used for payment or investment purposes, and otherwise, as specified in the Executive Regulation of this Decree-Law.
Proceeds: Funds generated directly or Indirectly from the commitment of any felony or misdemeanor including profits, privileges, and economic interests, or any similar funds converted wholly or partly into other funds.
Means: Any means used or intended to be used to commit a felony or misdemeanor.
Suspicious Transactions: Transactions related to funds for which there are reasonable grounds to believe that they are earned from any felony or misdemeanor or related to the financing of terrorism or of Illegal organizations, whether committed or attempted.
Freezing or seizure: Temporary attachment over the moving, conversion, transfer, replacement or disposition of funds in any form, by an order issued by a competent authority.
Confiscation: Permanent expropriation of private funds or proceeds or instrumentalities by a ruling issued by a competent court.
Financial Institutions: Anyone who conducts one or several of the financial activities or transactions defined In the Executive Regulation of the present Decree Law for the account of /or on behalf of a client.
Designated Nonfinancial Businesses and Professions: Anyone who conducts one or several of the commercial or professional activities defined in the Executive Regulation of this Decree Law.
Non-Profit Organizations: Any organized group, of a continuing nature set for a temporary or permanent time period, comprising natural or legal persons or not for profit legal arrangements for the purpose of collecting, receiving or disbursing funds for charitable, religious, cultural, educational, social, communal or any other charitable activities.
Legal Arrangement: A relationship established by means of a contract between two or more parties, including but not limited to trust funds or other similar arrangements.
Client: Any person involved in or attempts to carry out any of the activities specified in the Executive Regulations of this Decree Law with one of the financial institutions or designated nonfinancial businesses and professions or Virtual Asset Service Providers
Beneficial Owner: The natural person who owns or exercises effective ultimate control over the client 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, whether directly or through a chain of ownership, control or other indirect means.
Virtual asset service providers: Any natural or legal person, who practices any activity of commercial business, conducts one or more of the activities of virtual assets specified in the Executive Regulation of this Decree-Law, or the operations related there to for the benefit or on behalf of another natural or legal person.
Transaction: All disposal or use of Funds or proceeds including for example: deposits, withdrawals, transfer, sale, purchase, lending, swap, mortgage, and donation.
Registrar: The entity in charge of supervising the register of commercial names for all types of establishments registered In the State.
Customer Due Diligance (CDD): The process of identifying or verifying the Information of a Client or Beneficial owner, whether a natural, legal person or a legal arrangement, the nature of its activity, the purpose of the business relationship, the ownership structure, control over it for the purpose of this Decree-Law and its Executive Regulation.
Controlled Delivery: The process by which a competent authority allows the entering or transferring of illegal or suspicious funds or crime revenues to and from the State for the purpose of Investigating a crime or identifying the identity of Its perpetrators.
Undercover Operation: The process of search and Investigation conducted by one of the judicial impoundment officer by impersonating or playing a disguised or false role in order to obtain evidence or information related to the Crime.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)In application of the provisions of the present Decree law, the following terms and expressions shall have the following meanings assigned to them unless the context requires otherwise:
- State: United Arab Emirates.
- Ministry: Ministry of Finance.
- Minister: Minister of Finance.
- Central Bank: Central Bank of the UAE.
- Governor: Governor of Central Bank.
- Committee: National Committee for Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.
- FIU: Financial Intelligence Unit.
- Supervisory Authority: Federal and local authorities which are entrusted by legislation to supervise Financial Institutions, Designated Non-Financial Businesses and Professions and Non-Profit Organisations or the Competent Authority in charge of approving the pursuit of an activity or a profession in case a supervisory authority is not assigned by legislations.
- Law-Enforcement Authorities: Federal and local authorities, which are entrusted under applicable legislation to combat, search, investigate and collect evidences on the crimes including ML/FT and financing illegal organisations crimes.
- Competent Authorities: The competent government authorities in the State entrusted with the implementation of any provision of this Decree law.
- Predicate Offence: Any act constituting a felony or misdemeanour under the applicable laws of the State whether this act is committed inside or outside the State when such act is punishable in both countries.
- Money Laundering: Any of the acts mentioned in Clause (1) of Article (2) of the present Decree law.
- Financing of Terrorism: Any of the acts mentioned in Articles (29 and 30) of Federal Law no. (7) of 2014.
- Illegal Organisations: Organisations whose establishment is criminalized or which pursue a criminalized activity.
- Financing Illegal Organisations: Any physical or legal action aiming at providing funding to an illegal organisation, or any of its activities or its members.
- Crime: Money laundering crime and related predicate offences, or financing of terrorism or financing of illegal organisations.
- Funds: Assets in whatever form, whether tangible or intangible, movable or immovable including national currency, foreign currencies, documents or notes evidencing the ownership of those assets or associated rights in any form including electronic or digital forms or any interests, profits or income originating or earned from these assets.
- Proceeds: Funds generated directly or indirectly from the commitment of any felony or misdemeanour including profits, privileges, and economic interests, or any similar funds converted wholly or partly into other funds.
- Instrumentalities: Any item used or intended to be used in any way to commit a felony or misdemeanour.
- Suspicious Transactions: Transactions related to funds for which there are reasonable grounds to suspect that they are earned from any felony or misdemeanour, related to the financing of terrorism or of illegal organisations, whether committed or attempted.
- Freezing or seizure: Temporary restriction over the moving, conversion, transfer, replacement or disposition of funds in any form, by an order issued by a Competent Authority.
- Confiscation: Permanent expropriation of private funds or proceeds or instrumentalities by an injunction issued by a competent court.
- Financial institutions: Anyone who conducts one or several of the activities or operations defined in the Executive Regulation of the present Decree law for the account of /or on behalf of a customer.
- Designated Nonfinancial Businesses and Professions: Anyone who conducts one or several of the commercial or professional activities defined in the Executive Regulation of this Decree Law.
- Non-Profit Organisations: Any organized group, of a continuing nature set for a temporary or permanent time period, comprising natural or legal persons or not for profit legal arrangements for the purpose of collecting, receiving or disbursing funds for charitable, religious, cultural, educational, social, communal or any other charitable activities.
- 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 such as trust or other similar arrangements.
- Customer: Anyone involved in or attempts to carry out any of the activities specified in the Executive Regulations of this Decree Law with one of the Financial Institutions or Designated Nonfinancial Businesses and Professions.
- Beneficial Owner: The natural person who owns or exercises effective ultimate 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
- Transaction: All disposal or use of Funds or proceeds including for example: deposits, withdrawals, conversion or transfer, sales, purchases, lending, swap, mortgage, and donation.
- Registrar: The entity in charge of supervising the register of commercial names for all types of establishments registered in the State.
- Customer Due Diligence (CDD): The process of identifying or verifying the information of a Customer or Beneficial Owner, whether a natural or legal person or a legal arrangement, and the nature of its activity and the purpose of the business relationship and the ownership structure and control over it for the purpose of this Decree Law and its Executive Regulation.
- Controlled Delivery: The process by which a Competent Authority allows under its supervision the entering or transferring of illegal or suspicious funds or Crime revenues to and from the UAE for the purpose of investigating a Crime or identifying the identity of its perpetrators.
- Undercover Operation: The process of search and investigation conducted by one of the judicial impoundment officers by impersonating or playing a disguised or false role in order to obtain evidence or information related to a crime.
Article (2)
- Any person, having the knowledge that the funds are the proceeds of a felony or a misdemeanour, and who wilfully commits any of the following acts, shall be considered a perpetrator of the crime of Money Laundering:
- Transferring or moving proceeds or conducting any transaction with the aim of concealing or disguising their Illegal source.
- Concealing or disguising the true nature, source or location of the proceeds as well as the method involving their disposition, movement, ownership of or rights with respect to said proceeds.
- Acquiring, possessing or using proceeds upon receipt
- Assisting the perpetrator of the predicate offense to escape punishment
- Transferring or moving proceeds or conducting any transaction with the aim of concealing or disguising their Illegal source.
- The crime of Money Laundering is considered as an independent crime. The punishment of the perpetrator for the predicate offence shall not prevent his punishment for the crime of Money Laundering
- Proving the illicit source of the proceeds should not constitute a prerequisite to sentencing the perpetrator of the predicate offence
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- Any person, having the knowledge that the Funds are the proceeds of a felony or a misdemeanour, and who wilfully commits any of the following acts, shall be considered a perpetrator of the crime of Money Laundering:
a- Transferring or moving Proceeds or conducting any transaction with the aim of concealing or disguising their illegal source.
b- Concealing or disguising the true nature, source or location of the Proceeds as well as the method involving their disposition, movement, ownership of or rights with respect to said Proceeds.
c- Acquiring, possessing or using Proceeds upon receipt.
d- Assisting the perpetrator of the Predicate Offence to escape punishment.
2- The crime of Money Laundering is considered as an independent crime. The punishment of the perpetrator for the Predicate Offence shall not prevent his punishment for the crime of Money Laundering.
3- A conviction with a Predicate Offence shall not be deemed as a condition to prove the illicit source of the Proceeds.
- Any person, having the knowledge that the funds are the proceeds of a felony or a misdemeanour, and who wilfully commits any of the following acts, shall be considered a perpetrator of the crime of Money Laundering:
Article (3)
Without prejudice to the provisions of Federal Law No. (3) of 1987 referred to herein, and Federal Law No. (7) of 2014 referred to herein:
1- The crime of Financing Terrorism shall be committed by whoever intentionally commits any of the following:
a- Any of the acts specified in Clause (1) of Article (2) of the present Decree Law, if he is aware that the Proceeds are wholly or partly owned by a terrorist organisation or terrorist person or intended to finance a terrorist organisation, a terrorist person or a terrorism crime, even if it without the intention to conceal or disguise their illegal source.
b- Providing, collecting, preparing or obtaining Proceeds or facilitating their obtainment by others with intent to use them, or while knowing that such Proceeds will be used in whole or in part for the commitment of a terrorist offence, or if he has committed such acts on behalf of a terrorist organisation or a terrorist person while aware of their true background or purpose.
2- A person shall be guilty of financing illegal Organisations crime if he intentionally commits any of the following:
a- Any of the acts specified in Clause (1) of Article (2) of this Decree Law, if he is aware that the Proceeds are wholly or partly owned by an Illegal Organisation or by any person belonging to an Illegal Organisation or intended to finance such Illegal Organisation or any person belonging to it, even if it without the intention to conceal or disguise their illicit origin.
b- Providing, collecting, preparing, obtaining Proceeds or facilitating their obtainment by others with intent to use such Proceeds, or while knowing that such Proceeds will be used in whole or in part for the benefit of an Illegal Organisation or of any of its members, with knowledge of their true identity or purpose.
Article (4)
The legal person shall be criminally responsible for the Crime if it is committed in its name or for its account intentionally, without prejudice to the personal criminal responsibility of the perpetrator and the administrative penalties as prescribed by law.
Article (5)
1- The Governor or his delegate shall have the right to freeze suspicious Funds deposited at financial institutions for no more than (7) seven working days, in accordance with the rules and controls stipulated in the Executive Regulation of the present Decree Law and it may be, renewed by order of the public prosecutor or his delegate.
2- The public prosecution and the competent court, as the case may be, shall request the identification, tracking, or evaluation of suspicious Funds, Proceeds and Instrumentalities or of whatever is of equivalent value or seizing or freezing them if they are the result of, or in connection with, the Crime without pre-advising the owner and issuing a travel ban until the investigation or trial is completed.
3- The public prosecution and the competent court, as the case may be and when necessary, shall take the necessary decision to prohibit trading or disposing of such Funds, Proceeds and Instrumentalities and take the necessary actions to prevent any act aiming at evading related freezing or seizing orders, without prejudice to the rights of bona fide third parties.
4- All freezing orders of funds held by financial institutions licensed by the Central Bank may be only be executed through the Central Bank.
5- Any grievance against the public prosecution's decision to freeze or seize in accordance with the provisions of the present Article shall be filed before the competent court in whose jurisdiction the public prosecution issuing the decision is located. If the grievance is rejected, a new one may be lodged only after the expiry of three months from the date of rejection of the previous one, unless there is a serious reason to do so before the expiry of that period.
6- The grievance shall be filed by submitting a report to the competent court. The president of the court shall set a date to review the report and notify the plaintiff of the date. The public prosecution shall submit a memorandum expressing its opinion on the grievance. The court shall issue its decision on this grievance within no more than (14) fourteen business days from the date of its submission.
7- The public prosecution and the competent court, as the case may be, shall appoint whomever they find suitable to manage the Funds, Proceeds and Instrumentalities seized, frozen or subject to confiscation, also allowing selling or disposing it, even before the issuance of a court decision if needed. The proceeds of the sale shall be transferred to the UAE treasury in case of a final judgment of conviction. These Funds shall be earmarked to any rights awarded legally to any party acting in good faith, proportionately to its value.
8- The Executive Regulation of the present Decree Law shall define the rules and procedures for implementing the dispositions of the present Article.
Article (6)
- Without prejudice to the provisions of Article (5) of this Decree-Law, no criminal proceedings shall be Instituted against the perpetrator of money laundering, financing terrorism, or financing of illegal organizations in accordance with the provisions of this Decree-Law except by the public prosecutor or his delegate
- The Public prosecutor or his delegate and the competent court as the case may be shall issue a decision to take the necessary procedures to protect the intelligence Information and the means and methods of obtaining such information or Instruct the competent authorities to protect the witnesses, or the undisclosed sources, the accused or other parties involved in the case if there is a serious threat to their safety.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- Without prejudice to the provisions of Article (5) of this Decree Law, no criminal proceedings shall be instituted against the perpetrator of Money Laundering or Financing of Terrorism, or Financing of Illegal Organisations in accordance with the provisions of this Decree Law except by the Attorney General or his delegate.
2- The Attorney General or his delegate and the competent court as the case may be, shall issue a decision to take the necessary procedures to protect the intelligence information and the means and methods of obtaining such information or instruct the competent authorities to protect the witnesses, or the undisclosed sources, the accused or other parties involved in the case if there is a serious threat to their safety.
Article (7)
1- The public prosecution may, sua sponte or upon the request of the Law Enforcement Authorities, should there be sufficient evidence of the occurrence of the Crime, request direct access to accounts, records and documents held by third parties and request access to the stored data in the computer system and information technology programs, memorandums, correspondences and packages, identify track and seize the Funds, monitor the accounts, issue travel bans and other procedures aiding in uncovering the Crime and its perpetrators without prejudice to the legislations applicable in the UAE.
2- The Law Enforcement Authorities may conduct undercover operations and adopt other investigative methods and initiate the controlled delivery operation aimed at detecting the Crime or its evidence or identifying the source and destination of the Funds, Proceeds or Instrumentalities or arresting the perpetrators without prejudice to the legislation applicable in the UAE.
3- Any person involved in an undercover operation or a controlled delivery operation by Law Enforcement Authorities shall not be held criminally responsible unless such person has instigated the perpetration of the Crime or exceeded the powers granted to him.
4- The Competent Authorities in the UAE shall keep comprehensive statistics on the reports of Suspicious Transactions, investigations and Crime-related judgments, seized, frozen or confiscated funds, international cooperation requests and any statistics related to the efficiency and sufficiency of Crime combating procedures.
Article (8)
Any person shall declare whenever he brings into the UAE or take out any currency or bearer negotiable instruments or precious metals or stones of value, in accordance with the declaration system issued by the Central Bank.
Article (9)
Central Bank of the UAE shall establish an independent “Financial Intelligence Unit” to which suspicious transaction reports, Information on all financial institutions and designated nonfinancial businesses and professions Virtual Asset Service Providers shall be sent exclusively for consideration, analysis, and referral to the competent authorities, either automatically or upon request The Financial Intelligence Unit shall have competence over the following:
- Requesting financial Institutions and designated nonfinancial businesses and professions. Virtual Assets Service Providers and the competent authorities to submit any information or further documentation related to received reports and information and other information deemed necessary for Financial intelligence Unit to perform its duties on schedule and in the form determined by the Unit.
- Exchanging information with its counterparts in other countries, with respect to Suspicious Transactions Reports or any other information to which the Financial Intelligence Unit has exclusive access or is the exclusive recipient, whether directly or Indirectly, according to international agreements to which the State is a party or bilateral agreements signed by the Financial Intelligence Unit with its counterparts governing bilateral cooperation or conditional upon reciprocity, the financial intelligence unit may communicate to its counterparts its findings derived from the use of the information provided by its counterparts and the results of the analysis conducted based on this information. Such Information shall be used only for the purposes of combating the crime and shall not be disclosed to third parties without the Financial Intelligence Unit’s permission.
- Establishing a database or a special register to record all available information and to implement data privacy and data security procedures to protect this information including procedures for handling, archiving transferring and accessing the data, and make sure that access to its premises, its database and its technology systems is restricted.
- Any other competencies to be specified in the Executive Regulation attached to the present Decree-Law.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)An independent “Financial Intelligence Unit” shall be established in the Central Bank, to which Suspicious Transaction reports and related information from all Financial Institutions and Designated Nonfinancial Businesses and Professions shall be sent exclusively for consideration and analysis and referral to the competent authorities, spontaneously or upon request. The FIU shall have competence over the following:
1- Requesting Financial Institutions and Designated Nonfinancial Businesses and Professions and the competent authorities to submit any information or additional documentation related to received reports and information, and other information deemed necessary for the FIU to perform its duties, on schedule and in the form determined by the Unit.
2- Exchanging information with its counterparts in other countries, with respect to Suspicious Transactions Reports or any other information to which the FIU has access or is the recipient, whether directly or indirectly, according to international agreements to which the State is a party or bilateral agreements signed by the FIU with its counterparts governing bilateral cooperation or conditional upon reciprocity. The FIU may communicate to its counterparts its findings derived from the use of the information provided by its counterparts and the results of the analysis conducted based on this information. Such information shall be used only for the purposes of combating the Crime and shall not be disclosed to third parties without the FIU’s permission.
3- Establishing a database or a special register to record all available information and to implement data privacy and data security procedures to protect this information including procedures for handling, archiving and transferring and make sure that access to its premises, its database and its technology systems is restricted.
4- Any other competences to be specified in the Executive Regulation to the present Decree Law.
- Requesting financial Institutions and designated nonfinancial businesses and professions. Virtual Assets Service Providers and the competent authorities to submit any information or further documentation related to received reports and information and other information deemed necessary for Financial intelligence Unit to perform its duties on schedule and in the form determined by the Unit.
Article (10)
1- The public prosecution may seek the opinion of the FIU about incoming reports it receives related to cases of Money Laundering, Financing of Terrorism and of Illegal Organisations.
2- Law Enforcement Authorities shall be responsible for receiving and following-up on suspicious transactions reports received from the FIU and gathering related evidence.
3- Law Enforcement Authorities may obtain the information that it deems necessary to perform its duties from the relevant authorities as stipulated under the Executive Regulation of the present Decree Law.
Article (11)
A committee chaired by the Governor, called "National Committee for Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations", shall be established by virtue of the provisions of this Decree Law. A decision on the formation of the Committee shall be issued by the Minister.
Article (12)
The Committee shall have the following competences:
- Preparing and developing a national strategy to combat crime and proposing related regulations, policies and procedures in coordination with the competent authorities, and monitoring their implementation.
- Determining and assessing the risks of the crime on the national level.
- Coordinating with the relevant authorities and referring to related international sources of information in order to identify high-risk countries in addition to the countries that their combat systems in relation to money laundering and financing of terrorism are weak, Moreover, to identify the necessary countermeasures to be taken and other measures commensurate with the degree of risk, and instructing the supervisory authorities to ensure the adherence to the required due diligence procedures by financial institutions, designated nonfinancial businesses and professions, virtual asset service providers and non-profit organizations which are under their supervision in order to implement the said measures.
- Facilitating the exchange of information and coordination among the various bodies represented therein.
- Collecting and analyzing statistics and other information provided by the Competent Authorities to assess the effectiveness of their Regulations on combating Money laundering. Terrorism financing and financing of illegal organizations.
- Representing the State in International forums related to AML/CTF.
- Proposing the Regulation covering the work of the Committee, and submitting it to the Minister for approval.
- Any other matters referred to the Committee by Competent Authorities in the State.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)The Committee shall have the following competences:
1- Preparing and developing a national strategy to combat Crime and proposing related regulations, policies and procedures in coordination with the competent authorities, and monitoring their implementation.
2- Determining and assessing the risks of the Crime on the national level.
3- Coordinating with the relevant authorities and referring to related international sources of information in order to identify high-risk countries in relation to Money Laundering and Financing of Terrorism and instructing the supervisory authorities to ensure the adherence to the required due diligence procedures by Financial Institutions, Designated Nonfinancial Businesses and Professions, and non-profit organisations which are under their supervision.
4- Facilitating the exchange of information and coordination among the various bodies represented therein.
5- Assess the effectiveness of the system on combating Money Laundering, Terrorism Financing and Financing of Illegal Organisations based on collecting and analysing statistics and other information provided by the Competent Authorities.
6- Representing the State in international forums related to Anti-Money Laundering and combating Financing of Terrorism.
7- Proposing the Executive Regulation covering the work of the Committee, and submitting it to the Minister for approval.
8- Any other matters referred to the Committee by Competent Authorities in the UAE.
- Preparing and developing a national strategy to combat crime and proposing related regulations, policies and procedures in coordination with the competent authorities, and monitoring their implementation.
Article (13)
The Supervisory Authorities shall, each within the scope of its competence, carry out supervision, monitoring and follow up to ensure compliance with the provisions provided for in the present Decree-Law and its executive regulation, regulatory decisions in addition to any other related decisions and shall have in particular, the following competences
- Conduct a risk assessment on the likelihood of the perpetration of a Crime within the financial institutions, designated nonfinancial businesses and professions, and activities of virtual assets and activities of virtual asset service providers and non-profit organizations
- Conduct Control and audit inspections over financial institutions, designated nonfinancial businesses and professions, virtual assets service providers and non-profit organizations, both remotely and on site.
- Issue the decisions related to the administrative penalties in accordance with the provisions of this Decree-Law and its Executive Regulation, the grievance mechanism, and keep statistics of measures taken and penalties Imposed.
- Any other competencies stipulated in the Executive Regulation of the present Decree-Law
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)The Supervisory Authorities shall, each within the scope of its competence, carry out supervision, monitoring and follow up to ensure compliance with the provisions provided for in the present Decree Law and its Executive Regulation and shall have in particular, the following competences:
1- Conduct a risk assessment on the likelihood of the perpetration of a Crime within the Financial Institutions, Designated Nonfinancial Businesses and Professions and Non-Profit Organisations.
2- Conduct supervision and examination over financial institutions, designated nonfinancial businesses and professions and non-profit organisations, both off-site and on-site.
3- Issue the decisions related to the administrative penalties in accordance with the provisions of this Decree Law and its Executive Regulation, the grievance mechanism, and keep statistics of measures taken and penalties imposed.
4- Any other specialized activities stipulated in the Executive Regulation of the present Decree Law.
- Conduct a risk assessment on the likelihood of the perpetration of a Crime within the financial institutions, designated nonfinancial businesses and professions, and activities of virtual assets and activities of virtual asset service providers and non-profit organizations
Article (14)
- Without prejudice to any more severe administrative penalty provided by any other legislation, the Supervisory authority shall impose the following administrative penalties on the financial institutions, designated nonfinancial businesses and professions, and virtual assets service providers and non-profit organizations in case they violate the present Decree-Law and its Executive Regulation or regulatory decisions in addition to any other related decisions:
- Warning
- Administrative fine of no less than AED 50,000 (fifty thousand dirham) and no more than AED 5,000,000 (five million dirham) for each violation.
- Banning the violator from working in the sector related to the violation for the period determined by the supervisory authority.
- Constraining the powers of the Board members, supervisory or executive management members, managers or owners who are proven to be responsible of the violation Including the appointment of temporary supervisor.
- Arresting Managers, board members and supervisory and executive management members who are proven to be responsible of the violation for a period to be determined by the Supervisory Authority or request their removal.
- Arrest or restrict the activity or the profession for a period to be determined by the supervisory authority
- Cancel the License.
- Warning
- Except for paragraph (g) of Clause (1) of this Article, The Supervisory Authority may upon imposing the administrative penalties, request regular reports on the measures taken to correct the violation.
- In any case, the Supervisory Authority shall publish the administrative penalties through various means of publication.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- The Supervisory Authority shall impose the following administrative penalties on the Financial Institutions, Designated Nonfinancial Businesses and Professions and Non-Profit Organisations in case they violate the present Decree Law and its Executive Regulation:
a) Warning
b) Administrative fines of no less than AED 50,000 (fifty thousand dirham) and no more than AED 5,000,000 (five million dirham) for each violation.
c) Banning the violator from working in the sector related to the violation for the period determined by the supervisory authority.
d) Restricting the powers of the Board members, supervisory or executive management members, managers or owners who are proven to be responsible of the violation including the appointment of temporary inspector.
e) Suspending managers, board members and supervisory and executive management members who are proven to be responsible of the violation for a period to be determined by the Supervisory Authority or request their removal.
f) Suspending or restricting the practice of the activity or the profession for a period to be determined by the supervisory authority
g) Cancelling the License.
2- Except for paragraph (g) of Clause (1) of this Article, The Supervisory Authority may upon imposing the administrative penalties, request regular reports on the measures taken to correct the violation.
3- In any case, the Supervisory Authority shall publish the administrative penalties through various means of publication.
- Without prejudice to any more severe administrative penalty provided by any other legislation, the Supervisory authority shall impose the following administrative penalties on the financial institutions, designated nonfinancial businesses and professions, and virtual assets service providers and non-profit organizations in case they violate the present Decree-Law and its Executive Regulation or regulatory decisions in addition to any other related decisions:
Article (15)
The Financial institutions and designated nonfinancial businesses and professions in addition to the virtual assets service providers shall, upon suspicion or if they have reasonable grounds to suspect a transaction or funds representing all or some proceeds, or suspicion of their relationship to the Crime or that they will be used regardless of their value, to inform the Unit without delay, directly and provide the Unit with a detailed report Including all the data and information available regarding that transaction and the parties involved, and to provide any additional Information required by the Unit, with no right to object under the confidentiality provisions.
However, Lawyers, notaries, other legal professionals and independent legal auditors shall be exempted from this provision if the information related to these operations have been obtained subject to professional confidentiality
The Executive Regulation of the present Decree-Law shall determine the rules, controls and cases of the obligation to report suspicious transactions
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)The Financial Institutions and Designated Nonfinancial Businesses and Professions shall, upon suspicion or if they have reasonable grounds to suspect a transaction or Funds representing all or some a Proceeds, or suspicion of their relationship to the Crime or that they will be used regardless of their value, to inform the FIU directly and without delay, and provide the FIU with a detailed report including all the data and information available regarding that transaction and the parties involved, and to provide any additional information required by the FIU, with no right to object under the confidentiality provisions. Lawyers, notaries, other legal professionals and independent legal auditors shall be exempted from this provision if the information related to these Transactions have been obtained subject to professional confidentiality. The Executive Regulation of the present Decree Law shall determine the rules, controls and cases of the obligation to report suspicious transactions.
Article (16)
1- Financial Institutions and Designated Nonfinancial Businesses and Professions shall:
a) Identify the Crime risks within its scope of work as well as continuously assess, document, and update such assessment based on the various risk factors established in the Executive Regulation of this Decree Law and maintain a risk identification and assessment analysis with its supporting data to be provided to the Supervisory Authority upon request.
b) Take the necessary due diligence measures and procedures and define their scope, taking into account the various risk factors and the results of the national risk assessment and retain the records received during the implementation of this process. The Executive Regulation of the present Decree Law shall specify the cases in which such procedures and measures are applied, and the conditions for deferring the completion of a Customer or a Beneficial Owner identity verification.
c) Refrain from opening or conducting any financial or commercial transaction under an anonymous or fictitious name or by pseudonym or number, and maintaining a relationship or providing any services to it.
d) Develop internal policies, controls and procedures approved by senior management to enable them to manage the risks identified and mitigate them, and to review and update them continuously, and apply this to all subsidiaries and affiliates in which they hold a majority stake; the Executive Regulations of this Decree Law shall specify what should be included in said policies, controls and procedures.
e) Immediate implementation of the directives issued by the Competent Authorities in the State for implementing the resolutions issued by the United Nations Security Council under Chapter (7) of UN Charter for the Prohibition and Suppression of the Financing of Terrorism, and Proliferation of weapons of mass destruction and their financing, and other related directives.
f) Maintain all records, documents, and data for all transactions, whether local or international, and make this information available to the competent authorities promptly upon request, as stipulated in the Executive Regulation of this Decree Law.
g) Any other obligations stipulated in the Executive Regulation of this Decree Law.
2- For the purposes of this Decree Law, the Executive Regulation of this Decree Law shall regulates the following:
a) The obligations of Non-Profit Organisations.
b) Retaining information and records by the registrar, to be provided upon request and taking procedures for access by the public.
c) Retaining information and records by the legal person and legal arrangement, and making it available upon request.
Article (16) bis*
- Any natural or legal person may not engage in the activities of virtual assets service providers or any of the financial activities without a license, registration or registration, as the case may be, from the competent supervisory authorities.
- For the purposes of this Decree-Law, the Executive Regulations shall regulate the obligations of virtual assets service providers.
*Article (16) bis has been added by Federal Decree-Law No. (26) of 2021.
- Any natural or legal person may not engage in the activities of virtual assets service providers or any of the financial activities without a license, registration or registration, as the case may be, from the competent supervisory authorities.
Article (17)
All authorities shall abide by the confidentiality of the information obtained in relation to suspicious transaction or the crimes provided for in this Decree-Law, and such information may not be disclosed except to the extent necessary for use in investigations, prosecutions or cases in violation of the provisions of this Decree-Law.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)All entities shall abide by the confidentiality of the information obtained in relation to Suspicious Transaction or the Crimes provided for in this Decree Law, and not disclose them except to the extent necessary for use in investigations, prosecutions or cases in violation of the provisions of this Decree Law.
Article (18)
1- The competent judicial authority shall, upon request of a judicial authority of another country bound by an enforceable agreement with the State or by virtue of the reciprocity principle, provide judicial assistance in relation to investigation, court trials or procedures relevant to the Crime and issue orders as follows:
a) Identify, freeze, seize or confiscate any Funds, Proceeds, or Instrumentalities or their equivalent, generated from the Crime or used or intended to be used in the Crime or take any other procedures applicable under the enforceable legislation in the State, including, to provide records retained by Financial Institutions, or Designated Nonfinancial Businesses and Professions or Non-Profit Organisations, and to inspect persons and buildings, and to collect witnesses’ statements, gather evidence, and use investigative methods including undercover operations, intercepting communications, collecting electronic data and controlled delivery.
b)Handover and handback persons and items relevant to the Crime in a prompt manner in accordance with the legislations applicable in the State.
2- The Competent Authorities shall exchange information related to the Crime promptly with the foreign counterparts, respond to requests made by any competent entity in the foreign countries which are bound by an applicable convention with the State or in accordance with the reciprocity principle. The Competent Authorities shall gather information from the relevant authorities in the State and take the necessary action to ensure the confidentiality of the information and used it only for its intended purpose stated in the request for information and in accordance with applicable legislations in the State.
Article (19)
- Competent Authorities shall give priority to requests for international cooperation related to countering money laundering and combating terrorism financing and ensure prompt handling of those requests and take efficient measures to ensure the confidentiality of the information received
- In application of the present Decree-Law, the request for international cooperation shall not be rejected based on any of the following grounds:
- That the crime involves tax and financial affairs
- That the crime is political or related to politics.
- That the confidentiality provisions apply to financial Institutions and designated nonfinancial businesses and professions without prejudice to the legislations applicable in the State.
- That the request is connected to a crime under investigation or Judicial prosecution in the UAE unless the request win impede on the investigation or prosecution.
- Any other cases mentioned in the Executive Regulation hereof.
- That the crime involves tax and financial affairs
- The rules, controls and procedures governing international cooperation are contained in the Executive Regulation of this Decree-Law
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- Competent Authorities shall give priority to requests for international cooperation related to Anti-Money Laundering and Combating Financing of Terrorism and ensure prompt execution of those requests and take efficient measures to ensure the confidentiality of the information received.
2- In application of the present Decree Law, the request for international cooperation shall not be rejected based on any of the following grounds:
a) That the Crime involves tax and financial affairs
b) That the Crime is political or related to politics.
c) That the confidentiality provisions apply to Financial Institutions and Designated Nonfinancial Businesses and professions without prejudice to the legislation applicable in the State.
d) That the request is connected to a Crime under investigation or judicial prosecution in the State unless the request will impede on the investigation or prosecution.
e) Any other cases mentioned in the Executive Regulation of this Decree Law.
3- The rules, controls and procedures governing international cooperation are contained in the Executive Regulation of this Decree Law.
- Competent Authorities shall give priority to requests for international cooperation related to countering money laundering and combating terrorism financing and ensure prompt handling of those requests and take efficient measures to ensure the confidentiality of the information received
Article (20)
Any court injunction or court decision providing for the confiscation of Funds, Proceeds or Instrumentalities relating to Money-Laundering, Financing of Terrorism or Financing Illegal Organisations may be recognised if issued by a court or judicial authority of another state with which the State has entered into a ratified convention.
Article (21)
The imposition of penalties provided for in this Decree Law shall not prejudice any harsher penalty provided for in any other law.
Article (22)
- Any person who commits or attempts to commit any of the acts set forth in Clause (1) of Article 2 of this Decree-Law shall be sentenced to imprisonment for a period not exceeding ten years and to a fine of no less than (100,000) AED one hundred thousand and not exceeding (5,000,000) AED five Million or either one of these two penalties.
- A temporary imprisonment and a fine of no less than AED 300,000 (three hundred thousand dirham) and no more than AED 10,000,000 (ten million dirham) shall be applied If the perpetrator of a money laundering crime commits any of the following acts:
- If he abuses his influence or the power granted to him by his profession or professional activities
- If the crime is committed through a non-profit organization
- If the crime is committed through an organized crime group
- In case of Recidivism
- An attempt to commit a money laundering offense shall be punishable by the full penalty prescribed for it
- A life imprisonment sanction or temporary imprisonment of no less than (10) ten years and penalty of no less than AED 300,000 (three hundred thousand dirham) and no more than AED 10,000,000 (ten million dirham) is applied to anyone who uses Proceeds for terrorist financing.
- A temporary imprisonment sanction and a penalty of no less than AED 300,000 (three hundred thousand dirham) and no more than AED 10,000,000 (ten million dirham) shall be applicable to anyone who uses the Proceeds in financing illegal organizations.
- The Court may at the request of the Attorney General, his delegate, or on its own initiative commute or exempt from the sentence imposed on the offenders if they provide the Judicial or administrative authorities with information relating to any of the offenses punishable in this article, when this leads to the disclosure, prosecution, arrest the perpetrators or seizure Its proceeds.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- Any person who commits any of the acts set forth in Clause (1) of Article (2) of this Decree Law shall be sentenced to imprisonment for a period not exceeding ten years and to a fine of no less than (100,000) one hundred thousand dirham and not exceeding (5,000,000) five million dirham or either one of these two penalties.
A temporary imprisonment and a fine of no less than (300,000) three hundred thousand dirham and no more than (10,000,000) ten million dirham shall be applied if the perpetrator commits Money Laundering Crime in any of the following situations:
a) If he abuses his influence or the power granted to him by his employment or professional activities.
b) If the Crime is committed through a Non-Profit Organisation.
c) If the Crime is committed through an organized crime group.
d) In case of recidivism
2- An attempt to commit a Money Laundering offense shall be punishable by the full penalty prescribed for it
3- A life imprisonment sanction or temporary imprisonment of no less than (10) ten years and penalty of no less than (300,000) three hundred thousand dirham and no more than (10,000,000) ten million dirham is applied to anyone who uses Proceeds for Financing of Terrorism.
4- A temporary imprisonment sanction and a penalty of no less than (300,000) three hundred thousand dirham and no more than (10,000,000) ten million dirham shall be applicable to anyone who uses the Proceeds in Financing Illegal Organisations.
5- The Court may commute or exempt from the sentence imposed on the offenders if they provide the judicial or administrative authorities with information relating to any of the offenses punishable in this Article, when this leads to the disclosure of the Crime or its perpetrators, or the verification of the Crime against them or arrest of any of the perpetrators.
- Any person who commits or attempts to commit any of the acts set forth in Clause (1) of Article 2 of this Decree-Law shall be sentenced to imprisonment for a period not exceeding ten years and to a fine of no less than (100,000) AED one hundred thousand and not exceeding (5,000,000) AED five Million or either one of these two penalties.
Article (23)
- A penalty of no less than AED 500,000 (five hundred thousand) and no more than AED 50,000,000 (fifty million dirham) shall apply to any legal person whose representatives or managers or agents commit for its account or its name any of the crimes mentioned In this Decree-Law
- If the legal person is convicted with terrorism financing crime or financing illegal organizations, the court will order its dissolution and closure of its offices where its activity is performed.
- Should a legal person is convicted of any of the crimes stipulated In Clause (1) of Article (2) or Article (8) of this Decree-Law, the court may prevent him from practicing his activity for a specified period, or cancel the license, restriction or registration to practice activity.
- Upon issuance of the indictment, the court shall order the publishing of a summary of the judgment by the appropriate means at the expense of condemned party
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- A penalty of no less than (500,000) five hundred thousand dirham and no more than (50,000,000) fifty million dirham shall apply to any legal person whose representatives or managers or agents commit for its account or its name any of the Crimes mentioned in this Decree Law.
2- If the legal person is convicted with crime of Financing of Terrorism, the court shall order its dissolution and closure of its offices where its activity is performed.
3- Upon issuance of the indictment, the court shall order the publishing of a summary of the judgment by the appropriate means at the expense of condemned party.
- A penalty of no less than AED 500,000 (five hundred thousand) and no more than AED 50,000,000 (fifty million dirham) shall apply to any legal person whose representatives or managers or agents commit for its account or its name any of the crimes mentioned In this Decree-Law
Article (24)
Imprisonment and a fine of no less than (100,000) one hundred thousand dirham and no more than (1,000,000) one million dirham or any of those two sanctions is applied to anyone who violates on purpose or by gross negligence the provision of Article (15) of this Decree Law.
Article (25)
Imprisonment for no less than one year and a penalty of no less than AED 100,000 (one hundred thousand dirham) and no more than AED 500,000 (five hundred thousand dirham) or any of these two sanctions shall apply to anyone who notifies or warns a person or reveals any transaction under review in relation to suspicious transactions or being investigated by the Competent Authorities or to investigate them or any Information related to a violation of the provisions of Article (17) of this Decree-Law
Article (25) bis
Imprisonment for no less than (3) three months and a penalty of no less than AED 50,000 (fifty thousand dirham) or any of these two sanctions shall apply to whoever possesses, conceals or performs any operation of funds when there is sufficient evidence or presumption of the illegality of its source.
Upon conviction, the court shall rule for confiscation in accordance with the provisions of Article 26 of this Decree-Law.
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)Imprisonment for no less than six months and a fine of no less than (100,000) one hundred thousand dirham and no more than (500,000) five hundred thousand dirham or any of these two sanctions shall apply to anyone who notifies or warns a person or reveals transaction under review in relation to Suspicious Transactions or being investigated by the Competent Authorities.
Article (26)
- The court shall, once the perpetration of the crime is verified, confiscate the following:
- Funds subject matter of the crime, proceeds and instrumentalities.
- Any funds owned by foe perpetrator with an equivalent value to the funds, Proceeds and instrumentalities mentioned in paragraph (a) of this clause if it fails to confiscate those funds
If it is not possible to rule for the confiscation of funds, proceeds or instrumentalities due to their failure to seize them or because they are related to the rights of bona fide third parties, the court shall pass a fine equivalent to its value at the time of the crime.
- The confiscation shall be Imposed Irrespective of whether the funds, Proceeds, or Instrumentalities are owned by or in possession of the perpetrator or a third party without prejudice to the rights of third party acting in good faith
- The fact that the offender is unknown, lack of his criminal responsibility, or the criminal case for a crime punishable under the provisions of this Decree-Law is elapsed does not preclude the competent court from ruling on its own or at the request or the Public Prosecution, as the case may be, to confiscate the seized funds, proceeds and instrumentalities if it is proven mat they are related to the same.
- Without prejudice to the rights of bona fide third parties, any contract or act where the parties, or any one of them or otherwise are aware that such contract or act aims at impacting the ability of the competent authorities to enforce the seizure, freezing or the execution of the confiscation order, shall be void
Article (16) bis
Imprisonment for no less than six months and a penalty of no less than AED 200,000 (two hundred thousand dirham) and no more than AED 5,000,000 (five million dirham) or any of these two sanctions shall apply to anyone who violates the provisions of Article (16) bis of this Decree-Law
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- The court shall, once the perpetration of the Crime is verified, confiscate the following:
a) Funds of the Crime, proceeds and instrumentalities used or intended to be used in the Crime.
b) Any Funds owned by the perpetrator with an equivalent value to the Funds and Proceeds mentioned in paragraph (a) of this clause if it fails to confiscate those funds.
2- The confiscation shall be imposed irrespective of whether the Funds, Proceeds, or Instrumentalities are owned by or in possession of the perpetrator or a third party without prejudice to the rights of third party acting in good faith.
3- In the cases of the death of the accused in a Crime punishable under the Decree Law or the perpetrator’s identity being unknown shall not prevent the public prosecution from referring the case file to the competent court to issue an order to confiscate the seized Funds, Proceeds and Instrumentalities if it is established that they were related to the Crime.
4- Without prejudice to the rights of bona fide third parties, any contract or act where the parties, or any one of them or otherwise are aware that such contract or act aims at impacting the ability of the competent authorities to enforce the seizure, freezing or the execution of the confiscation order, shall be void.
- The court shall, once the perpetration of the crime is verified, confiscate the following:
Article (27)
Supervisory authorities, FIU, Law Enforcement Authorities, Financial Institutions, Designated Nonfinancial Businesses and Professions, their board members, employees and legally authorized representatives are exempted from criminal, civil or administrative responsibility in relation to their providing any requested information or violating any obligation under legislative, contractual and administrative directives aimed at securing confidentiality of information unless the disclosure is made in bad faith or with the intent of causing damages to others.
Article (28)
Imprisonment of no less than a year and no more than (7) seven years, or a fine of no less than AED 50,000 (fifty thousand dirham) and no more than AED 5,000,000 (five million dirham) shall be applied to any person who violates the instruction issued by the Competent authority in the State for the implementation of the directives of UN Security Council under Chapter (7) of UN Convention for the Suppression of the Financing of Terrorism and Proliferation of Weapons of Mass Destruction and other related decisions
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)Imprisonment or a fine of no less than (50,000) fifty thousand dirham and no more than AED (5,000,000) five million dirham shall be applied to any person who violates the instruction issued by the Competent Authority in the State for the implementation of the resolutions of United Nations Security Council under Chapter (7) of UN charter for the Suppression of the Financing of Terrorism and Proliferation of Weapons of Mass Destruction and its financing and other related decisions.
Article (29)
- If any foreigner is convicted of a money laundering crime or any felonies mentioned in this Decree-Law, and is given a sanction restricting his freedom, he must be deported from the UAE
- Without prejudice to Clause (1) of this article, if any foreign person is convicted for other criminal offences provided hereunder this Decree-Law, and is given a sentence restricting his freedom, the court may decide to deport him from the UAE or order him to be deported instead of Imposing a sanction restricting his freedom
- The criminal case shall not be subject to the statute of limitations for money laundering or financing terrorism or illegal organizations crimes. The sanctions shall not lapse with time or with the lapse of any related civil legal cases due to statute of limitations
- This Decree Law shall not prejudice the provisions of refereed Federal Law (7) of 2014
- The Financing of Illegal organizations is considered a crime if its purpose is to undermine the internal security of the State or its vital interests thereof and terrorism financing crime and the offense punishable in Article (28) of this Decree-Law are considered as crimes Intended to undermine the internal and external security of the State
This article has been amended by Federal Decree-Law No. (26) of 2021. You are viewing the latest version. To view the previous version, click the version box below.Version 1(effective from 23/10/2018 to 13/09/2021)1- If any foreigner is convicted of a Money Laundering Crime or any felony mentioned in this Decree Law, and is given a sanction restricting his freedom, he must be deported from the State.
2- Without prejudice to Clause(1) of this Article, if any foreign person is convicted for other offences provided hereunder this Decree Law, and is given a sentence restricting his freedom, the court may decide to deport him from the State or order him to be deported instead of imposing a sanction restricting his freedom.
3- The criminal case shall not be subject to the statute of limitations for Money Laundering or Financing of Terrorism or Financing Illegal Organisations Crimes. The sanctions shall not lapse with time or with the lapse of any related civil legal cases due to statute of limitations.
4- This Decree Law shall not prejudice the provisions of refereed Federal Law no. (7) of 2014.
5- The Financing of Illegal Organisations is considered a Crime if its purpose is to undermine the internal security of the State or its vital interests thereof and Financing of Terrorism Crimes are considered as crimes intended to undermine the internal and external security of the State.
- If any foreigner is convicted of a money laundering crime or any felonies mentioned in this Decree-Law, and is given a sanction restricting his freedom, he must be deported from the UAE
Article (30)
Imprisonment and a fine or one of the two penalties shall be imposed on anyone who intentionally fails to declare or refrains from providing additional information upon request, from him or deliberately conceals information that must be declared or deliberately presents incorrect information, in violation of the provisions provided for in Article (8) of this Decree Law. Upon conviction, the Court may rule on the confiscation of seized Funds without prejudice to the rights of others acting in good faith
Article (31)
Imprisonment or a fine of no less than (10,000) ten thousand dirhams and no more than (100,000) one hundred thousand dirhams shall be applied to any person who violates any other provision of this Decree Law.
Article (32)
Employees designated per decision issued by the Minister of Justice, in coordination with the Governor, shall, in establishing acts occurring in violation of the provisions of this Decree Law or its Executive Regulation or the decisions issued thereunder, have the capacity of judicial officers.
Article (33)
The Cabinet of Ministers shall issue the Executive Regulation of this Decree Law based upon the proposal of Minister.
Article (34)
1- Any provision that violates or conflicts with the provisions of this Decree Law shall be revoked.
2- Federal Law no. (4) of 2002 on the criminalization of money laundering shall be abrogated.
Article (35)
The present Decree Law shall be published in the Official Gazette and to be entered into effect one month from the date of publication.
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
IA-BOD-RES 10/2019 Effective from 10/2/2019The Cabinet,
- Pursuant to the perusal of the Constitution;
- Federal Law No. (1) of 1972 concerning the Competencies of Ministries and Powers of the Ministers and its amendments;
Based on the proposal of the Minister of Finance and the approval of the Cabinet,
Has issued the following:
Chapter 1 Definitions
Article (1)
In application of the provisions of the present Decision, the following terms and expressions shall have the meanings assigned to them unless the context requires otherwise:
State: United Arab Emirates
Minister: Minister of Finance
Central Bank: Central Bank of United Arab Emirates
Governor: Governor of the Central Bank
Committee: National Committee for Anti- Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.
FIU: Financial Intelligence Unit
Supervisory Authority: Federal and local authorities, which are entrusted by legislation to supervise Financial Institutions, Designated Non-Financial Businesses and Professions and Non-Profit Organisations or the competent authority in charge of approving the pursuit of an activity or a profession in case a supervisory authority is not assigned by legislations.
Law Enforcement Authorities: Federal and local authorities which are entrusted under applicable legislation to combat, search, investigate and collect evidences on the crimes including ML/FT and financing illegal organisations crimes.
Competent Authorities: The competent government authorities entrusted with the implementation of any provision of the Decretal-Law in the State.
Predicate Offence: Any act constituting an felony or misdemeanour under the applicable laws of the State whether this act is committed inside or outside the State when such act is punishable in both countries.
Money Laundering: Any of the acts mentioned in Clause (1) of Article (2) of the Decretal-Law.
Financing of Terrorism: Any of the acts mentioned in Articles (29) and (30) of Federal Law no. (7) of 2014 on combating terrorism offences.
Illegal Organisations: Organisations whose establishment is criminalised or which pursue a criminalised activity.
Financing of Illegal Organisations: Any physical or legal action aiming at providing funding to an illegal organisation, or any of its activities or members.
Crime: Money laundering crime and related Predicate Offences, or Financing of Terrorism or Illegal Organisations.
Funds: Assets in whatever form, whether tangible, intangible, movable or immovable including national currency, foreign currencies, documents or notes evidencing the ownership of those assets or associated rights in any form including electronic or digital forms or any interests, profits or income originating or earned from these assets.
Proceeds: Funds generated directly or indirectly from the commitment of any felony or misdemeanour including profits, privileges, and economic interests, or any similar funds converted wholly or partly into other funds.
Means: Any means used or intended to be used for the commission of an offence or felony.
Suspicious Transactions: Transactions related to funds for which there are reasonable grounds to suspect that they are earned from any felony or misdemeanour related to the financing of terrorism or of illegal organisations, whether committed or attempted.
Freezing or Seizure: Temporary restriction over the moving, conversion, transfer, replacement or disposition of funds in any form, by an order issued by a Competent Authority.
Confiscation: Permanent expropriation of private funds or proceeds or instrumentalities by an injunction issued by a competent court.
Financial Institutions: Anyone who conducts one or several of the financial activities or operations of /or on behalf of a Customer.
Intermediary Financial Institution: The Financial Institution that receives and sends wire transfer between the Ordering Financial Institution and the Beneficiary Financial institution or another Intermediary Financial Institution.
Beneficiary Financial Institution: The Financial Institution that receives a wire transfer from an Ordering Financial Institution directly or indirectly via an Intermediary Financial Institution and makes funds available to the beneficiary.
Financial Transactions or Activities: Any activity or transaction defined in Article (2) of the present Decision.
Designated Nonfinancial Businesses and Professions (DNFBPs): Anyone who conducts one or several of the commercial or professional activities defined in Article (3) of the present Decision.
Non-Profit Organisations (NPOs): Any organised group, of a continuing nature set for a temporary or permanent time period, comprising natural or legal persons or not for profit legal arrangements for the purpose of collecting, receiving or disbursing funds for charitable, religious, cultural, educational, social, communal or any other charitable activities.
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 such as trusts or other similar arrangements.
Trust : A legal relationship in which a settlor places funds under the control of a trustee for the interest of a beneficiary or for a specified purpose. These assets constitute funds that are independent of the trustee's own estate, and the rights to the trust assets remain in the name of the settlor or in the name of another person on behalf of the settlor.
Settlor: A natural or legal person who transfers the control of his funds to a Trustee under a document.
Trustee: A natural or legal person who has the rights and powers conferred to him by the Settlor or the Trust, under which he administers, uses, and acts with the funds of the Settlor in accordance with the conditions imposed on him by either the Settlor or the Trust.
Customer: Anyone who performs or attempts to perform any of the acts defined in Articles (2) and (3) of the present Decision with any Financial Institution or Designated Non-Financial Business or Profession.
Transaction: All disposal or use of Funds or proceeds including for example: deposit, withdrawal, conversion, sale, purchase, lending, swap, mortgage, and donation.
Beneficial Owner: The natural person who owns or exercises effective ultimate 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.
Business Relationship: Any ongoing commercial or financial relationship established between financial institutions, designated non-financial businesses and professions, and their Customers in relation to activities or services provided by them.
Correspondent Banking Relationship: Relationship between a correspondent financial institution and a respondent one through a current account or any other type of account(s) or through a service related to such an account and includes a corresponding relationship established for the purpose of securities transactions or transfer of funds.
Intermediary Account: Corresponding account used directly by a third party to conduct a transaction on its own behalf.
Financial Group: A group of financial institutions that consists of holding companies or other legal persons exercising the control over the rest of the group and coordinating functions for the application of supervision on the group, branch, and subsidiary level, in accordance with the international core principles for financial supervision, and AML/CFT policies and procedures.
Core Principles for Financial Supervision: Basel Committee on Banking Supervision (BCBS) Principles 1-3, 5-9, 11-15, 26, and 29; International Association of Insurance Supervisors (IAIS) Principles 1, 3-11, 18, 21-23, and 25; and International Organisation of Securities Commission (IOSCO) Principles 24, 28, 29 and 31; and Responsibilities A, B, C and D.
Wire Transfer: Financial transaction conducted by a financial institution or through an intermediary institution on behalf of a transferor whose funds are received by a beneficiary in another financial institution, whether or not the transferor and the beneficiary are the same person.
Shell Bank: Bank that has no physical presence in the country in which it is incorporated and licensed, and is unaffiliated with a regulated financial group that is subject to effective consolidated supervision.
Registrar: The entity in charge of supervising the register of commercial names for all types of establishments registered in the State.
Customer Due Diligence (CDD): Process of identifying or verifying the information of a Customer or Beneficial Owner, whether a natural or legal person or a legal arrangement, and the nature of its activity and the purpose of the business relationship and the ownership structure and control over it for the purposes of the Decretal-Law and this Decision.
Controlled Delivery: The process by which a competent authority allows the entering or transferring of illegal or suspicious funds or crime revenues to and from the UAE for the purpose of investigating a crime or identifying the identity of its perpetrators.
Undercover Operation: The process of search and investigation conducted by one of the judicial impoundment officers by impersonating or playing a disguised or false role in order to obtain evidence or information related to the Crime.
High Risk Customer: A Customer who represents a risk either in person, activity, business relationship, nature of geographical area, such as a Customer from a high-risk country or non-resident in a country in which he does not hold an identity card, or a costumer having a complex structure, performing complex operations or having unclear economic objective, or who conducts cash-intensive operations, or operations with an unknown third party, or operations without directly confronting any other high risk operations identified by financial institutions, or designated non-financial businesses and professions, or the Supervisory Authority.
Politically Exposed Persons (PEPs): Natural persons who are or have been entrusted with prominent public functions in the State 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 organisation or any prominent function within such an organisation; and the definition also includes the following:
- Direct family members (Of the PEP, who are spouses, children, spouses of children, parents).
- Associates known to be close to the PEP, which include:
- Individuals having joint ownership rights in a legal person or arrangement or any other close business relationship with the PEP.
- Individuals having individual ownership rights in a legal person or arrangement established in favour of the PEP.
- Individuals having joint ownership rights in a legal person or arrangement or any other close business relationship with the PEP.
Decretal- Law: Federal Decretal-Law No. (20) of 2018 on Anti- Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.
- Direct family members (Of the PEP, who are spouses, children, spouses of children, parents).
Chapter 2 Financial Institutions, DNFBPs, and Non-Profit Organisations
Part 1 Financial Institutions and DNFBPs
Section 1
Article (2) Activities and Transactions of Financial Institutions and DNFBPs
The following are considered financial activities and transactions:
- Receiving deposits and other funds that can be paid by the public, including deposits in accordance with Islamic Sharia
- Providing private banking services
- Providing credit facilities of all types
- Providing credit facilities of all types, including credit facilities in accordance with Islamic Sharia
- Providing cash brokerage services
- Financial transactions in securities, finance and financial leasing
- Providing currency exchange and money transfer services
- Issuing and managing means of payment, guarantees or obligations
- Providing stored value services, electronic payments for retail and digital cash.
- Providing virtual banking services
- Trading, investing, operating or managing funds, option contracts, future contracts, exchange rate and interest rate transactions, other derivatives or negotiable financial instruments
- Participating in issuing securities and providing financial services related to these issues
- Managing funds and portfolios of all kinds
- Saving funds
- Preparing or marketing financial activities
- Insurance transactions, in accordance with Federal Law No. (6) of 2007 concerning the Establishment of the Insurance Authority and the Organisation of its Operations
- Any other activity or financial transaction determined by the Supervisory Authority
- Receiving deposits and other funds that can be paid by the public, including deposits in accordance with Islamic Sharia
Article (3)
Anyone who is engaged in the following trade or business activities shall be considered a DNFBP:
- Brokers and real estate agents when they conclude operations for the benefit of their Customers with respect to the purchase and sale of real estate
- Dealers in precious metals and precious stones in carrying out any single monetary transaction or several transactions that appear to be interrelated or equal to more than AED 55,000.
- Lawyers, notaries, and other independent legal professionals and independent accountants, when preparing, conducting or executing financial transactions for their Customers in respect of the following activities:
- Purchase and sale of real estate.
- Management of funds owned by the Customer.
- Management of bank accounts, saving accounts or securities accounts.
- Organising contributions for the establishment, operation or management of companies.
- Creating, operating or managing legal persons or Legal Arrangements.
- Selling and buying commercial entities.
- Purchase and sale of real estate.
- Providers of corporate services and trusts upon performing or executing a transaction on the behalf of their Customers in respect of the following activities:
- Acting as an agent in the creation or establishment of legal persons;
- Working as or equipping another person to serve as director or secretary of a company, as a partner or in a similar position in a legal person.
- Providing a registered office, work address, residence, correspondence address or administrative address of a legal person or Legal Arrangement.
- Performing work or equipping another person to act as a trustee for a direct Trust or to perform a similar function in favour of another form of Legal Arrangement.
- Working or equipping another person to act as a nominal shareholder in favour of another person.
- Acting as an agent in the creation or establishment of legal persons;
- Other professions and activities which shall be determined by a decision of the Minister
- Brokers and real estate agents when they conclude operations for the benefit of their Customers with respect to the purchase and sale of real estate
Section 2 Identification and Mitigation of Risks
Article (4)
- Financial institutions and DNFBPs are required to identify, assess, and understand their crime risks in concert with their business nature and size, and comply with the following:
- Considering all the relevant risk factors such as customers, countries or geographic areas; and products, services, transactions and delivery channels, before determining the level of overall risk and the appropriate level of mitigation to be applied.
- Documenting risk assessment operations, keeping them up to date on on-going bases and making them available upon request.
- Considering all the relevant risk factors such as customers, countries or geographic areas; and products, services, transactions and delivery channels, before determining the level of overall risk and the appropriate level of mitigation to be applied.
- Financial Institutions and DNFBPs shall commit to take steps to mitigate the identified risks mentioned as per Clause (1) herein, taking into consideration the results of the National Risk Assessment, by the following:
- Developing internal policies, controls and procedures that are commensurate with the nature and size of their business and are approved by senior management, to enable them to manage the risks that have been identified, and if necessary, to monitor the implementation of such policies, controls and procedures and enhance them as per Article (20) of the present Decision.
- Applying CDD measures to enhance high risks management once identified. Examples include:
- Obtaining more information and investigating this information such as information relating to the Customer and Beneficial Owner identity, or information relating to the purpose of the business relationship or reasons of the transaction.
- Updating the CDD information of the Customer and Beneficial Owner more systematically.
- Taking reasonable measures to identify the source of the funds of the Customer and Beneficial Owner.
- Increasing the degree and level of ongoing business relationship monitoring and examination of transactions in order to identify whether they appear unusual or suspicious.
- Obtaining the approval of senior management to commence the business relationship with the Customer.
- Obtaining more information and investigating this information such as information relating to the Customer and Beneficial Owner identity, or information relating to the purpose of the business relationship or reasons of the transaction.
- Developing internal policies, controls and procedures that are commensurate with the nature and size of their business and are approved by senior management, to enable them to manage the risks that have been identified, and if necessary, to monitor the implementation of such policies, controls and procedures and enhance them as per Article (20) of the present Decision.
- In case the requirements stipulated in Clauses (1 and 2) above are met, the Financial Institutions and DNFBPs shall be permitted to apply simplified CDD measures to manage and limit the identified low risks, unless there is suspicion of a committed Crime. The simplified CDD measures should be commensurate with the low risk factors. These include the following, as examples:
- Verifying the identity of the Customer and Beneficial Owner after establishing the business relationship.
- Updating the Customer’s data based on less frequent intervals.
- Reducing the rate of ongoing monitoring and transaction checks.
- Concluding the purpose and nature of the business relationship based on the type of transactions or the business relationship that has been established, without the need to gather information or performing specific procedure.
- Verifying the identity of the Customer and Beneficial Owner after establishing the business relationship.
- Financial institutions and DNFBPs are required to identify, assess, and understand their crime risks in concert with their business nature and size, and comply with the following:
Section 3 Customer Due Diligence (CDD)
Article (5)
- Financial Institutions and DNFBPs are required to undertake CDD measures to verify the identity of the Customer and the Beneficial Owner before or during the establishment of the business relationship or opening an account, or before executing a transaction for a Customer with whom there is no business relationship. And in the cases where there is a low crime risk, it is permitted to complete verification of Customer identity after establishment of the business relationship, under the following conditions:
- The verification will be conducted in a timely manner as of the commencement of business relationship or the implementation of the transaction.
- The delay is necessary in order not to obstruct the natural course of business.
- The implementation of appropriate and effective measures to control the risks of the Crime.
- The verification will be conducted in a timely manner as of the commencement of business relationship or the implementation of the transaction.
- Financial Institutions and DNFBPs are required to take measures to manage the risks in regards to the circumstances where Customers are able to benefit from the business relationship prior to completion of the verification process.
- Financial Institutions and DNFBPs are required to undertake CDD measures to verify the identity of the Customer and the Beneficial Owner before or during the establishment of the business relationship or opening an account, or before executing a transaction for a Customer with whom there is no business relationship. And in the cases where there is a low crime risk, it is permitted to complete verification of Customer identity after establishment of the business relationship, under the following conditions:
Article (6)
Financial Institutions and DNFBPs should, as the case may be, undertake CDD measures in the following cases:
- Establishing the business relationship;
- Carrying out occasional transactions in favour of a Customer for amounts equal to or exceeding AED 55,000, whether the transaction is carried out in a single transaction or in several transactions that appear to be linked;
- Carrying out occasional transactions in the form of Wire Transfers for amounts equal to or exceeding AED 3,500.
- Where there is a suspicion of the Crime.
- Where there are doubts about the veracity or adequacy of previously obtained Customer's identification data.
- Establishing the business relationship;
Article (7)
Financial Institutions and DNFBPs should undertake CDD measures and ongoing supervision of business relationships, including:
- Audit transactions that are carried out throughout the period of the business relationship, to ensure that the transactions conducted are consistent with the information they have about Customer, their type of activity and the risks they pose, including - where necessary - the source of funds
- Ensure that the documents, data or information obtained under CDD Measures are up-to-date and appropriate by reviewing the records, particularly those of high-risk customer categories
- Audit transactions that are carried out throughout the period of the business relationship, to ensure that the transactions conducted are consistent with the information they have about Customer, their type of activity and the risks they pose, including - where necessary - the source of funds
Article (8)
- Financial Institutions and DNFBPs should identify the Customer’s identity, whether the Customer is permanent or walk-in, and whether the Customer is a natural or legal person or legal arrangement, and verify the Customer’s identity and the identity of the Beneficial Owner. This should be done using documents, data or information from a reliable and independent source or any other source to verify the identity verification as follows:
- For Natural Persons:
The name, as in the identification card or travel document, nationality, address, place of birth, name and address of employer, attaching a copy of the original and valid identification card or travel document, and obtain approval from the senior management, if the Customer or the Beneficial Owner is a PEP.
- For Legal Persons and Legal Arrangements:
- The name, Legal Form and Memorandum of Association
- Headquarter office address or the principal place of business; if the legal person or arrangement is a foreigner, it must mention the name and address of its legal representative in the State and submit the necessary documents as a proof.
- Articles of Association or any similar documents, attested by the competent authority within the State.
- Names of relevant persons holding senior management positions in the legal person or legal arrangement.
- The name, Legal Form and Memorandum of Association
- For Natural Persons:
- Financial institutions and DNFBP’s are required to verify that any person purporting to act on behalf of the Customer is so authorised, and verify the identity of that person as prescribed in Clause (1), of this Article.
- Financial institutions and DNFBP’s are required to understand the intended purpose and nature of the business relationship, and obtain, when necessary, information related to this purpose.
- Financial institutions and DNFBP’s are required to understand the nature of the Customer’s business as well as the Customer’s ownership and control structure.
- Financial Institutions and DNFBPs should identify the Customer’s identity, whether the Customer is permanent or walk-in, and whether the Customer is a natural or legal person or legal arrangement, and verify the Customer’s identity and the identity of the Beneficial Owner. This should be done using documents, data or information from a reliable and independent source or any other source to verify the identity verification as follows:
Article (9)
Financial Institutions and DNFBP’s are required to take reasonable measures to verify the identity of the Beneficial Owners of legal persons and Legal Arrangements, by using information, data, or statistics acquired from a reliable source, by the following:
1. For Customers that are legal persons:
(a) Obtaining and verifying the identity of the natural person, who by himself or jointly with another person, has a controlling ownership interest in the legal person of 25% or more, and in case of failing or having doubt about the information acquired, the identity shall be verified by any other means.
(b) In the event of failing to verify the identity of the natural person exercising control as per paragraph (a) of this Clause, or the person(s) with the controlling ownership interest is not the Beneficial Owner, the identity shall be verified for the relevant natural person(s) holding the position of senior management officer, whether one or more persons.
2. For Customers that are Legal Arrangements:
Verifying the identity of the Settlor, the Trustee(s), or anyone holding a similar position, the identity of the beneficiaries or class of beneficiaries, the identity of any other natural person exercising ultimate effective control over the legal arrangement, and obtaining sufficient information regarding the Beneficial Owner to enable the verification of his/her identity at the time of payment, or at the time he/she intends to exercise his/her legally acquired rights.
Article (10)
Financial Institutions and DNFBPs shall be exempted from identifying and verifying the identity of any shareholder, partner, or the Beneficial Owner, if such information is obtainable from reliable sources where the Customer or the owner holding the controlling interest are as follow:
- A company listed on a regulated stock exchange subject to disclosure requirements through any means that require adequate transparency requirements for the Beneficial Owner.
- A subsidiary whose majority shares or stocks are held by the shareholders of a holding company.
- A company listed on a regulated stock exchange subject to disclosure requirements through any means that require adequate transparency requirements for the Beneficial Owner.
Article (11)
- In addition to the CDD measures required for the Customer and the Beneficial Owner, Financial Institutions shall be required to conduct CDD measures and ongoing monitoring of the beneficiary of life insurance policies and funds generating transactions, including life insurance products relating to investments and family Takaful insurance, as soon as the beneficiary is identified or designated as follows:
- For the beneficiary identified by name, the name of the person, whether a natural person a legal person or a legal arrangement, shall be obtained.
- For a beneficiary designated by characteristics or by class– such as a family relation like parent or child, or by other means such as will or estate – it shall be required to obtain sufficient information concerning the beneficiary to ensure that the Financial Institution will be able to establish the identity of the beneficiary at the time of the pay-out.
- For the beneficiary identified by name, the name of the person, whether a natural person a legal person or a legal arrangement, shall be obtained.
- In all cases – the Financial Institutions should verify the identity of the beneficiary at the time of the payout as per the insurance policy or prior to exercising any rights related to the policy. If the Financial Institution identifies the beneficiary of the insurance policy to be a high-risk legal person or arrangement, then it should conduct enhanced CDD measures to identify the Beneficial Owner of that beneficiary, legal person, or legal arrangement.
- In addition to the CDD measures required for the Customer and the Beneficial Owner, Financial Institutions shall be required to conduct CDD measures and ongoing monitoring of the beneficiary of life insurance policies and funds generating transactions, including life insurance products relating to investments and family Takaful insurance, as soon as the beneficiary is identified or designated as follows:
Article (12)
Financial Institutions and DNFBPs should apply CDD measures to Customers and the ongoing business relationship on the effective date of the present Decision, within such times as deemed appropriate based on relative importance and risk priority. It should also ensure the sufficiency of data acquired, in case CDD measures were applied before the effective date of the present Decision.
Article (13)
- Financial Institutions and DNFBPs shall be prohibited from establishing or maintaining a business relationship or executing any transaction should they be unable to undertake CDD measures towards the Customer and should consider reporting a suspicious transaction to the FIU.
- Even if they suspect the commission of a Crime, financial institutions and DNFBPs should not apply CDD measures if they have reasonable grounds to believe that undertaking such measures would tip-off the Customer and they should report a Suspicious Transaction to the FIU along with the reasons having prevented them from undertaking such measures.
- Financial Institutions and DNFBPs shall be prohibited from establishing or maintaining a business relationship or executing any transaction should they be unable to undertake CDD measures towards the Customer and should consider reporting a suspicious transaction to the FIU.
Article (14)
Financial Institutions and DNFBP’s shall commit to the following:
- Not to deal in any way with Shell Banks, whether to open bank accounts in their names, or to accept funds or deposits from them.
- Not to create or keep records of bank accounts using pseudonyms, fictitious names or numbered accounts without the account holder’s name.
- Not to deal in any way with Shell Banks, whether to open bank accounts in their names, or to accept funds or deposits from them.
Section 4 Politically Exposed Persons (PEPs)
Article (15)
- In addition to undertaking CDD measures required under Section 3, Part 1 of this Chapter, Financial Institutions and DNFBPs shall be required to carry out the following:
First: For Foreign PEPs:
- Put in place suitable risk management systems to determine whether a Customer or the Beneficial Owner is considered a PEP.
- Obtain senior management approval before establishing a business relationship, or continuing an existing one, with a PEP.
- Take reasonable measures to establish the source of funds of Customers and Beneficial Owners identified as PEPs.
- Conduct enhanced ongoing monitoring over such relationship.
Second: For Domestic PEPs and individuals previously entrusted with prominent functions at international organisations:
- Take sufficient measures to identify whether the Customer or the Beneficial Owner is considered one of those persons.
- Take the measures identified in Clauses (b), (c), and (d) under the first paragraph of this Article, when there is a high-risk business relationship accompanying such persons.
- Put in place suitable risk management systems to determine whether a Customer or the Beneficial Owner is considered a PEP.
- Financial Institutions shall be required to take reasonable measures to determine the beneficiary or Beneficial Owner of life insurance policies and family takaful insurance. If identified as a PEP, Financial institutions shall inform senior management before the pay-out of those policies, or prior to the exercise of any rights related to them, in addition to thoroughly examining the overall business relationship, and consider reporting to the Unit a suspicious transaction report.
- In addition to undertaking CDD measures required under Section 3, Part 1 of this Chapter, Financial Institutions and DNFBPs shall be required to carry out the following:
Section 5 Suspicious Transaction Reports (STRs)
Article (16)
Financial Institutions and DNFBPs shall put in place indicators that can be used to identify the suspicion on the occurrence of the Crime in order to report STRs, and shall update these indicators on an ongoing basis, as required, in accordance with the development and diversity of the methods used for committing such crimes, whilst complying with what the Supervisory Authorities or FIU may issue instructions in this regard.
Article (17)
- If Financial Institutions and DNFBPs have reasonable grounds to suspect that a Transaction, attempted Transaction, or funds constitute crime proceeds in whole or in part, or are related to the Crime or intended to be used in such activity, regardless of the amount, they shall adhere to the following without invoking bank secrecy or professional or contractual secrecy:
- Directly report STRs to the FIU without any delay, via the electronic system of the FIU or by any other means approved by the FIU
- Respond to all additional information requested by the FIU.
- Directly report STRs to the FIU without any delay, via the electronic system of the FIU or by any other means approved by the FIU
- Lawyers, notary publics, other legal stakeholders and independent legal auditors shall be exempt from Clause (1) of this Article, if obtaining this information regarding such Transactions relates to the assessment of their Customers’ legal position, or defending or representing them before judiciary authorities or in arbitration or mediation, or providing legal opinion with regards to legal proceedings, including providing consultation concerning the initiation or avoidance of such proceedings, whether the information was obtained before or during the legal proceedings, or after their completion, or in other circumstances where such Customers are subject to professional secrecy.
- Financial Institutions and DNFBPs, their board members, employees and authorised representatives shall not be legally liable for any administrative, civil or criminal liability for reporting when reporting to the Unit or providing information in good faith.
- If Financial Institutions and DNFBPs have reasonable grounds to suspect that a Transaction, attempted Transaction, or funds constitute crime proceeds in whole or in part, or are related to the Crime or intended to be used in such activity, regardless of the amount, they shall adhere to the following without invoking bank secrecy or professional or contractual secrecy:
Article (18)
- Financial Institutions and DNFBPs, their managers, officials or staff, shall not disclose, directly or indirectly, to the Customer or any other person(s) that they have reported, or are intending to report a Suspicious Transaction, nor shall they disclose the information or data contained therein, or that an investigation is being conducted in that regard.
- When lawyers, notaries, other independent legal professionals, and legal independent auditors attempt to discourage their Customers from committing a violation, they shall not be considered to have made a disclosure.
- Financial Institutions and DNFBPs, their managers, officials or staff, shall not disclose, directly or indirectly, to the Customer or any other person(s) that they have reported, or are intending to report a Suspicious Transaction, nor shall they disclose the information or data contained therein, or that an investigation is being conducted in that regard.
Section 6 Reliance on a Third Party
Article (19)
- Taking into consideration the high-risk countries identified by the Committee, the Financial Institutions and DNFBPs shall be permitted to rely on a third party to undertake the necessary CDD measures towards Customers as per Section 3 of Part 1 of this Chapter, and each of the Financial Institution and the DNFBP shall be responsible for the validity of these CDD measures, and shall do the following:
- Immediately obtain, from third parties, the necessary identification data and other necessary information collected through the CDD measures and ensure that copies of the necessary documents for such measures can be obtained without delay and upon request.
- Ensure that the third party is regulated and supervised, and adheres to the CDD measures towards Customers and record-keeping provisions of the present Decision.
- Immediately obtain, from third parties, the necessary identification data and other necessary information collected through the CDD measures and ensure that copies of the necessary documents for such measures can be obtained without delay and upon request.
- Financial Institutions and DNFBPs, who rely on third parties that are part of the same Financial Group,shall ensure that:
- The Financial Group applies the CDD, PEP, and record-keeping requirements and implements programs for combating the Crime in accordance with Sections 3, 4, 11 of Part 1 of this Chapter and Article (31) of this Decision, and the Financial Group is subject to supervision in that regard.
- The Financial Group sufficiently mitigates any high risks linked to countries through its own policies and controls for combating the Crime.
- The Financial Group applies the CDD, PEP, and record-keeping requirements and implements programs for combating the Crime in accordance with Sections 3, 4, 11 of Part 1 of this Chapter and Article (31) of this Decision, and the Financial Group is subject to supervision in that regard.
- Taking into consideration the high-risk countries identified by the Committee, the Financial Institutions and DNFBPs shall be permitted to rely on a third party to undertake the necessary CDD measures towards Customers as per Section 3 of Part 1 of this Chapter, and each of the Financial Institution and the DNFBP shall be responsible for the validity of these CDD measures, and shall do the following:
Section 7 Internal Supervision and Foreign Branches and Subsidiaries
Article (20)
Financial Institutions and DNFBPs shall have internal policies, procedures and controls for combating the Crime, that should be commensurate with the Crime risks, and with the nature and size of their business, and to continuously update them, and to apply them to all its branches and subsidiaries in which it holds majority interest, including the following:
- CDD measures towards Customers as required in accordance with the Decretal-Law and the present Decision, including procedures for the risk management of business relationships prior to completing the verification process.
- Procedures for the reporting of Suspicious Transactions.
- Appropriate arrangements for compliance management for combating the Crime, including appointing a compliance officer
- Screening procedures to ensure the availability of high competence and compatibility standards when hiring staff
- Preparation of periodic programs and workshops in the field of combatting the Crime to build the capabilities of compliance officers and other competent employees.
- An independent audit function to test the effectiveness and adequacy of internal polices, controls and procedures relating to combating the Crime.
- CDD measures towards Customers as required in accordance with the Decretal-Law and the present Decision, including procedures for the risk management of business relationships prior to completing the verification process.
Section 8 Compliance Officer Tasks
Article (21)
Financial Institutions and DNFBPs shall appoint a compliance officer. The compliance officer shall have the appropriate competencies and experience and under his or her own responsibility, shall perform the following tasks:
- Detect Transactions relating to any Crime.
- Review, scrutinise and study records, receive data concerning Suspicious Transactions, and take decisions to either notify the FIU or maintain the Transaction with the reasons for maintaining while maintaining complete confidentiality.
- Review the internal rules and procedures relating to combating the Crime and their consistency with the Decretal-Law and the present Decision, assess the extent to which the institution is committed to the application of these rules and procedures, propose what is needed to update and develop these rules and procedures, prepare and submit semi-annual reports on these points to senior management, and send a copy of that report to the relevant Supervisory Authority enclosed with senior management remarks and decisions.
- Prepare, execute and document ongoing training and development programs and plans for the institution’s employees on Money Laundering and the Financing of Terrorism and Financing of Illegal Organisations, and the means to combat them.
- Collaborate with the Supervisory Authority and FIU, provide them with all requested data, and allow their authorised employees to view the necessary records and documents that will allow them to perform their duties.
- Detect Transactions relating to any Crime.
Section 9 High-Risk Countries
Article (22)
- Financial Institutions and DNFBPs shall implement enhanced CDD measures based on the level of risk that might arise from business relationships and Transactions with natural or legal persons from high-risk countries.
- Financial Institutions and DNFBPs shall implement CDD measures as defined by the Committee regarding High Risk Countries.
- Financial Institutions and DNFBPs shall implement enhanced CDD measures based on the level of risk that might arise from business relationships and Transactions with natural or legal persons from high-risk countries.
Section 10 Requirements relating to New Technologies
Article (23)
- Financial institutions and DNFBPs shall identify and assess the risks of money laundering and terrorism financing that may arise when developing new products and new professional practices, including means of providing new services and using new or under-development techniques for both new and existing products.
- Financial Institutions and DNFBPs shall assess risks prior to the release of products, practices or techniques, and take appropriate measures to manage and mitigate such risks
- Financial institutions and DNFBPs shall identify and assess the risks of money laundering and terrorism financing that may arise when developing new products and new professional practices, including means of providing new services and using new or under-development techniques for both new and existing products.
Section 11 Record-keeping
Article (24)
- Financial Institutions and DNFBPs shall maintain all records, documents, data and statistics for all financial transactions and local or international commercial and cash transactions for a period of no less than five years from the date of completion of the transaction or termination of the business relationship with the Customer.
- Financial institutions and DNFBPs shall keep all records and documents obtained through CDD measures, ongoing monitoring, account files and business correspondence, and copies of personal identification documents, including STRs and results of any analysis performed , For a period of no less than five years from the date of termination of the business relationship or from the closing date of the account to Customers who maintain accounts with these institutions or after the completion of a casual transaction or from the date of completion of the inspection by the Supervisory authorities, or from the date of issuance of a final judgment of the competent judicial authorities, all depending on the circumstances.
- The records, documents and documents kept shall be organised so as to permit data analysis and tracking of financial transactions.
- Financial Institutions and DNFBPs shall make all Customer information regarding CDD towards Customers, ongoing monitoring and results of their analysis, records, files, documents, correspondence and forms available immediately to the competent authorities upon request.
- Financial Institutions and DNFBPs shall maintain all records, documents, data and statistics for all financial transactions and local or international commercial and cash transactions for a period of no less than five years from the date of completion of the transaction or termination of the business relationship with the Customer.
Part 2 Requirements for Financial Institutions
Section 1 Correspondent Banking Relationship
Article (25)
- Before entering into correspondent banking or any other similar relationship, financial institutions shall take the following measures:
- Refrain from entering into or maintaining a correspondent banking relationship with Shell Banks or with an institution that allows their accounts to be used by Shell Banks.
- Collect sufficient information about any receiving correspondent banking institution for the purpose of identifying and achieving a full understanding of the nature of its work, and to make available, through publicly available information, its reputation and level of control, including whether it has been investigated.
- Evaluate anti-crime controls applied by the receiving institution.
- Obtain approval from senior management before establishing new correspondent banking relationships.
- Understand the responsibilities of each institution in the field of combatting Crime.
- Refrain from entering into or maintaining a correspondent banking relationship with Shell Banks or with an institution that allows their accounts to be used by Shell Banks.
- With respect to intermediate payment accounts, the financial institution should be required to ensure that the receiving institution has taken CDD measures towards Customers who have direct access to those accounts and that it is able to provide CDD information to the relevant Customers upon request of the correspondent institution.
- Before entering into correspondent banking or any other similar relationship, financial institutions shall take the following measures:
Section 2 Money or Value Transfer Services
Article (26)
- Providers of money or value transfer services shall be licensed by or registered with the competent Supervisory Authority. The Supervisory Authority shall take the necessary measures to punish those who provide such services without a licence or registration in accordance with their effective legislation and to ensure compliance of licensed or registered providers with the Crime combating controls.
- Providers of money or value transfer services shall keep an up-to-date list of their agents and make them available to the relevant authorities within the country in which the money or value transfer services providers and their agents operate, and shall engage their agents in combatting the Crime control programs and monitor them for compliance with these programs.
- Providers of money or value transfer services shall be licensed by or registered with the competent Supervisory Authority. The Supervisory Authority shall take the necessary measures to punish those who provide such services without a licence or registration in accordance with their effective legislation and to ensure compliance of licensed or registered providers with the Crime combating controls.
Section 3 Wire Transfers
Article (27)
- Financial institutions shall ensure that all international wire transfers equal to or exceeding AED (3,500) are always accompanied by the following data:
- The name of the originator, his or her identity number or travel document, date and place of birth, address and account number. In the absence of an account, the transfer must include a unique transaction reference number which allows the process to be tracked.
- The name of the beneficiary and his account number used to make the transfers. In the absence of the account, the transfer must include a unique transaction reference number which allows the process to be tracked.
- The name of the originator, his or her identity number or travel document, date and place of birth, address and account number. In the absence of an account, the transfer must include a unique transaction reference number which allows the process to be tracked.
- In the event that several individual cross-border wire transfers from a single originator are bundled in a batch file for transmission to beneficiaries, the batch file shall contain required and accurate originator information, and full beneficiary information, that is fully traceable within the beneficiary country; and the financial institution shall be required to include the originator’s account number or unique transaction reference number.
- Financial institutions shall ensure that all cross-border wire transfers less than AED 3,500 are always accompanied by the data in Clause (1) of this Article, without the need to verify the accuracy of the data referred to, unless there are suspicions about committing the Crime.
- For domestic wire transfers, the ordering financial institution shall ensure that the information accompanying the wire transfer includes originator information as indicated in Clause (1) of this Article, unless this information can be made available to the beneficiary financial institution and competent authorities by other means.
- Where the information accompanying the domestic wire transfer can be made available to the beneficiary financial institution and competent authorities by other means, the ordering financial institution shall be only required to include the account number or a unique transaction reference number, provided that this number or identifier will permit the transaction to be traced back to the originator or the beneficiary. The ordering financial institution shall make the information available within three business days of receiving the request either from the beneficiary financial institution or from competent authorities.
- Financial institutions shall not carry out wire transfers if they fail to comply with the conditions set out in this article.
- Ordering financial institutions shall keep all information about the originator and the beneficiary collected in accordance with the provisions of Article (24) of this Decision.
- Financial institutions shall ensure that all international wire transfers equal to or exceeding AED (3,500) are always accompanied by the following data:
Article (28)
- An intermediary financial institution shall ensure that all originator and beneficiary information that accompanies a wire transfer is retained with it for cross-border wire transfers.
- Where technical limitations prevent the required originator or beneficiary information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, the Intermediary Financial Institution shall keep a record of all the information received from the ordering financial institution or another cross-border Intermediary Financial Institution, in accordance with the provisions of Article (24) of the present Decision.
- Intermediary Financial Institutions shall take reasonable measures, which are consistent with straight-through processing, to identify cross-border wire transfers that lack required originator information or required beneficiary information and shall have risk-based policies and procedures for determining when to execute, reject, or suspend a wire transfer; and the appropriate follow-up action.
- An intermediary financial institution shall ensure that all originator and beneficiary information that accompanies a wire transfer is retained with it for cross-border wire transfers.
Article (29)
- Beneficiary Financial Institutions shall take reasonable measures, to identify cross-border wire transfers that lack required originator information or required beneficiary information, which may include real-time monitoring where feasible or post-event monitoring.
- For cross-border wire transfers of AED 3,500 or more, a Beneficiary Financial Institution shall verify the identity of the beneficiary, if the identity has not been previously verified.
- Beneficiary Financial Institutions shall have risk-based policies and procedures determining when to execute, reject, or suspend a wire transfer lacking required originator or required beneficiary information; and for determining the appropriate follow-up action.
- Beneficiary Financial Institutions shall maintain records of all required originator and required beneficiary information collected, in accordance with the provisions of Article (24) of this Decision.
- Beneficiary Financial Institutions shall take reasonable measures, to identify cross-border wire transfers that lack required originator information or required beneficiary information, which may include real-time monitoring where feasible or post-event monitoring.
Article (30)
- Providers of Money or Value Transfer Services shall comply with all of the relevant requirements of Articles (27), (28), and (29) of this Decision, whether they operate directly or through their agents.
- In the case of a provider of money or value transfer services that controls both the ordering and the beneficiary side of a cross-border wire transfer, the provider of money or value transfer services shall:
- Take into account all information from both the ordering and beneficiary sides in order to determine whether an STR is to be filed; and
- If it is decided to file STR regarding the Transaction, the STR shall be sent to the Financial Intelligence Unit in the relevant country, attaching all relevant transaction information.
- Take into account all information from both the ordering and beneficiary sides in order to determine whether an STR is to be filed; and
- Providers of Money or Value Transfer Services shall comply with all of the relevant requirements of Articles (27), (28), and (29) of this Decision, whether they operate directly or through their agents.
Section 4 Financial Group
Article (31)
Financial Groups shall implement group-wide programs with respect to combating the Crime. Such programs shall be applicable and appropriate to all its branches and majority-owned subsidiaries. In addition to the measures mentioned in Article (20) of this Decision, these programs should also include the following:
- Policies and procedures for the exchange of information required for the purposes of CDD and risk management of the Crime;
- The provision of Customer information, accounts, and Transactions from the branches and subsidiaries to the compliance officers at a Financial Group level, whenever necessary for the purpose of combating the Crime.
- Provision of adequate safeguards on the confidentiality and use of the information exchanged.
- Policies and procedures for the exchange of information required for the purposes of CDD and risk management of the Crime;
Article (32)
- Financial Institutions should ensure that their foreign branches and majority-owned subsidiaries apply Crime-combating measures that are consistent with the requirements of the Decretal-Law and the present Decision when the minimum Crime-combating requirements of the other country are less strict than those applied in the State, to the extent permitted by that other country’s laws and regulations.
- If the other country does not permit the appropriate implementation of measures for combating the Crime that are consistent with the requirements of the Decretal-Law and the present Decision, then Financial Institutions shall take additional measures to manage AML/CFT risks related to their operations abroad and reduce them appropriately, inform the other country of the matter, and abide by the instructions received from the Country in this regard.
- Financial Institutions should ensure that their foreign branches and majority-owned subsidiaries apply Crime-combating measures that are consistent with the requirements of the Decretal-Law and the present Decision when the minimum Crime-combating requirements of the other country are less strict than those applied in the State, to the extent permitted by that other country’s laws and regulations.
Part 3 Requirements of Non-Profitable Organisations
Article (33)
Non-Profit Organisations, in collaboration with the competent Supervisory Authority, shall commit to the following:
- Apply best practices adopted by the competent Supervisory Authority to mitigate their vulnerabilities so that they can protect themselves from being abused for Financing of Terrorism and of Illegal Organisations.
- Put in place clear policies to promote transparency, integrity, and public confidence in its own administration.
- Conduct Transactions through official financial channels, taking into consideration the different capabilities of financial sectors in other countries.
- Apply best practices adopted by the competent Supervisory Authority to mitigate their vulnerabilities so that they can protect themselves from being abused for Financing of Terrorism and of Illegal Organisations.
Chapter 3 Transparency and Beneficial Owner
Part 1 Requirements of Company Registrar and Companies
Article (34)
- The Registrar shall provide information regarding legal persons in the State and make it available to the public as follows:
- The types, different forms and basic features of legal persons
- The processes for the creation of those legal persons
- The processes for obtaining its basic information as stipulated in paragraph (b), Clause (1), of Article (8) of this Decision
- The processes for obtaining information about the Beneficial Owner.
- The types, different forms and basic features of legal persons
- The Registrar shall undertake to maintain and keep the up-to-date basic information defined in paragraph (b), Clause (1), of Article (8) of this Decision, ensure its accuracy and make it available to the public
- Upon registering companies, the Registrar shall commit to receive the data of the Beneficial Owner of the company as stipulated in Clause (Error! Reference source not found.) of Article (9) of this Decision and make sure it remains up to date accurate, and available to the Competent Authorities.
- The Registrar shall provide information regarding legal persons in the State and make it available to the public as follows:
Article (35)
- Companies shall be required to maintain the information set out in paragraph (b), Clause (1) of Article (8) of this Decision and a register of all their shareholders containing the number of shares held by each shareholder and categories of shares, if any, including the voting rights and providing this register to the Registrar after ensuring its accuracy.
- Companies shall undertake to maintain and make available the data mentioned in Clause (Error! Reference source not found.) of Article (9) of this Decision to the Registrar at all times and upon request, update such data within 15 business days upon its amendment or change and ensure to keep this information up-to-date and accurate on an ongoing basis and assist the Registrar in documenting such information if so required.
- Companies shall have one or more natural persons residents of the State and authorised to disclose to the Registrar all information contained in Clauses (1) and (2) of this Article
- Any company established or registered in the State shall be prohibited from issuing share warrants to bearer.
- Companies that permit the issuance of nominee shares in the name of individuals or members of the board of directors shall be required to disclose those shares and the identities of the members of the board of directors to the Registry for the purpose of registering them.
- Companies shall be required to maintain the information set out in paragraph (b), Clause (1) of Article (8) of this Decision and a register of all their shareholders containing the number of shares held by each shareholder and categories of shares, if any, including the voting rights and providing this register to the Registrar after ensuring its accuracy.
Article (36)
The Registrar and the companies, or the administrators or liquidators or any other stakeholder involved in the dissolution of the company, shall maintain records and all information as mentioned in Article (34) and Article (35) for at least five years from the date in which the company is dissolved or otherwise ceased to exist.
Part 2 Requirements of Legal Arrangements
Article (37)
- The Trustees in Legal arrangements are required to information about the Beneficial Owner as prescribed in Clause (Error! Reference source not found.) of Article (9) of this Decision.
- The Trustees in Legal Arrangements are required to maintain basic information relating to intermediaries, who are subject to supervision, and service providers, including consultants, investors, directors, accountants and tax advisors.
- The information mentioned in Clauses (1) and (2) of this Article shall be maintained accurately and updated within 15 days if it is amended or changed and legal arrangement representatives shall be required to maintain this information for at least five years from the date of the end of their involvement with the legal arrangement.
- The Competent Authorities, and in particular Law Enforcement Authorities, shall request and obtain information held by trustees, Financial Institutions, or DNFBPs, without delay, relating to the following:
- The Beneficial Ownership of legal arrangements
- The residence of the Trustee
- The funds that are held or managed by the Financial Institution or DNFBP in relation to any trustees with which they have a Business Relationship, or for which they undertake an occasional Transaction.
- The Beneficial Ownership of legal arrangements
- The Trustees in Legal arrangements are required to information about the Beneficial Owner as prescribed in Clause (Error! Reference source not found.) of Article (9) of this Decision.
Part 3 Prohibition of Invocation of Banking, Professional or Contractual Secrecy
Article (38)
It is prohibited to invoke banking, professional or contractual secrecy as a pretext to prevent application of the provisions of the Decretal-Law and this Decision in the following cases:
- Exchange of information among Financial Institutions whenever it is related to Correspondent Banking or Wire Transfers and the reliance on regulated third party relationships in accordance with Articles (19), (25), and (27) to (30) of this Decision.
- Exchange of information among Competent Authorities at the domestic or international level in relation to the combating of the Crime.
- Exchange of information among Financial Institutions whenever it is related to Correspondent Banking or Wire Transfers and the reliance on regulated third party relationships in accordance with Articles (19), (25), and (27) to (30) of this Decision.
Part 4 Confidentiality of information
Article (39)
- Any person who obtains information related to a suspicious transaction or any of the crimes stipulated in the Decretal-Law shall be bound by its confidentiality and not disclosed except to the extent necessary for its use in investigations, prosecutions or cases in violation of the provisions of the Decretal-Law and this Decision.
- In all cases, it is not permissible to contact the Customer directly or indirectly to notify him of the actions taken, except at the written request of the competent Supervisory Authority.
- Any person who obtains information related to a suspicious transaction or any of the crimes stipulated in the Decretal-Law shall be bound by its confidentiality and not disclosed except to the extent necessary for its use in investigations, prosecutions or cases in violation of the provisions of the Decretal-Law and this Decision.
Chapter 4 Financial Intelligence Unit
Section 1 Independence of the FIU
Article (40)
- The FIU shall be operationally independent in order to carry out its functions effectively, and the Central Bank shall provide it with the required technical, financial and human resources.
- The main headquarter for the FIU shall be the capital of the State and it may open branches within the Central Bank’s branches in the Emirates of the State.
- The FIU shall operate as national centre to receive STR’s and other information related to the Crime.
- The FIU shall be operationally independent in order to carry out its functions effectively, and the Central Bank shall provide it with the required technical, financial and human resources.
Section 2 Powers of the FIU
Article (41)
The FIU shall have the following powers:
- Putting in place the FIU’s departments and internal regulations for approval by the Central Bank’s Board of Directors. The internal regulations shall include procedures to ensure the competency and integrity of its employees and the awareness of their responsibilities in dealing with confidential information.
- Establishing a database or special register to hold any information it has available and securing this information by establishing rules that govern information security and confidentiality, including procedures for processing, storing, disseminating and setting procedures to ensure limited access to the FIU’s facilities, information and technical systems and to the review or disclosure of information, except by those authorised to do so.
- Providing courses and programs to train and develop the employees working in it and any other authority, be it inside or outside the State.
- Preparing studies, research and statistics related to the Crime, and following up on any studies, research or statistics conducted domestically or internationally in this regard.
- Preparing annual reports about its Crime-combatting activities that include specifically general analysis of STRs and notifications received as well as activities and trends of the Crime, and preparing a brief of this report for dissemination purposes.
- Putting in place the FIU’s departments and internal regulations for approval by the Central Bank’s Board of Directors. The internal regulations shall include procedures to ensure the competency and integrity of its employees and the awareness of their responsibilities in dealing with confidential information.
Article (42)
The FIU shall be responsible for carrying out its duties with regards to STRs as follows:
- Receiving STRs relating to the Crime from Financial Institutions and DNFBPs on the FIU’s approved templates, then studying, analysing and storing them in its database.
- Requesting Financial Institutions, DNFBPs, and Competent Authorities to provide any additional information and documents relating to the STRs and information received, and any other information that it might deem necessary to perform its duties, including information relating to customs’ disclosures, in the time and form specified by the FIU
- Analysing available reports and information as follows:
- Operational analysis by using available and obtainable information, to identify specific targets, such as persons, funds, or criminal networks, track activities or specific Transactions, and determine the links between those targets, activities or transactions and potential proceeds of the Crime.
- Strategic analysis by using available and obtainable information, including data provided by Competent Authorities, to identify trends and patterns of the Crime.
- Operational analysis by using available and obtainable information, to identify specific targets, such as persons, funds, or criminal networks, track activities or specific Transactions, and determine the links between those targets, activities or transactions and potential proceeds of the Crime.
- Providing the Financial Institutions and DNFBPs with the analysis results of the information provided in the reports received by the FIU in order to enhance the effectiveness of the measures for combating the Crime and detecting STRs.
- Cooperating and coordinating with the Supervisory Authorities by disseminating the outcomes of its own analysis, specifically with respect to the quality of STRs, to ensure the compliance of Financial Institutions and DNFBPs with the procedures for combating the Crime
- Sending the data relating to the reports, the outcomes of its analyses and any other relevant data to Law Enforcement Authorities, when there are sufficient grounds to suspect its connection to the Crime, to take required actions in that regard.
- Providing to judiciary authorities and Law Enforcement Authorities information related to the Crime and information it can obtain from foreign FIUs, spontaneously or upon request.
- Receiving STRs relating to the Crime from Financial Institutions and DNFBPs on the FIU’s approved templates, then studying, analysing and storing them in its database.
Article (43)
The FIU shall be responsible for carrying out its duties at the international level as follows:
- Exchanging information with its FIU counterparts in other countries on STRs or any other information the FIU has the power to obtain or access, whether directly or indirectly, as per the international agreements to which the State is a party or any memorandums of understanding the FIU has entered into with FIU counterparts to regulate its cooperation with them or on the condition of reciprocity.
- Reporting to its FIU counterparts the outcomes of using the submitted information and analysis conducted based on that information.
- The information specified in Clauses (1) and (2) of this Article may not be used except for Crime-combatting purposes and may not be disclosed to any third party without the FIU’s approval.
- Following up on the developments relating to Money Laundering and Terrorism Financing crimes through the relevant regional and international organisations and bodies and participating in related meetings.
- Following up with the requirements of the Egmont Group, as well as participating and attending its meetings as a member of the group.
- Exchanging information with its FIU counterparts in other countries on STRs or any other information the FIU has the power to obtain or access, whether directly or indirectly, as per the international agreements to which the State is a party or any memorandums of understanding the FIU has entered into with FIU counterparts to regulate its cooperation with them or on the condition of reciprocity.
Chapter 5 Supervisory Authorities
Section 1 Supervisory Authority for Financial Institutions and DNFBPs
Article (44)
The Supervisory Authorities, each in accordance with its specialisations, shall assume the functions of supervision, monitoring and follow-up to ensure compliance with the provisions of the Decretal-Law and this Decision and shall be specialised in the following:
- Conducting a risk assessment for any potential occurrence of the Crime in legal persons, including Financial Institutions and DNFBPs.
- Putting in place the Crime-Combating regulations, instructions and forms for the entities subject to their supervision, when necessary.
- Putting in place the required procedures and controls to assess the compliance of supervised institutions with the provisions of the Decretal-Law and this Decision and any other legislation related to combating the Crime in the State, as well as to request the information relating to such compliance.
- Setting and applying the regulations, controls, standards of merit to anyone who seeks to acquire, control, participate in management or operation, whether directly or indirectly, or to be the beneficiary of Financial Institutions and DNFBPs.
- Conducting onsite and offsite supervision and inspections over Financial Institutions and DNFBPs.
- Determining the frequency of supervision and inspection over Financial Institutions, Financial Groups, and DNFBPs based on the following:
- National Risk Assessment
- Distinctive characteristics of Financial Institutions, Financial Groups and DNFBPs in terms of their diversities, numbers and the degree of discretion provided to them under the risk-based approach.
- Risks of the Crime as well as internal policies, controls and procedures associated with Financial Institutions, Financial Groups, or DNFBPs as identified by the Supervisory Authority’s assessment of each’s risk profile.
- National Risk Assessment
- Undertaking all measures to ensure full compliance of the Financial Institutions and DNFBPs in implementing Security Council Resolutions relating to the prevention and suppression of terrorism and Terrorism Financing, and the prevention and suppression of the proliferation of weapons of mass destruction and its financing, and other related decisions, by conducting onsite visits and on-going monitoring, and imposing appropriate administrative sanctions when there is a violation or shortcoming in implementing the instructions.
- Ensuring that the prescribed measures are adopted by the supervised institutions in accordance with the provisions of the Decretal-Law and this Decision, and that these measures are implemented in their foreign branches and majority-owned subsidiaries to the extent permitted by the laws of the country, where those branches and subsidiaries exist.
- Periodically reviewing the assessment of the Crime risk profile of a Financial Institution and Financial Group (including the risks of non-compliance), and when there are major events or developments in the management and operations of the Financial Institution or Group.
- Ensuring the compliance of Financial Institutions and DNFBPs subject to their supervision in implementing enhanced CDD measures on Customers and ongoing monitoring of the business relationship related to High-Risk Countries.
- Providing Financial Institutions and DNFBPs with guidelines and feedback to enhance the effectiveness of implementation of the Crime-combatting measures.
- Maintaining an up-to-date list of the names and data of compliance officers of the institutions under their Supervision, and notifying the FIU thereof; and requiring those institutions to obtain their prior consent before appointing their compliance officers.
- Conducting programs and outreach campaigns on combating the Crime.
- Issuing decisions of imposing administrative sanctions in accordance with the provisions of the Decretal-Law and the present Decision, and the mechanism for submitting relevant grievance.
- Maintaining statistics about the measures taken and sanctions imposed.
- Conducting a risk assessment for any potential occurrence of the Crime in legal persons, including Financial Institutions and DNFBPs.
Section 2 Supervisory Authority for Non-Profit Organisations
Article (45)
The Competent Supervisory Authority for NPOs shall commit to the following:
- Obtaining, in a timely manner, all information available with all Competent Authorities regarding NPO activities for the purpose of determining the size, features and types of NPOs, and identifying the threats posed against them by terrorism organisations, and the extent to which they are exposed to the risk of being misused for supporting Financing of Terrorism and Financing of Illegal Organisations, and then taking all appropriate and effective measures to combat these identified risks and reviewing them on a periodic basis to ensure their adequacy.
- Reviewing the relevance and adequacy of legislation relating to NPOs to stop their misuse for supporting the Financing of Terrorism and of Illegal Organisations, and working to improve them when necessary.
- Periodically reassessing NPOs by reviewing updated information on their potential vulnerabilities, which may be exploited in support of Financing of Terrorism.
- Promoting and conducting awareness outreach and educational programs in order to raise awareness of NPOs and their donators on their potential vulnerabilities, which may expose them to risks of being misused for supporting and financing of Terrorism, and measures that can be taken by NPOs to protect themselves from such risks.
- Supervising and monitoring NPOs using a risk-based approach to prevent their misuse in the Support and Financing of Terrorism and ensure compliance with their requirements.
- Cooperating, coordinating and exchanging information at the local level with Competent Authorities that hold relevant information on NPOs.
- Possessing experience in the field of investigations and the ability to examine NPOs that are suspected of being misused for supporting and financing of terrorism.
- Fully reviewing the information relating to the administration and management of any NPO, including financial information and information relating to its programs.
- Establishing mechanisms to ensure the prompt exchange of information with Competent Authorities for the purpose of taking preventive measures or investigative action when there is suspicion or reasonable grounds to suspect that the NPO is:
- A front for the raising of funds on behalf of a terrorist organisation.
- Being exploited as a conduit for the Financing of Terrorism or for the evasion of asset freezing measures or any other form of terrorism support.
- Concealing or disguising the flow of funds intended for legitimate purposes, but redirected for the benefit of terrorists or terrorist organisations.
- A front for the raising of funds on behalf of a terrorist organisation.
- Determining the appropriate points of contact and procedures required to respond to international requests for information regarding NPOs suspected of Financing of Terrorism or is being exploited for the Financing of Terrorism or other forms of terrorism support.
- Obtaining, in a timely manner, all information available with all Competent Authorities regarding NPO activities for the purpose of determining the size, features and types of NPOs, and identifying the threats posed against them by terrorism organisations, and the extent to which they are exposed to the risk of being misused for supporting Financing of Terrorism and Financing of Illegal Organisations, and then taking all appropriate and effective measures to combat these identified risks and reviewing them on a periodic basis to ensure their adequacy.
Chapter 6 Provisional Measures and Investigative Procedures
Section 1 Provisional Measures
Article (46)
- The Governor, or whoever is acting in his place, shall order the Freezing of funds, which are suspected to be linked to the Crime, with Financial Institutions licensed by the Central Bank for a period of no more than (7) seven working days, in the case of the FIU’s requests based on its analysis of STRs and other information received.
- The FIU shall, in the event of taking the decision mentioned in Clause (1) of this Article, do the following:
- Notify the concerned Financial Institution to perform the Freezing order without prior notice to the owner of the funds.
- Notify the public prosecutor, in case the Governor requests extending the Freezing order, including the justifications of such extension.
- Notify the concerned Financial Institution to perform the Freezing order without prior notice to the owner of the funds.
- The FIU, after presenting to the Governor, shall notify the concerned Financial Institution of the cancelation of the Freezing order in case the public prosecutor refuses the extension or after expiry of the period specified in Clause (1) of this Article without receiving a response from the public prosecutor
- The Financial Institution, which holds the frozen funds, shall notify the owner of the frozen funds of the Freezing order and its sources, and shall request the owner to provide the required documents that prove the legitimacy of the source of these funds and refer these documents to the FIU to take the required actions.
- The Governor shall submit a proposal to the public prosecutor to cancel the extension of the Freezing order once there are no grounds to such freeze in order for the public prosecutor to take actions as he deems appropriate.
- The fund freezing orders shall not be executed by Financial Institutions licensed by the Central Bank unless they are issued by it.
- The Governor, or whoever is acting in his place, shall order the Freezing of funds, which are suspected to be linked to the Crime, with Financial Institutions licensed by the Central Bank for a period of no more than (7) seven working days, in the case of the FIU’s requests based on its analysis of STRs and other information received.
Article (47)
- The Public Prosecution and the competent court shall, as the case may be, order the identification, tracing, and valuation of the Funds, Proceeds and Means under suspicion, or their equivalent value, or order their Seizing or Freezing, if they were the result of or linked to the Crime, and that is without prior notice to the owner, and shall issue a travel ban for the owner until the completion of the investigation or trial.
- The Public Prosecution or the competent court shall, as the case may be and when deemed necessary, take decisions to prevent the dealing with or disposing of such Funds, Proceeds or Means, and take the necessary measures to prevent any action intended to evade the Freezing and Seizing order issued in that regard, without violating the rights of bona fide third parties.
- Any interested party shall have the right to contest the public prosecution’s Freezing or Seizing decision before the competent court of first instance, which is located within the jurisdiction of the order public, or the competent court specialised in criminal claims.
- The contest shall be submitted as a report to the competent court. The president of the court shall, then, schedule a hearing session with the knowledge of the defendant, and the public prosecution shall be required to lodge a memorandum with its opinion on the defendant’s grievance. The court then issues its final decision within a period of no more than 14 working days as of the date of submission of the appeal.
- The decision to dismiss the contest request is not subject to appeal; if the contest was rejected, it is not permissible to lodge a new contest except after a duration of three months from the date of rejecting the contest, unless a serious reason occurs before the period passes.
- The Public Prosecution and the competent court shall, as the case may be, order the identification, tracing, and valuation of the Funds, Proceeds and Means under suspicion, or their equivalent value, or order their Seizing or Freezing, if they were the result of or linked to the Crime, and that is without prior notice to the owner, and shall issue a travel ban for the owner until the completion of the investigation or trial.
Article (48)
The public prosecution and the competent court shall, as the case may be, appoint whomever they deem suitable to manage the seized and frozen Funds, Proceeds and Means or those subject to Confiscation, and permit them to dispose or sell the Funds, Proceeds and Means in public auction, even before the issuance of the verdict, if necessary, if they are concerned about their depreciation or devaluation over time. The amount of the sale shall be deposited in the State’s treasury in the event of a final verdict of conviction. Such funds shall remain within the limits of their value for any rights legitimately determined to any bona fide third parties.
Section 2 Investigation Procedures
Article (49)
- The public prosecution and Law Enforcement Authorities shall, when launching an investigation and collecting evidence for a Predicate Offense, when necessary, take into consideration the extent to which the financial aspects of the criminal activity are connected with Money Laundering, Financing of Terrorism, or the Financing of Illegal Organisations, in order to determine the scope of the crime, identify and track proceeds and any other funds that may be subject to confiscation and strengthen evidence of the crime.
- The public prosecution shall request the opinion of the FIU on the notifications received in relation to Money Laundering, Financing of Terrorism or Financing of Illegal Organisations cases.
- Law Enforcement Authorities shall be responsible for receiving, and following up on, the results of STR analysis from the FIU and for gathering the related evidence.
- The public prosecution and Law Enforcement Authorities shall promptly identify, trace and seize Funds, Proceeds and Means that might be subject to Confiscation and linked to the Crime.
- Law Enforcement Authorities shall obtain the information directly from Competent Authorities, even if it is subject to banking secrecy or professional confidentiality, as they deem fit so they can perform their duties in detecting the Crime or its perpetrator(s) and collecting evidence about them, and the authority, who is the recipient of the information request, shall execute the request without delay.
- The public prosecution and Law Enforcement Authorities shall, when launching an investigation and collecting evidence for a Predicate Offense, when necessary, take into consideration the extent to which the financial aspects of the criminal activity are connected with Money Laundering, Financing of Terrorism, or the Financing of Illegal Organisations, in order to determine the scope of the crime, identify and track proceeds and any other funds that may be subject to confiscation and strengthen evidence of the crime.
Chapter 7 International Cooperation
Section 1 General Provisions for International Cooperation
Article (50)
Competent Authorities, for the purpose of implementation of International Cooperation requests on the Crime, to conclude, negotiate and sign agreements in a timely manner with foreign counterpart authorities, in a manner that does not contradict the legislation in force in the State
Article (51)
Competent authorities shall give priority to all International cooperation requests related to the Crime and implement them expeditiously through clear and secure mechanisms and channels. The confidentiality of the information received shall be subject to the request, if required. If the confidentiality of the information cannot be kept, then the requesting authority shall be informed of the matter.
Article (52)
Within the scope of implementing the provisions of the Decretal-Law and this Decision, an International Cooperation request regarding the Crime shall not be rejected on the basis of any of the following:
- The crime involves financial, tax or customs matters.
- Secrecy provisions are binding upon Financial Institutions and DNFBPs, providing that they do not violate the applicable laws in the State, unless the relevant information was obtained under the circumstances where professional legal privileges or professional secrecy apply.
- The crime is political or related to a political crime.
- The request is connected with a crime subject of an ongoing investigation or prosecution in the State, unless the request impedes the investigation or the prosecution.
- The act, on which the assistance is based, does not constitute a crime in the State, or the act does not have similar attributes to a crime set out in the State, unless it involves constraining, coercive measures or its in accordance with the applicable laws in the State.
- The criminal act in the State is listed under a different name or description or that its structure varies from that of the requesting country.
- The crime involves financial, tax or customs matters.
Section 2 Exchange of Information between Competent Authorities and Counterparts
Article (53)
In accordance with the legislation and agreements in force in the State or on the condition of reciprocity, the competent authorities shall:
- Execute requests received from any foreign entity and exchange information on the Crime at the appropriate speed with foreign counterparts, and obtain any other requested information on its behalf, even if such requests change in nature, whether spontaneously or upon request.
- Provide feedback to foreign counterparts on the use of the information obtained and the extent to which it was beneficial, if requested to do so.
- Obtain a declaration or undertaking from the foreign counterpart that international cooperation information will only be used for the intended purpose, unless prior approval has been obtained.
- Use international cooperation information obtained for the intended purpose, unless the foreign counterpart grants its approval for use for another purpose.
- Refuse to provide information in the event that it is not effectively protected by the foreign counterpart requesting international cooperation.
- Execute requests received from any foreign entity and exchange information on the Crime at the appropriate speed with foreign counterparts, and obtain any other requested information on its behalf, even if such requests change in nature, whether spontaneously or upon request.
Article (54)
- The Competent Authorities commit to provide the means for international cooperation with respect to the basic information and Beneficial Owners of companies and legal arrangements, whereby such cooperation shall include the following:
- Facilitating the access of foreign competent authorities to basic information held by the registries of companies and legal arrangements;
- Exchanging information on legal arrangements and the shareholders in companies;
- Using their powers to obtain all the information on Beneficial Owners on behalf of foreign counterparts.
- Facilitating the access of foreign competent authorities to basic information held by the registries of companies and legal arrangements;
- The Competent Authorities shall supervise the implementation quality for the international cooperation requests received from other countries in relation to basic company information and Beneficial Ownership for companies and legal arrangements, as well as the requests for international cooperation relating to determining the location of the Beneficial Owner from companies abroad.
- The Competent Authorities commit to provide the means for international cooperation with respect to the basic information and Beneficial Owners of companies and legal arrangements, whereby such cooperation shall include the following:
Article (55)
In accordance with the legislation in force in the State, and the provisions of the agreements to which they are a party, and on the condition of reciprocity, the Supervisory Authorities of the Financial Institutions shall:
- Exchange information relating to the appropriate Crime that it maintains and which is available to it directly or indirectly, with foreign counterparts, regardless of their nature, and consistent with the relevant international financial control principles relevant to anti money-laundering and combating the financing of terrorism applicable to each of them, including information on:
- The regulatory framework of the financial sectors and the general information related to them.
- Preventive financial control measures such as information related to the activities and works of financial institutions, their real beneficiaries, their management, and information of merit and eligibility.
- Internal policies of financial institutions in the field of combatting the Crime, CDD information of Customers, and of information related to accounts and transactions.
- The regulatory framework of the financial sectors and the general information related to them.
- Obtaining prior approval of the foreign supervisory authority, where the information is required for transmission or use, other than for the intended purpose, and to informing it of the matter in the event of disclosure of such information whenever it is the result of a legal obligation.
- Requesting or facilitating access to information on behalf of the foreign supervisory authority, for the purposes of enhancing supervision on the financial group.
- Exchange information relating to the appropriate Crime that it maintains and which is available to it directly or indirectly, with foreign counterparts, regardless of their nature, and consistent with the relevant international financial control principles relevant to anti money-laundering and combating the financing of terrorism applicable to each of them, including information on:
Article (56)
Without prejudice to the provisions of the treaties and conventions to which the State is a party and subject to reciprocity; and without prejudice to the legislation in force in the State, Law Enforcement Authorities, in coordination with the Competent Authority, may:
- Exchange information held by it, either directly or indirectly, with foreign counterparts for purposes of investigation or collection of inferences relating to Crime, identification and tracking of proceeds and intermediaries.
- Use the powers conferred upon it in accordance with the legislation in force in the State to conduct investigations and obtain information on behalf of the foreign counterpart, and coordinate the formation of bilateral or multilateral teams to conduct joint investigations.
- Exchange information held by it, either directly or indirectly, with foreign counterparts for purposes of investigation or collection of inferences relating to Crime, identification and tracking of proceeds and intermediaries.
Section 3 International Legal Assistance
Article (57)
Upon request from another judiciary authority in another country, with whom there is a valid agreement in place with the State, or on the basis of reciprocity concerning any acts that are punishable as per the applicable laws in the State, the competent judiciary authority shall provide legal assistance in investigations, trials or measures linked to the Crime and it shall order the following:
- Locating, Freezing, Seizing or Confiscation of Funds, Proceeds or Means that have been used, or intended for use in the Crime, or their equivalent. The death or anonymity of the suspect shall not prevent undertaking such measures.
- Any other measures applicable in accordance with the enforceable laws in the State, including the provision of records maintained by Financial Institutions, DNFBPs or NPOs, the search of persons and buildings, gathering statements from witnesses, collecting evidence, using investigative methods such as Undercover Operations, wiretapping, communications, obtaining electronic data and information and Controlled Delivery.
- Extradition and repatriation of persons and things related to the Crime in accordance with the laws applicable in the State.
- Locating, Freezing, Seizing or Confiscation of Funds, Proceeds or Means that have been used, or intended for use in the Crime, or their equivalent. The death or anonymity of the suspect shall not prevent undertaking such measures.
Article (58)
It is permitted to recognise any judgement or judicial order that provides for the confiscation of Funds, Proceeds or Means relating to Money Laundering, the Financing of Terrorism or the Financing of Illegal Organisations issued by a competent court or judiciary authority in another country, with whom there is an attested agreement in place with the State.
Article (59)
Taking into consideration the applicable laws in the State, the implementation of the judgement or judicial order mentioned in Article (58) of the present Decision shall not contradict a judgment or order previously issued by a court in the State, there shall not be an ongoing charge in the State regarding the same judgment issued from the requesting country, and the request shall also include the following documents and information:
- An attested copy of the judgment or judicial order for Confiscation along with the law on which it is based, and a statement of the reasons for issuing the confiscation order, if not mentioned in the judgment or the order itself.
- A statement establishing that the sentenced person has been duly summoned and represented, and has been able to defend himself.
- A document confirming that the judgement or judicial order is enforceable and not subject to appeal through ordinary methods.
- Description of the Funds, Proceeds and Means for Confiscation, their estimated value, their potential location and information regarding any persons who might be holding or possessing these funds.
- Statement of the amount to be repatriated from the funds for Confiscation.
- Any information relating to third party rights on the Funds, Proceeds or Means.
- Statement of the procedures undertaken in the requesting country to protect bona fide third parties.
- An attested copy of the judgment or judicial order for Confiscation along with the law on which it is based, and a statement of the reasons for issuing the confiscation order, if not mentioned in the judgment or the order itself.
Section 4 Implementation of the Security Council Resolutions
Article (60)
Every natural or legal person shall immediately comply with the instructions issued by the Competent Authorities in the State concerning the implementation of the resolutions issued by UN Security Council under Chapter VII of the Charter of the United Nations regarding the prevention and suppression of terrorism and Terrorism Financing, and the prevention and suppression of the proliferation of Weapons of Mass Destruction and its financing, and any other related decisions.
Chapter 8 Final Provisions
Article (61)
Any provision that contradicts or violates the provisions of the present Decision shall be considered void.
Article (62)
The present Decision shall come into force as of the date of its issuance and shall be published in the Official Gazette.
Procedures for Anti-Money Laundering and Combating the Financing of Terrorism and Illicit Organizations
CBUAE-BOD 59/4/2019 Effective from 13/7/2019Central Bank Board of Directors’ Decision No. 59/4/2019 Regarding Procedures for Anti-Money Laundering and Combating the Financing of Terrorism and Illicit Organizations
CBUAE-BOD 59/4/2019 Effective from 13/7/2019Chairman of the Board,
Having perused the provisions of the Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities;
Circular No. 24/2000 - Regulation concerning Procedures for Anti-Money Laundering and its amendments.
The Central Bank's Board of Directors has issued the following resolution:
Article (1):
Definitions
UAE: United Arab Emirates.
Decree Federal Law: Decree Federal Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations.
Executive Regulation: Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree Federal Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations.
The Central Bank: Central Bank of the UAE.
Financial Institution: Anyone, licensed or registered by the Central Bank, who conducts one or several of the financial activities or operations, defined in Article (2) of the Executive Regulation, of or on behalf of a customer.
Article (2):
Financial Institution and its concerned persons must comply with the requirements mentioned in the Decree Federal Law, the Executive Regulation, instructions, guidelines and notices issued by the Central Bank relating to implementation of the Decree Federal Law and the Executive Regulation.
Article (3):
The Central Bank shall supervise and examine, periodically or unexpectedly, without prior notice to the Financial Institution, to verify the Financial Institution’s compliance with the Decree Federal Law, the Executive Regulation, relevant instructions, guidelines and notices issued by the Central Bank and shall identify any violations resulting from the examination.
The Central Bank shall request all information and documents it deems necessary for the purpose of supervision and verification from the Financial Institution or its employees.
Article (4):
Without prejudice to any of the sanctions or measures contained in any other legislation, the Central Bank may, upon the violation by any Financial Institution of any of the provisions referred to in Article (2) of this Decision, impose any of the administrative sanctions specified in the Decree Federal Law.
Article (5):
The violator may appeal against the decision on the violation, in accordance with the procedures prescribed by the Central Bank in this regard.
Article (6):
The Central Bank may publish its administrative sanctions in the various means of publication.
Article (7):
Circular No. 24/2000 - Regulation concerning Procedures for Anti-Money Laundering and its amendments shall be canceled.
Article (8):
This Decision shall be communicated to whomsoever is concerned for implementation, and shall be published in the Official Gazette in both Arabic and English.
Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations Guidelines for Financial Institutions
Effective from 13/7/2023Part I—Overview
1. Introduction
1.1 Purpose and Scope
The purpose of these Anti-Money Laundering and Combating the Financing of Terrorism and the Financing of Illegal Organisations Guidelines for Financial Institutions (FIs) (Guidelines) is to provide guidance and assistance to supervised institutions that are FIs, in order to assist their better understanding and effective performance of their statutory obligations under the legal and regulatory framework in force in the United Arab Emirates (UAE or State).
These Guidelines have been prepared as a joint effort between the Supervisory Authorities of the UAE, and set out the minimum expectations of the Supervisory Authorities regarding the factors that should be taken into consideration by each of the supervised financial institutions which fall under their respective jurisdictions, when identifying, assessing and mitigating the risks of money laundering (ML), the financing of terrorism (FT), and the financing of illegal organisations.
Nothing in these Guidelines is intended to limit or otherwise circumscribe additional or supplementary guidance, circulars, notifications, memoranda, communications, or other forms of guidance or feedback, whether direct or indirect, which may be published on occasion by any of the Supervisory Authorities in respect of the supervised institutions which fall under their respective jurisdictions, or in respect of any specific supervised institution.
Finally, it should be noted that, guidance on the subject of the United Nations Targeted Financial Sanctions (TFS) regime, and the related Cabinet Decision No. (74) of 2020 Regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions On the Suppression and Combating of Terrorism, Terrorists Financing & Proliferation of Weapons of Mass Destruction, and Related Resolutions is outside of the scope of these Guidelines.
1.2 Applicability
Unless otherwise noted, these Guidelines apply to all Financial Institutions, and the members of their boards of directors, management and employees, established and/or operating in the territory of the UAE and their respective Financial and Commercial Free Zones, whether they establish or maintain a Business Relationship with a Customer, or engage in any of the financial activities and/or transactions or the trade and/or business activities outlined in Articles (2) and (3) of 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.
Specifically, they are applicable to all such natural and legal persons in the following categories:
• Banks, finance companies, exchange houses, money service businesses (including hawaladar or other monetary value transfer services);
• Insurance companies, agencies, and brokers;
• Securities and commodities brokers, dealers, advisors, investment managers;
• Virtual asset service providers (VASPs);
• Other financial institutions not mentioned above.
1.3 Legal Status
Article 44.11 of 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.”
As such, these Guidelines do not constitute additional legislation or regulation, and are not intended to set legal, regulatory, or judicial precedent. They are intended rather to be read in conjunction with the relevant laws, cabinet decisions, regulations and regulatory rulings which are currently in force in the UAE and their respective Free Zones, and supervised institutions are reminded that the Guidelines do not replace or supersede any legal or regulatory requirements or statutory obligations. In the event of a discrepancy between these Guidelines and the legal or regulatory frameworks currently in force, the latter will prevail. Specifically, nothing in these Guidelines should be interpreted as providing any explicit or implicit guarantee or assurance that the Supervisory or other Competent Authorities would defer, waive, or refrain from exercising their enforcement, judicial, or punitive powers in the event of a breach of the prevailing laws, regulations, or regulatory rulings.
These Guidelines, and any lists and/or examples provided in them, are not exhaustive and do not set limitations on the measures to be taken by supervised institutions in order to meet their statutory obligations under the legal and regulatory framework currently in force. As such, these Guidelines should not be construed as legal advice or legal interpretation. Supervised institutions should perform their own assessments of the manner in which they should meet their statutory obligations, and they should seek legal or other professional advice if they are unsure of the application of the legal or regulatory frameworks to their particular circumstances.
1.4 Organisation of the Guidelines
These Guidelines are organized into five (5) parts, roughly corresponding to the following major themes:
Part I—Overview (including background information on the UAE’s AML/CFT legislative and strategy framework, and highlights of key provisions of the law and regulations affecting Financial Institutions);
Part II—Identification and Assessment of ML/FT Risks;
Part III—Mitigation of ML/FT Risks;
Part IV—AML/CFT Compliance Administration and Reporting (including guidance on governance, suspicious transaction reporting, and record-keeping);
The various sections and sub-sections of each part are organized according to subject matter. In general, each section or subsection includes references to the articles of the AML-CFT Law and/or the AML-CFT Decision to which it pertains. While it has been kept to a minimum, users may find that there are instances of repetition of some content throughout various sections of the Guidelines. This has been done in order to ensure that each section or sub-section pertaining to a specific subject matter is comprehensive, and to minimize the need for cross-referencing between sections.
In some cases, the requirements or provisions of specific sections of the relevant legal and regulatory frameworks are deemed sufficiently clear with regard to the statutory obligations of supervised institutions such that no additional guidance on those sections is provided for in these Guidelines. In other cases, guidance is provided with regard to subjects which are not covered explicitly in the AML-CFT Law or the AML-CFT Decision, but which are nevertheless addressed either implicitly or by reference to international best practices.
In certain instances in which there are meaningful differences between the relevant legal and regulatory framework currently in force and previous laws or regulations, or in which there are differences in specific regulatory requirements between various Supervisory Authorities, the Guidelines may or may not highlight these differences. In the event of such differences or discrepancies, supervised institutions seeking further clarification on matters related to those sections are invited to contact their relevant Supervisory Authority through the established channels.
It is the Supervisory Authorities’ intention to update or amend these Guidelines from time to time, as and when it is deemed appropriate. Supervised institutions are reminded that these Guidelines are not the only source of guidance on the assessment and management of ML/FT risk, and that other bodies, including international organisations such as FATF,
MENAFATF and other FATF-style regional bodies (FSRBs), the Egmont Group, and others also publish information that may be helpful to them in carrying out their statutory obligations. It is the sole responsibility of supervised institutions to keep apprised and updated at all times regarding the ML/FT risks to which they are exposed, and to maintain appropriate risk identification, assessment, and mitigation programmes, and to ensure their responsible officers, managers and employees are adequately informed and trained on the relevant policies, processes, and procedures.
Text from the AML-CFT and the AML-CFT Decision are quoted, or otherwise summarized or paraphrased, from time to time throughout these Guidelines. For the sake of convenience, unless specifically noted to the contrary, all references in the text to the term “financing of terrorism” also encompass the financing of illegal organisations. In general, capitalized terms in the text of these Guidelines have the meanings provided in the Glossary of Terms (see Appendix 11.1). However, in the event of any inconsistency or discrepancy between the text or definitions provided for in the Law and/or the Cabinet Decision and such quotations, summaries or paraphrases, or such defined terms, the former shall prevail.
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.
3. Highlights of Key Provisions Affecting Financial Institutions
The AML-CFT Law and the AML-CFT Decision contain numerous provisions setting out the rights and obligations of supervised institutions, including Financial Institutions, as well as their senior managers and employees. This section highlights some of the key provisions affecting FIs that are of immediate concern. FIs are reminded that it is their sole responsibility to adhere to all provisions of the AML-CFT Law, the AML-CFT Decision, and all regulatory notices, rulings and circulars affecting them.
3.1 Summary of Minimum Statutory Obligations of Supervised Institutions
The AML-CFT Law and the AML-CFT Decision set out the minimum statutory obligations of supervised institutions as follows:
• To identify, assess, understand risks (AML-CFT Law Article 16.1(a), AML-CFT Decision Article 4.1);
• To define the scope of and take necessary due diligence measures (AML-CFT Law Article 16.1(b), AML-CFT Decision Article 4.1(a) and 2);
• To appoint a compliance officer, with relevant qualification and expertise and in line with the requirements of the relevant Supervisory Authority (AML-CFT Decision Article 21, 44.12);
• To put in place adequate management and information systems, internal controls, policies, procedures to mitigate risks and monitor implementation (AML-CFT Law Article 16.1(d), AML-CFT Decision Article 4.2(a));
• To put in place indicators to identify suspicious transactions (AML-CFT Law Article 15, AML-CFT Decision Article 16);
• To report suspicious activity and cooperate with Competent Authorities (AML-CFT Law Article 9.1, 15, 30, AML-CFT Decision Article 13.2, 17.1, 20.2);
• To promptly apply directives of Competent Authorities for implementing UN Security Council decisions under Chapter 7 of the UN Convention for the Prohibition and Suppression of the FT and Proliferation (AML-CFT Law Article 16.1(e), AML-CFT Decision Article 60);
• To maintain adequate records (AML-CFT Law Article 16.1(f), AML-CFT Decision Article 7.2, 24).
Specific guidance on these and other provisions of the AML-CFT Law and the AML-CFT Decision is provided in the following sections.
3.2 Confidentiality and Data Protection
(AML-CFT Law Article 15; AML-CFT Decision Articles 17.2, 21.2, 31.3, 39)
Financial Institutions are obliged to report to the UAE’s Financial Intelligence Unit (FIU) when they have reasonable grounds to suspect a transaction or funds representing all or some proceeds, or suspicion of their relationship to a Crime (see Section 7, Suspicious Transaction Reporting). In reporting their suspicions, they must maintain confidentiality with regard to both the information being reported and to the act of reporting itself, and make reasonable efforts to ensure the information and data reported are protected from access by any unauthorised person.
It should be noted that the confidentiality requirement does not pertain to communication within the FI or its affiliated group members (foreign branches, subsidiaries, or parent company) for the purpose of sharing information relevant to the identification, prevention or reporting of a Crime. However, under no circumstances are FIs, or their managers or employees, permitted to inform a Customer or the representative of a Business Relationship, either directly or indirectly, that a report has been made, under penalty of sanctions (see Section 3.9, Sanctions against Persons Violating Obligations). This is the so-called “tipping off” requirement. This also extends to any related information that might be provided to the FIU or information that is being requested by the FIU.
FIs are not permitted to object to the statutory reporting of suspicions on the grounds of Customer confidentiality or data privacy, under penalty of sanctions. Moreover, data protection laws include provisions that allow the FI to report to the authorities. (see Section 3.9, Sanctions against Persons Violating Obligations).
3.3 Protection against Liability for Reporting Persons
(AML-CFT Law Article 27; AML-CFT Decision Article 17.3)
The AML-CFT Law and the AML-CFT Decision provide Financial Institutions, as well as their board members, employees and authorised representatives, with protection from any administrative, civil or criminal liability resulting from their good-faith performance of their statutory obligation to report suspicious activity to the FIU. This protection is also applicable if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred.
3.4 Statutory Prohibitions
(AML-CFT Law Article 16.1(c); AML-CFT Decision Articles 13.1, 14, 35.4, 38)
Financial Institutions are prohibited from the following activities:
• Establishing or maintaining any Customer or Business Relationship, conducting any financial or commercial transactions, keeping any accounts under an anonymous or fictitious name or by pseudonym or number;
• Establishing or maintaining a Business Relationship or executing any transaction in the event they are unable to complete adequate risk-based CDD measures in respect of the Customer for any reason;
• Dealing in any way with Shell Banks, whether to open (correspondent) bank accounts in their names, or to accept funds or deposits from them;
• Invoking banking, professional or contractual secrecy as a pretext for refusing to perform their statutory reporting obligation in regard to suspicious activity;
• Issuing or dealing in bearer shares or bearer share warrants.
3.5 Money Laundering
(AML-CFT Law Articles 2.1-3, 4, 29.3, AML-CFT Decision Article 1)
The AML-CFT Law defines money laundering as engaging in any of the following acts wilfully, having knowledge that the funds are the proceeds of a felony or a misdemeanour (i.e., a predicate offence):
• Transferring or moving proceeds or conducting any transaction with the aim of concealing or disguising their Illegal source;
• Concealing or disguising the true nature, source or location of the proceeds as well as the method involving their disposition, movement, ownership of or rights with respect to said proceeds;
• Acquiring, possessing or using proceeds upon receipt;
• Assisting the perpetrator of the predicate offense to escape punishment.
Both the AML-CFT Law and the AML-CFT Decision define “funds” in a very broad sense as “assets in whatever form, whether tangible, intangible, movable or immovable including national currency, foreign currencies, documents or notes evidencing the ownership of those assets or associated rights in any forms including electronic or digital forms or any interests, profits or income originating or earned from these assets.” They likewise define “proceeds” as “funds generated directly or indirectly from the commitment of any crime or felony including profits, privileges, and economic interests, or any similar funds converted wholly or partly into other funds.”
Therefore, in order to be considered money laundering, it is not necessary for any of the above-stipulated acts to involve only money or monetary instruments per se, but any number of tangible or intangible assets such as, but not limited to:
• Funds bank or other financial accounts, including so-called virtual or crypto currencies;
• Financial instruments or securities, such as shares, bonds, notes, commercial paper, promissory notes, IOUs, share warrants, options, rights (including land rights), or other transferrable securities or bearer negotiable instruments;
• Contracts, loan instruments, titles, claims, insurance policies, or their assignment;
• Intellectual property (including but not limited to patents or registered trademarks), royalties, licenses, or the rights thereto;
• Physical property, including but not limited to commodities, land, precious metals and stones, motor vehicles or vessels, works of art, or any other goods exchanged as payment-in-kind.
The size or monetary value of the financial or commercial transaction, the timeframe during which it took place, and the nature of the funds or proceeds (whether in liquid funds or some other tangible or intangible asset) are irrelevant to the suspicion and reporting of a suspicious transaction.
The AML-CFT Law designates money laundering as a criminal offence. Its prosecution is independent of that of any predicate offence to which it is related or from which the proceeds are derived. The suspicion of money laundering is not dependent on proving that a predicate offence has actually occurred or on proving the illicit source of the proceeds involved, but can be inferred from certain information, including indicators or behavioural patterns.
According to the 2018 National Risk Assessment, professional third-party money laundering has been identified as one of the top ML/FT threats in the UAE.
3.6 Predicate Offences
The AML-CFT Law defines a predicate offence as “any act constituting an offence or misdemeanour under the applicable laws of the State whether this act is committed inside or outside the State when such act is punishable in both countries.” A predicate offence is therefore any crime, whether felony or misdemeanour, which is punishable in the UAE, regardless of whether it is committed within the State or in any other country in which it is also a criminal offence.
FATF has designated 21 (twenty-one) categories of predicate offences. Each of these categories of predicate offences has been criminalised in the legislative framework of the State. FIs are reminded that this is not an exhaustive list of predicate offences, but simply a convenient categorisation, since in the UAE according to the AML-CFT Law, even crimes that do not appear on this list, whether felonies or misdemeanours, can be predicate offences to money laundering.
Based on expert analysis of these categories conducted on behalf of the UAE’s Competent Authorities for the 2018 National Risk Assessment, the top (highest) threats to the State in relation to money laundering have been identified as: fraud, counterfeiting and piracy of products, illicit trafficking in narcotic drugs and psychotropic substances, and professional third-party money laundering.
Similarly, other (medium-high) threats of particular concern to the UAE in relation to money laundering have been identified as the categories of: insider trading and market manipulation, robbery and theft, illicit trafficking in stolen and other goods, forgery, smuggling (including in relation to customs and excise duties and taxes), tax crimes (related to direct taxes and indirect taxes), and terrorism (including terrorist financing).
While FIs should pay special attention to the most serious threats identified in the NRA and any topical risk assessment when performing their own ML/FT business risk assessments, they are reminded that their risk assessment operations should consider all categories of risk for applicability to their own particular circumstances.
3.7 Financing of Terrorism
(AML-CFT Law Articles 3.1, 4, 29.3, AML-CFT Decision Article 1)
The AML-CFT Law designates the financing of terrorism as a criminal offence, which is not subject to the statute of limitations. It defines the financing of terrorism as:
• Committing any act of money laundering, being aware that the proceeds are wholly or partly owned by a terrorist organisation or terrorist person or intended to finance a terrorist organisation, a terrorist person or a terrorism crime, even if it without the intention to conceal or disguise their illicit origin; or
• Providing, collecting, preparing or obtaining proceeds or facilitating their obtainment by others with intent to use them, or while knowing that such proceeds will be used in whole or in part for the commitment of a terrorist offense, or committing such acts on behalf of a terrorist organisation or a terrorist person while aware of their true background or purpose.
There are numerous risk factors that FIs should consider important when assessing their exposure to the risk of terrorist financing (see Section 4.1.1, Risk Factors), including geographic-, sector-, channel-, product-, service- and customer-specific risks.
In a 2019 report by MENAFATF, an assessment of the global threat posed by the financing of terrorism stated:
“The number, type, scope, and structure of terrorist actors and the global terrorism threat are continuing to evolve. Recently, the nature of the global terrorism threat has intensified considerably. In addition to the threat posed by terrorist organisations such as ISIL, Al-Qaeda and other groups, attacks in many cities across the globe are carried out by individual terrorists and terrorist cells ranging in size and complexity. Commensurate with the evolving nature of global terrorism, the methods used by terrorist groups and individual terrorists to fulfil their basic need to generate and manage funds is also evolving.
Terrorist organisations use funds for operations (terrorist attacks and pre-operational surveillance); propaganda and recruitment; training; salaries and member compensation; and social services. These financial requirements are usually high for large terrorist organisations, particularly those that aim to, or do, control territory. In contrast, the financial requirements of individual terrorists or small cells are much lower with funds primarily used to carry out attacks. Irrespective of the differences between terrorist groups or individual terrorists, since funds are directly linked to operational capability, all terrorist groups and individual terrorists seek to ensure adequate funds generation and management.”1
1 Social Media and Terrorism Financing: A joint project by Asia/Pacific Group on Money Laundering & Middle East and North Africa Financial Action Task Force, APG/MENAFATF, January 2019, p.4.
3.8 Financing of Illegal Organisations
(AML-CFT Law Articles 3.2, 4, 29.3, AML-CFT Decision Article 1)
Like the financing of terrorism, the AML-CFT Law designates the financing of illegal organisations as a criminal offence that is not subject to the statute of limitations. The Law defines the financing of illegal organisations as:
• Committing any act of money laundering, being aware that the proceeds are wholly or partly owned by an illegal organisation or by any person belonging to an illegal organisation or intended to finance such illegal organisation or any person belonging to it, even if without the intention to conceal or disguise their illicit origin.
• Providing, collecting, preparing, obtaining proceeds or facilitating their obtainment by others with intent to use such proceeds, or while knowing that such proceeds will be used in whole or in part for the benefit of an Illegal organisation or of any of its members, with knowledge of its true identity or purpose.
• When assessing their risk exposure to the financing of illegal organisations, FIs should pay special attention to the regulatory disclosure, accounting, financial reporting and audit requirements of organisations with which they conduct Business Relationships or transactions. This is particularly important where non-profit, community/social, or religious/cultural organisations are involved, especially when those organisations are based, or have significant operations, in jurisdictions that are unfamiliar or in which transparency or access to information may be limited for any reason.
3.9 The ML Phases
To identify, understand and accurately assess the ML/FT risks to which FIs are exposed at both the enterprise and business relationship levels, FIs should be aware of the three phases of money laundering. By determining for which ML/FT phase a certain product can be misused or the FI itself can be misused, will help the FI understand its specific inherent ML/FT risks. The paragraphs below describe the crime of money laundering as consisting of three distinct (though sometimes overlapping) phases:
Placement. In this phase, criminals attempt to introduce Funds or the Proceeds of Crime into the financial system using a variety of techniques or typologies (see Section 3.10, ML/FT Typologies).
Examples of placement transactions include the following:
• Blending of funds: Commingling of illegitimate funds with legitimate funds, such as placing the cash from illegal narcotics sales into cash-intensive, locally owned businesses. • Foreign exchange: Purchasing of foreign exchange with illegal funds. • Breaking up amounts: Placing cash in small amounts and depositing them into numerous bank accounts in an attempt to evade attention or reporting requirements. • Currency smuggling: Cross-border physical movement of cash or monetary instruments. • Loans: Repayment of legitimate loans using laundered cash.
Layering. Once the Funds or Proceeds are introduced, or placed, into the financial system, they can proceed to the next phase of the process; often, this is accomplished by placing the funds into circulation through formal financial institutions, and other legitimate businesses, both domestic and international.” In this layering phase, criminals attempt to disguise the illicit nature of the Funds or Proceeds of Crime by engaging in transactions, or layers of transactions, which aim to conceal their origin.
Examples of layering transactions include:
• Electronically moving funds from one country to another and dividing them into advanced financial options and/or markets; • Moving funds from one financial institution to another or within accounts at the same institution; • Converting the cash placed into monetary instruments; • Reselling high-value goods and prepaid access/stored value products; • Investing in real estate and other legitimate businesses; • Placing money in stocks, bonds or life insurance products; and • Using shell companies to obscure the ultimate beneficial owner and assets.
Integration. In this phase, criminals attempt to return, or integrate, their “laundered” Funds or the Proceeds of Crime back into the economy, or to use it to commit new criminal offences, through transactions or activities that appear to be legitimate.
A key objective for criminals engaged in money laundering—and therefore a key generic risk underlying the specific risks faced by FIs—is the exploitation of situations and factors (including products, services, structures, transactions, and geographic locations) which favour anonymity and complexity, thereby facilitating a break in the “paper trail” and concealment of the illicit source of the Funds.
Although the sizes of transactions related to the financing of terrorism and illegal organisations can be (much) smaller than those involved in money laundering operations, and some of the typologies and specific techniques used may differ, the overall principles and generic risks are the same. The terrorists and criminals involved in these acts attempt to exploit situations and factors favouring anonymity and complexity, in order to obscure and conceal the illicit source of the Funds, or the illicit destination or purpose for which they are intended, or both. FIs should remain careful that their services are not being used either directly or indirectly to facilitate Money Laundering or the Financing of Terrorism or Illegal Organisations in any of the three stages described above.
3.10 ML/FT Typologies
The methods used by criminals for money laundering, the financing of terrorism, and the financing of illegal organisations are continually evolving and becoming more sophisticated. It is therefore critical in combating these crimes for FIs to ensure that their personnel are kept up-to-date on the latest ML/FT trends and typologies.
There are numerous useful sources of research and information related to ML/FT typologies, including by the Supervisory Authorities, the FATF, MENAFATF and other FSRBs, the Egmont Group, and others. FIs should incorporate the regular review of ML/FT trends and typologies into their compliance training programmes (see Section 8.2, Staff Screening and Training), as well as into their risk identification and assessment procedures.
Examples of some of the key ML/FT typologies with which FIs should be familiar include (but are not limited to):
• Currency exchanges / cash conversion: used to assist with smuggling to another jurisdiction or to exploit low reporting requirements on currency exchange houses to minimize risk of detection – e.g., purchasing of travellers cheques to transport value to another jurisdiction. • Cash couriers / currency smuggling: concealed movement of currency to avoid transaction / cash reporting measures. • Structuring (smurfing): A method involving numerous transactions (deposits, withdrawals, transfers), often various people, high volumes of small transactions and sometimes numerous accounts to avoid detection threshold reporting obligations. • Use of credit cards, cheques, promissory notes, etc.: Used as instruments to access funds held in a financial institution, often in another jurisdiction. • Purchase of portable valuable commodities (gems, precious metals, etc.): A technique to purchase instruments to conceal ownership or move value without detection and avoid AML/CFT measures – e.g., movement of diamonds or gold to another jurisdiction. • Purchase of valuable assets (real estate, race horses, vehicles, etc.): Criminal proceeds are invested in high-value negotiable goods to take advantage of reduced reporting requirements to obscure the source of proceeds of crime. • Commodity exchanges (barter): Avoiding the use of money or financial instruments in value transactions to avoid AML/CFT measures - e.g., a direct exchange of heroin for gold bullion. • Use of wire transfers: to electronically transfer funds between financial institutions and often to another jurisdiction to avoid detection and confiscation. • Underground banking / unlicensed remittance services: Illegal mechanisms based on networks of trust used to remit monies, without the proper license or registration. Often work in parallel with the traditional banking sector and exploited by money launderers and terrorist financiers to move value without detection and to obscure the identity of those controlling funds. • Trade-based money laundering and terrorist financing: usually involves invoice manipulation and uses trade finance routes and commodities to avoid financial transparency laws and regulations. • Abuse of non-profit organizations (NPOs): May be used to raise terrorist funds, obscure the source and nature of funds and to distribute funds for terrorist activities. • Investment in capital markets: to obscure the source of proceeds of crime to purchase negotiable instruments, often exploiting relatively low reporting requirements. • Mingling (business investment): A key step in money laundering involves combining proceeds of crime with legitimate business monies to obscure the illegal source of the funds. • Use of shell companies/corporations: a technique to obscure the identity of persons controlling funds and exploit relatively low reporting requirements. • Use of offshore banks/businesses, including trust company service providers: to obscure the identity of persons controlling funds and to move monies away from interdiction by domestic authorities. • Use of nominees, trusts, family members or third parties, etc: to obscure the identity of persons controlling illicit funds. • Use of foreign bank accounts: to move funds away from interdiction by domestic authorities and obscure the identity of persons controlling illicit funds. • Identity fraud / false identification: used to obscure the identity of those involved in many methods of money laundering and terrorist financing. • Use “gatekeepers” professional services (lawyers, accountants, brokers, etc.): to obscure the identity of beneficiaries and the illicit source of funds. May also include corrupt professionals who offer ‘specialist’ money laundering services to criminals. • New Payment technologies: use of emerging payment technologies for money laundering and terrorist financing. Examples include cell phone-based remittance and payment systems. • Virtual assets: (VA) and related services have the potential to spur financial innovation and efficiency, but their distinct features also create new opportunities for money launderers, terrorist financiers, and other criminals to launder their proceeds or finance their illicit activities. FIs may refer to the FATF Recommendations that place AML/CFT requirements on Virtual Assets (VA) and Virtual Asset Service Providers (VASPs). The FATF has also issued a document on Guidance on Risk Based Approach to VAs and VASPs. FIs should be familiar with the AML/CFT risks of dealing with VAs and VASPs in accordance with the FATF guidance. • Life insurance products can be for instance be used for money laundering when they have saving or investment features which may include the options for full or partial withdrawals or early surrenders. • General insurance product: there are several cases where the early cancellation of policies with return of premium has been used to launder money. ○ A number of policies entered into by the same insurer/intermediary for small amounts and then cancelled at the same time; ○ Return premium being credited to an account different from the original account; ○ Requests for return premiums in currencies different from the original premium; ○ Regular purchase and cancellation of policies. • Overpayment of premiums: arranging for excessive numbers or excessively high values of insurance reimbursements by cheque or wire transfer to be made, in this method, the launderer may arrange for insurance of the legitimate assets and ‘accidentally’ but on a recurring basis, significantly overpay his premiums and request a refund for the excess.
The UAE FIU releases reports on Trends and Typologies of Money Laundering which is an analysis based on the information extracted from the suspicious transaction reports (STRs) filed by reporting entities. This is a very useful resource for FIs for understanding the prevalent typologies of ML and FT crimes as well as getting information on the latest trends on these crimes in the country. This report is released on the FIU’s GoAML System for STR reporting and therefore, is accessible to registered users of this system.
Links to some other official sources, which may be useful in keeping up-to-date with regard to ML/FT typologies, may be found in Appendix 11.2.
3.11 Sanctions against Persons Violating Reporting Obligations
(AML-CFT Law Articles 15, 24, 25)
The AML-CFT Law provides for the following sanctions against any Financial Institutions, their managers or their employees, who fail to perform, whether purposely or through gross negligence, their statutory obligation to report a suspicion of money laundering or the financing of terrorism or of illegal organisations:
• Imprisonment and fine of no less than AED100,000 and no more than AED1,000,000; or
• Any of these two sanctions.
According to Article 15 of the AML-CFT Law, the requirement to report is in the case of suspicion or reasonable grounds to suspect a Crime. It should also be noted that the transactions or funds that are the subject of the suspicion may represent only part of the proceeds of the criminal offence, regardless of their value.
Likewise, the AML-CFT Law provides for sanctions against anyone who warns or notifies a person of a suspicious transaction report or reveals that a transaction is under review or investigation by the Competent Authorities, as follows:
• Imprisonment for no less than six months and a penalty of no less than AED100,000 and no more than AED500,000; or
• Any of these two sanctions.
Part II—Identification and Assessment of ML/FT Risks
4. Identification and Assessment of ML/FT Risks
(AML-CFT Law Article 16.1; AML-CFT Decision Article 4.1)
Both the AML-CFT Law and the AML-CFT Decision provide that FIs may utilize a risk-based approach with respect to the identification and assessment of ML/FT risks.
FIs are obliged to assess and to understand the ML/FT risks to which they are exposed, and how they may be affected by those risks. Specifically, the AML-CFT Law provides that they shall:
“…continuously assess, document, and update such assessment based on the various risk factors established in the Implementing Regulation of this Decree-Law and maintain a risk identification and assessment analysis with its supporting data to be provided to the Supervisory Authority upon request.”
Furthermore, the AML-CFT Decision charges supervised institutions with:
“…Documenting risk assessment operations, keeping them up to date on on-going bases and making them available upon request.”
Guidance on these subjects is provided in the following sections.
4.1 Risk-Based Approach (RBA)
A risk-based approach (RBA) is central to the effective implementation of the AML/CFT legislation. It means that FIs identify, assess, and understand the ML/TF risks to which they are exposed, and implement the most appropriate mitigation measures. An RBA requires financial institutions to have systems and controls that are commensurate with the specific risks of money laundering and terrorist financing facing them. Assessing this risk is, therefore, one of the most important steps in creating a good AML/CFT compliance program and will enable FIs to focus their resources where the risks are higher. In this regard, FIs can take into account their business nature, size and complexity.
(AML-CFT Law Article 16.1; AML-CFT Decision Article 4.1-3)
Implicit in both the AML-CFT Law and the AML-CFT Decision is the well-established concept of a risk-based approach (RBA) to the identification and assessment of ML/FT risks. Specifically, the AML-CFT Law states that FIs should “identify crime risks within (their) scope of work” and should update their risk assessments on the basis of the various risk factors set out in the AML-CFT Decision. Likewise, the AML-CFT Decision states that FIs’ identification, assessment and understanding of the risks should be carried out “in concert with their business nature and size,” and that various risk factors should be considered in determining the level of mitigation required. The AML-CFT Decision further provides that enhanced due diligence should be performed in cases where high risks are identified, while simplified due diligence may be performed in certain cases where low risk is identified, unless there is a suspicion of ML/FT.
An RBA to AML/CFT means that FIs should identify, assess and understand the ML/TF risks to which they are exposed and take AML/CFT measures commensurate to those risks in order to mitigate them effectively. This will require an understanding of the ML/TF risk faced by UAE (national risks), risks by the sector and the FI as well as specific products and services, customer base, the capacity in which customers are operating, jurisdictions in which they operate , the delivery channel and the effectiveness of risk controls put in place.
The use of an RBA thus allows FIs to allocate their resources more efficiently and effectively, within the scope of the national AML/CFT legislative and regulatory framework, by adopting and applying preventative measures that are targeted at and commensurate with the nature of risks they face.
While there are limits to any risk-management approach, and no RBA can be considered as completely failsafe; there may be occasions where an FI has taken all reasonable measures to identify and mitigate ML/TF risks, but it is still used for ML/TF in isolated instances. FIs should nevertheless understand that a risk-based approach is not a justification for ignoring certain ML/FT risks, nor does it exempt them from taking reasonable and proportionate mitigation measures, even for risks that are assessed as low. Their statutory obligations require them to identify, assess and understand the level of (inherent) risks presented by their (types of) customers, products and services, transactions, geographic areas and delivery channels, and to be in a position to apply sufficient AML/CFT mitigation measures on a risk-appropriate basis at all times.
In order to do so, they should identify and assess their exposure to ML/FT risks on the basis of a variety of risk factors (see Section 4.1, Risk Factors), some of which are related to the nature, size, complexity and operational environment of their businesses, and others of which are customer- or relationship-specific. Furthermore, they should take reasonable and proportionate risk mitigation measures based on the severity of the risks identified.
Conducting an ML/TF business risk assessments can assist FIs to understand their risk exposure and the areas they should give priority in combating ML/FT. The extent of business-wide risks to which an FI is exposed may require different levels of AML/CFT resources and mitigation strategies.
The following picture is a schematic overview of the RBA process from an ML/TF business risk assessments to developing policies, procedures and measures to CDD and the reporting of suspicious transactions.
4.1.1 Assessing Business-wide Risks
(AML-CFT Law Article 16.1; AML-CFT Decision Article 4.1)
An important first step in applying an RBA is to identify, assess and understand the ML/FT risks by way of an ML/FT risk assessment of the entire business. The purpose of such an ML/FT business risk assessment is to improve the effectiveness of ML/FT risk management, by identifying the inherent ML/FT risks faced by the enterprise as a whole, determining how these risks are effectively mitigated through internal policies, procedures and controls, and establishing the residual ML/FT risks and any gaps in the controls that should be addressed.
Thus, an effective ML/TF business risk assessment can allow FIs to identify gaps and opportunities for improvement in their framework of internal AML/CFT policies, procedures and controls, as well as to make informed management decisions about risk appetite, allocation of AML/CFT resources, and ML/FT risk-mitigation strategies that are appropriately aligned with residual risks.
The first step of conducting an ML/TF business risk assessment for FIs is to identify, assess and understand the inherent ML/FT risks (i.e., the risks that an FI is exposed to if there were no control measures in place to mitigate them) across all business lines and processes with respect to the following risk factors: customers, products, services and transactions, delivery channels, geographic locations, and any other risk factors.
With the inherent risks as a basis, the FI can determine the nature and intensity of risk mitigating controls to apply to the inherent risks. The level of inherent ML/FT risks influence the kinds and levels of AML/CFT resources and mitigation strategies which FIs require to put in place. The assessment of inherent ML/FT risks and of the effectiveness of the risk mitigation measures will result in a residual risk assessment, i.e., the risks that remain when effective control measures are in place. In case the residual risk falls outside the risk appetite of the FI, additional control measures will need to be implemented to ensure that the level of ML/FT risk is acceptable to the FI.
FIs may utilise a variety of models or methodologies to analyse their risks, in keeping with the nature and size of their businesses. FIs should decide on both the frequency and methodology of an ML/FT business risk assessment, including baseline and follow-up assessments, that are appropriate to their particular circumstances, taking into consideration the nature of the inherent and residual ML/FT risks to which they are exposed, as well as the results of the NRA and Topical Risk Assessments. In most cases, FIs should consider performing the ML/FT business risk assessment at least annually; however assessments that are more frequent or less frequent may be justified, depending on the particular circumstances. They should also decide on policies and procedures related to the periodic review of their ML/TF business risk assessment methodology, taking into consideration changes in internal or external factors. These decisions should be documented, approved by senior management, and communicated to the appropriate levels of the organisation.
As part of the model or methodology, FIs should consider including in their ML/FT risk assessment the following elements:
• Likelihood or probability of occurrence of identified inherent risks;
• Timing of identified inherent risks;
• Impact on the organisation of identified inherent risks.
The result of an effective ML/FT business risk assessment will be the classification of identified risks into different categories, such as high, medium, low, or some combination of those categories (such as medium-high, medium-low). Such classifications may assist FIs to prioritise their ML/FT risk exposures more effectively, so that they may determine the appropriate types and levels of AML/CFT resources needed, and adopt and apply reasonable and risk-proportionate mitigation measures.
4.1.2 Risk Factors
As part of the business-wide ML/TF risk assessment, a proper identification of risk factors is crucial to the effective assessment of ML/FT risk. Risks will often occur as combinations of these risk factors. A risk can for instance occur because of the interrelationship between a customer and the jurisdictions where the customer is from or is active, or because of the connection between a product and the delivery channel.
Identified risk factors are used for the accurate categorisation of inherent risks, as well as for the application of appropriate mitigation measures. At the enterprise level, this includes adopting and applying adequate policies, procedures, and controls to business processes (see Section 5.1, Internal Policies, Controls and Procedures). The policies, procedures, and controls will in turn address the risks at the individual customer level, including assigning appropriate risk classifications to customers and applying due diligence measures that are commensurate with the identified risks (see Section 6, Customer Due Diligence).
The AML-CFT Decision outlines several risk factors which FIs must consider, when identifying and assessing their ML/FT risk exposure. FIs may also consider a wide array of additional risk factors, utilising various sources, such as:
• ML/FT red-flag indicators;
• Input and information from relevant internal sources, including the designated AML/CFT compliance officer;
• Information from national sources, including the results of the NRA or any Topical Risk Assessment with regard to ML/FT trends and sectoral threats and notices or circulars from the relevant Supervisory Authorities;
• Information from publications of relevant international organisations, such as FATF, MENAFATF and other FSRBs, the Egmont Group, UNODC, and others. (Links to some of these sources may be found in Appendix 11.2.)
In keeping with the ever-evolving nature of ML/FT risks, and in order to ensure that FIs implement a model for conducting the ML/TF business risk assessment that is appropriate to the nature and size of their businesses, FIs should continuously update the risk factors which they consider, in order to reflect new and emerging ML/FT risks and typologies.
A good practice to assess the inherent risk factors, is for FIs to formulate risk scenarios and assess the likelihood that a scenario occurs and the impact should a scenario materialize. The likelihood can be assessed based on the number of times per year that a risk scenario can occur. The impact can be assessed based on the possible financial and reputational effects that can result if a scenario indeed occurs. In this way, the FI can determine the inherent risks of a risk factor.
When assessing the inherent risks, an FI should make an inventory of the customers it services, the products and services it offers, define the scope of business areas to assess, including business units, legal entities, divisions, countries and regions. For this, an FI should make use of up-to-date quantitative and qualitative information on for instance, the types and number of customers, the volume of operations for the types of customers, volume of business per product and services and geographic locations.
Examples with regard to some of the major risk factors that should be taken into account by FIs when conducting the ML/TF business risk assessment are provided in the sections below. Even though some of these risk factors will also be relevant for the risk assessment of an individual Customer or Business Relationship, for the ML/TF business risk assessment, FIs are reminded that they should take a holistic view when evaluating exposure to these categories of customers.
4.1.3 Customer Risk
The customer risk factors relate to types or categories of customers. Certain customer or business relationship categories pose a risk that should be taken into account when assessing the overall level of inherent customer risk. When identifying certain categories of customers as inherently high risk, FIs should also consider the results of the NRA or any Topical Risk Assessment, as well as information from official sources, including the Supervisory Authorities, the FIU, the FATF, MENAFATF and other FSRBs, the Egmont Group, etc.
When assessing the customer risk factors with respect to the business-wide ML/FT risk assessment, an FI can take into account:
• Type of customers: The risks related to retail customers in combination with their product/service needs may be different from those related to high net worth or corporate customers and their respective product/service needs. Likewise, the risks associated with resident customers may be different from those associated with non-resident customers.
• Customer base. FIs with small, homogenous customer bases may face different risks from those with larger, more diverse customer bases. Similarly, FIs targeting growing or emerging markets may face different customer risks than those with more established customer bases.
• Maturity of relationship. FIs that rely on more transactional, occasional, or one-off interactions with their customers may be exposed to different risks from institutions with more repetitive or long-term business relationships.
The specific customer risk factors that FIs should consider, include:
• Categories of business relationships with complex legal, ownership, or direct or indirect group or network structures, or with less transparency with regard to Beneficial Ownership, effective control, or tax residency, may pose different ML/FT risks than those with simpler legal/ownership structures or with greater transparency.
• Categories of Customers involved in highly regulated and supervised activities and those involved in activities that are unregulated.
• Customers associated with higher-risk persons or professions (for example, foreign PEPs and/or their companies), or those linked to sectors associated with higher ML/FT risks.
• Non-resident entities particularly those with connections to offshore and high risk jurisdictions.
• Professionals (e.g., lawyers, accountants and TCSPs) acting as introducer or intermediary on behalf of customers or groups of customers (whereby there is no direct contact with the customer).
• High net worth individuals.
• Respondent banks from high risk countries.
Some of these customer risk factors are also relevant when determining the customer risk classification of an individual customer and the type and extent of customer due diligence to be performed (see Section 6, Customer Due Diligence).
4.1.4 Geographic Risk
FIs should consider geographic ML/FT risk factors both from domestically and cross-border sources. These risks arise from: (i) the locations where the FI has offices, branches and subsidiaries and (ii) locations in which the customers reside or conduct their activities. Examples of some of these factors include:
• Regulatory/supervisory framework. Countries with stronger AML/CFT controls present a different level of risk than countries with weaker regulatory and supervisory frameworks, for instance countries identified by the FATF as jurisdictions with weak AML/CFT measures.
• International Sanctions. FIs should consider whether the countries or jurisdictions they deal with are the subject of international sanctions, such as targeted financial sanctions (TFS), UAE, OFAC, UN and EU restrictive measures, that could impact their ML/FT risk exposure and mitigation requirements.
• Reputation. FIs should consider whether the countries or jurisdictions they deal with are associated with higher or lower levels of ML/FT, corruption, and (lack of) transparency (particularly as regards financial and fiscal reporting, criminal and legal matters, and Beneficial Ownership, but also including such factors as freedom of information and the press).
• Combination with customers’ inherent risk factors. FIs should consider the countries risk in combination with customers risks, including principal residential or operating locations of customers.
4.1.5 Product-, Service-, Transaction-Related Risk
When assessing the inherent ML/FT risks associated with product, service, and transaction types, an FI should take stock of its lines of business, products and services that are more vulnerable to ML/FT abuse. FIs should assess the inherent ML/FT risks of abuse of the products and services by their customers taking into account a number of factors such as their ease for holding and transferring value or their complexity and transparency. Some of the risk factors that FIs should consider, among others, are:
• Typology. FIs should consider whether the product, service, or transaction type is associated with any established ML/FT typologies (see Section 3.10, ML/FT Typologies).
• Complexity. Products, services, or transaction types that favour complexity, especially when that complexity is excessive or unnecessary, can often be exploited for the purpose of money laundering and/or the financing of terrorism or illegal organisations. FIs should consider the conceptual, operational, legal, technological and other complexities of the product, service, or transaction type. Those with higher complexity or greater dependencies on the interactions between multiple systems and/or market participants may expose FIs to different types and levels of ML/FT risk than those with lower complexity or with fewer dependencies on multiple systems and/or market participants.
• Transparency and transferability. Situations that favour anonymity can often be exploited for the purpose of ML/FT. FIs should consider the level of transparency and transferability of ownership or control of products, services, or transaction types, particularly in respect of the ability to monitor the identities and the roles/responsibilities of all parties involved at each stage. Special attention should be given to products, services, or transaction types in which funds can be pooled or co-mingled, or in which multiple or anonymous parties can have authority over the disposition of funds, or for which the transferability of Beneficial Ownership or control can be accomplished with relative ease and/or with limited disclosure of information.
• Size/value. Products, services, or transaction types with different size or value parameters or limits may pose different levels of ML/FT risk.
4.1.6 Delivery Channel-Related Risk
Different delivery channels for the acquisition and management of customers and business relationships, as well as for the delivery of products and services, entail different types and levels of ML/FT risk.
When evaluating delivery channel-related risk, FIs should pay particular attention to those channels, whether related to customer acquisition and/or relationship management, or to product or service delivery, which have the potential to favour anonymity. Among others, these may include non-face-to-face channels (especially in cases where there are no safeguards in place such as electronic identification means), such as internet-, phone-, or other remote-access services or technologies; the use of third-party business introducers, intermediaries, agents or distributors; and the use of third-party payment, or other transaction intermediaries.
4.1.7 Other Risk Factors
Given the ever-evolving nature of ML/FT risks, new risks are constantly emerging, while existing ones may change in their relative importance due to legal or regulatory developments, changes in the marketplace, or as a result of new or disruptive products or technologies. For this reason, no list of risks can ever be considered as exhaustive.
Nevertheless, additional factors that may present specific risks are, e.g., the introduction of new products or services, new technologies or delivery processes or the establishment of new branches and subsidiaries locally and abroad.
In order to ensure, therefore, that FIs are in a position to review and update the ML/TF business risk assessment as well as mitigation measures, FIs should take into consideration the results of the NRA or any Topical Risk Assessment. They should also consult publications from official sources on a regular basis, including those of the relevant Supervisory Authorities, the FIU, the FATF, MENAFATF and other FSRBs, the Egmont Group, and others. Links to some of these sources may be found in Appendix 11.2.
Examples of some of the types of additional risk factors which FIs may consider in identifying and assessing their ML/FT risk exposure include:
• Novelty/innovation. FIs should consider the depth of experience with and knowledge of the product, service, transaction, or channel type. Products, services, transaction, or delivery channel types that are new to the market or to the enterprise may not be as well understood as, and may therefore pose a different level of ML/FT risk than, more established ones. Likewise, products, services, transaction, or delivery channel types which are unexpected or unusual with respect to a particular type of customer may indicate a different level of potential ML/FT risk exposure than would more traditional or expected product, service, transaction, or channel types in regard to that same type of customer.
• Cyber security/distributed networks. FIs may consider evaluating the degree to which their operational processes and/or their customers expose them to the risk of exploitation for the purpose of professional third-party money laundering and/or the financing of terrorism or of illegal organisations, through cyber-attacks or through other means, such as the use of distributed technology or social networks. An example of such a risk is the recent dramatic increase in the global incidence of so-called CEO fraud, in which fraudsters troll companies with phishing e-mails that are purportedly from the CEO or other senior executives, and attempt to conduct fraudulent transactions or obtain sensitive data that can be used for criminal purposes.
4.1.8 Assessing New Product and New Technologies Risks
As part of their obligation to update their ML/FT risk assessments on an ongoing basis, the AML-CFT Decision specifically requires FIs to “identify and assess the risks of money laundering and terrorism financing that may arise when developing new products and new professional practices, including means of providing new services and using new or under-development techniques for both new and existing products.”
FIs must complete the assessment of such risks, and take the appropriate risk management measures, prior to launching new products and services, practices or techniques, or technologies. In general, they should integrate these ML/FT risk assessment and mitigation requirements into their new product, service, channel, or technology development processes.
For the purpose of assessing the ML/FT risks associated with new products, services, practices, techniques, or technologies, FIs may consider utilising the same or similar risk assessment models or methodologies as those utilised for their ML/FT business risk assessments, updated as necessary for the particular circumstances. They should also document the new product, service, practice, technique, or technology risk assessments, in keeping with the nature and size of their businesses (see Section 4.6.1, Documentation, Updating and Analysis).
4.2 Risk Assessment Methodology and Documentation
(AML-CFT Law Article 16.1(a) and AML-CFT Decision Article 4.1)
A well-documented assessment of the identified inherent risk factors (see Section 4.1, Risk Factors) is fundamental to the adoption and effective application of reasonable and proportionate ML/FT risk-mitigation measures. Thus, the result of such an ML/TF business risk assessment allows for a systematic categorisation and prioritization of inherent and residual ML/FT risks, which in turn allows FIs to determine the types and appropriate levels of AML/CFT resources needed for mitigation purposes.
An effective ML/TF business risk assessment is not necessarily a complex one. The principle of a risk-based approach means that FIs’ risk assessments should be commensurate with the nature and size of their businesses. FIs with smaller or less complex business models may have simpler risk assessments than those of institutions with larger or more complex business models, which may require more sophisticated risk assessments.
4.2.1 Risk Assessment Methodology
(AML-CFT Decision Article 4.1(b))
The AML-CFT Decision obliges FIs to document their risk assessment operations. FIs may utilise a variety of models or methodologies in assessing their ML/FT risk. FIs should determine the type and extent of the risk assessment methodology that they consider to be appropriate for the size and nature of their businesses, and should document the rationale for these decisions.
To be effective, a risk assessment should be based on a methodology that:
• Is based on quantitative and qualitative data and information and makes use of internal meetings or interviews; internal questionnaires concerning risk identification and controls; review of internal audit reports;
• Reflects the FI’s management-approved AML/CFT risk appetite and strategy;
• Takes into consideration input from relevant internal sources, including input and views from the designated AML/CFT compliance officer and other relevant units like risk management and internal control;
• Takes into consideration relevant information (such as ML/FT trends and sectoral risks) from external sources, including the NRA or any Topical Risk Assessment, Supervisory and other Competent Authorities, and the FATF, MENAFATF and other FSRBs, the Egmont Group, and others where appropriate;
• Describes the weighting of risk factors, the classification of risks into different categories, and the prioritisation of risks.
• Evaluates the likelihood or probability of occurrence of identified ML/FT risks, and determining their timing and impact on the organization.
• Takes into account whether the AML/CFT controls are effective, specifically whether there are adequate controls to mitigate risks concerning customers, products, services, or transactions.
• Determines the effectiveness of the AML/CFT risk mitigating measures in place by using information such as audit and compliance reports or management information reports.
• Determines the residual risk as a result of the inherent risks and the effectiveness of the AML/CFT risk mitigating measures.
• Establishes based on the residual risk and the risk appetite, whether additional AML/CFT controls have to be put in place.
• Determines the rationale and circumstances for approving and performing manual interventions or exceptions to model-based risk weightings or classifications.
• Is properly documented and maintained, regularly evaluated and updated, and communicated to management and relevant personnel within the organisation.
• Is tested and audited for the effectiveness and consistency of the risk methodology and its output with regard to statutory obligations.
4.2.2 Documentation and Updating
(AML-CFT Law Article 16.1(a) and AML-CFT Decision Article 4.1(a)-(b))
Documentation
FIs are obliged to document their ML/TF business risk assessment, including methodology, analysis, and supporting data, and to make them available to the Supervisory Authorities upon request. FIs should incorporate into their documentation, the information used to conduct the ML/TF business risk assessment in order to demonstrate the effectiveness of their risk assessment processes. Examples of such information include, but are not limited to:
• Organization’s overall risk policies (for example, risk appetite statement, customer acceptance policy, and others, where applicable).
• ML/FT risk assessment model, methodology and procedures, including such information as organizational roles and responsibilities; process flows, timing and frequency; internal reporting requirements; and review, testing, and updating requirements.
• Risk factors identified, and input received from relevant internal sources, including the designated AML/CFT compliance officer.
• Details of the inherent and residual risk-factor analysis that constitutes the risk assessment.
The documentation measures taken by FIs should be reasonable and commensurate with the nature and size of their businesses.
Updating
FIs are obliged to keep their ML/TF business risk assessment up-to-date on an ongoing basis. In fulfilling this obligation, they should review and evaluate their ML/FT business risk assessment processes, models, and methodologies periodically, in keeping with the nature and size of their businesses. FIs should also update their ML/TF business risk assessment whenever they become aware of any internal or external events or developments which could affect their accuracy or effectiveness.
Such developments may include, among other things, changes in business strategies or objectives, technological developments, legislative or regulatory developments, or the identification of material new ML/FT threats or risk factors. In this regard, FIs should take into consideration the results of the most recent NRA or any Topical Risk Assessment, as well as circulars, notifications and occasional published information from official sources, such as the Supervisory Authorities; other national Competent Authorities; or relevant international organisations, such as FATF, MENAFATF and other FSRBs, the Egmont Group, and others. Links to some of these sources may be found in Appendix 11.2.
Part III—Mitigation of ML/FT Risks
The Elements of an AML/CFT Program
Commonly referred to as the three lines of defense, the basic elements that must be addressed in an AML/ CFT program are
• A system of internal policies, procedures and controls, including an ongoing employee training program (first line of defense);
• A designated compliance function with a compliance officer or money laundering reporting officer (second line of defense); and
• An independent audit function to test the overall effectiveness of the AML program (third line of defense).
In setting up these three lines of defense, FIs can take into account their business nature, size and complexity.
(AML-CFT Law Article 16.1(b), 16.1(d); AML-CFT Decision Articles 4.2 , 4.3)
FIs are obliged to take the necessary measures to manage and mitigate the ML/FT risks to which they are exposed. Both the AML-CFT Law and the AML-CFT Decision provide that FIs may utilize a risk-based approach with respect to mitigation of ML/FT risks.
5. Internal Policies, Controls and Procedures
Policies:
Clear and simple high-level statements that are uniform across the entire organization (sets the tone from the top).
Procedures:
Translates the AML/CFT policies into an acceptable and workable practice, tasking the stakeholders with their respective responsibilities.
Controls:
The internal technology or tools the financial institution utilizes to ensure the AML/CFT program is functioning as intended and within predefined parameters.
(AML-CFT Law Article 16.1(d); AML-CFT Decision Articles 4.2(a), 20)
The AML-CFT Law and the AML-CFT Decision require FIs to implement internal policies, controls and procedures that enable them to manage and mitigate the ML/FT risks they have identified in their ML/TF business risk assessment, in keeping with the nature and size of their businesses. Such policies, controls and procedures must be approved by senior management, reviewed for effectiveness and continuously updated, and must apply to all branches, subsidiaries and affiliated entities in which FIs hold a majority interest (see Section 8.3, Group Oversight for more guidance). They must also take into consideration the results of the NRA and Topical Risk Assessments.
Additionally, FIs should ensure that the policies, controls and procedures they implement to manage and mitigate ML/FT risks are reasonable, proportionate to the risks involved, and consistent with the results of their ML/TF business risk assessments.
Such policies, procedures and methodologies should be reasonable and proportionate to the risks involved, and, in formulating them, FIs should consider the results of the NRA and any Topical Risk Assessment as well as their own ML/FT business risk assessment. Commensurate with the nature and size of the FIs’ businesses, the policies, procedures and methodologies should also be documented, approved by senior management, and communicated at the appropriate levels of the organisation.
In developing the internal AML/CFT control systems, FIs should also take into account their IT infrastructure and management information systems capabilities. FIs should consider how well their technical infrastructure, including their data management and management information reporting capabilities, are suited to the ML/FT risk mitigation requirements of the types of customers they deal with, particularly in respect of the size and growth dynamics of their customer base.
The internal policies, controls and procedures that FIs design to prevent, detect and deter ML/FT risks can be categorised broadly as those related to:
• The identification and assessment of ML/FT risks (see Section 4.5, Business-wide Risk Assessment).
• Customer due diligence (CDD), including enhance due diligence (EDD), and simplified due diligence (SDD) (see Section 6, Customer Due Diligence), including its review and updating, and reliance on third parties in regard to it.
• Customer and transaction monitoring, and the reporting of suspicious transactions (see Section 7, Suspicious Transaction Reporting).
• AML/CFT governance, including compliance staffing and training, senior management responsibilities, and the independent auditing of risk mitigation measures (see Section 8, Governance).
• Record-keeping requirements (see Section 9, Record Keeping).
Guidance in relation to these categories is provided in the above-referenced sections.
6. Customer Due Diligence (CDD)
MAIN ELEMENTS OF A CUSTOMER DUE DILIGENCE PROGRAM
- Customer Identification; - Profiles; - Customer Acceptance; - Risk rating; - Monitoring; - Investigation; and - Documentation
(AML-CFT Law Article 16.1(b); AML-CFT Decision Articles 4.2(b), 4.3, 5-13, 14, 15, 19, 20.1, 22, 24.2-4, 25, 27, 29.2, 30, 31.1, 35.1-2 and 5, 37.1-2, 44.10, 55.1)
6.1 Risk-Based Application of CDD Measures
The AML-CFT Law implicitly recognises the need for an RBA to customer due diligence measures, by obliging FIs to “take the necessary due diligence measures and procedures and define their scope, taking into account the various risk factors and the results of the national risk assessment….” This principle is further emphasised by the AML-CFT Decision, which explicitly provides for the application of enhanced due diligence (EDD) measures to manage identified high risks (see Section 6.4, Enhanced Due Diligence (EDD) Measures), and of simplified due diligence (SDD) to manage identified low risks in the absence of a suspicion of ML/FT (see Section 6.5, Simplified Due Diligence (SDD) Measures).
FIs are reminded, that each customer’s ML/FT risk profile is dynamic and subject to change depending on numerous factors, including (but not limited to) the discovery of new information or a change in behaviour, and the appropriate level of due diligence should be applied in keeping with the specific situation and risk indicators identified. In that regard, FIs should always be prepared to increase the type and level of due diligence exercised on a customer of any ML/FT risk category whenever the circumstances require, including situations in which there are any doubts as to the accuracy or appropriateness of the customer’s originally designated ML/FT risk category. This means that the CDD measures are not to be taken as a static formula but that depending on the risk of a customer the intensity and depth of the CDD measures should vary.
6.1.1. Assessing Customer and Business Relationship Risk
(AML-CFT Law Article 16.1; AML-CFT Decision Article 4.1)
A customer can be anyone who performs a one-off or occasional financial activity or transaction or anyone who establishes an ongoing commercial or financial relationship with the FI.
The accurate assessment of customer or business relationship risk is fundamental to the risk classification of customers and the effective application of appropriate risk-based customer due diligence measures. FIs should take the necessary steps to ensure that their customer or business relationship risk assessment processes are robust and reliable, and that they incorporate the results of the NRA, any Topical Risk Assessment and their own ML/TF business risk assessment, as well as the input of relevant internal stakeholders, including the designated AML/CFT compliance officer.
In assessing customer or business relationship risk, FIs should analyse customers on the basis of the identified risk factors in order to arrive at a risk classification. FIs may utilize different methodologies to accomplish their risk classification, depending on the nature and size of their businesses, and of the risks involved. For example, some entities with smaller or less complex businesses, or with more homogenous customer bases, may elect to assess business relationship risk and assign customer risk classifications on the basis of generic profiles for customers of the same type. Other larger or more complex FIs may elect to assess business relationship risk and assign customer risk classifications using more sophisticated models or scorecards based on weightings of various risk factors.
Regardless of the methodologies they choose, FIs should ensure that their business relationship risk assessment processes and the rationale for their methodologies are well-documented, approved by senior management, and communicated at the appropriate levels of the organisation. They should also decide on policies and procedures related to both the periodic review of their business relationship risk assessment processes, and to the frequency for updating the individual business relationship risk assessments and customer risk classifications produced by them, taking into consideration changes in internal or external factors.
6.1.2 Establishing a Customer Risk Profile
(AML-CFT Decision Articles 7.1, 8.3-4)
FIs should establish a risk profile for their customers, commensurate with the types and levels of risk involved. Such risk profiles allow FIs to compare a customer’s actual activity with the expected activity more effectively, and thus contribute to their capacity to discover unusual circumstances or potentially suspicious transactions.
Where legal persons or legal arrangements are concerned, FIs are obliged to identify any natural person who owns or controls an interest of 25% or more. In order to achieve an effective understanding of the ownership and control structure of a customer that is a legal person or arrangement, FIs should obtain from the customer and including in the risk profile a detailed explanation or a company structure chart providing the details of any ownership interests of 25% or more, and tracing them through any intermediate entities (whether legal persons or arrangements, or natural persons who are nominee stakeholders) to the natural persons who ultimately own or control them.
Furthermore, in order to understand the nature of the business of a legal person or Legal Arrangement, FIs should obtain and include in the profile a detailed explanation or company structure chart showing the entity’s internal management structure, identifying the persons holding senior management positions, or other positions of control. They should also obtain information about the legal person’s or arrangement’s majority-owned or controlled operating subsidiaries, including the nature of the business and the operating locations of those subsidiaries.
FIs are also required to understand the intended purpose and nature of the Business Relationship, and, for legal persons or arrangements, the nature of the customer’s business and its ownership and control structure.
Based on the risk profile, FIs should carry out ongoing due diligence of their Business Relationships, so as to be able to ensure that the transactions conducted are consistent with the information they have about the customer, the type of activity they are engaged in, the risks they entail, and, where necessary, their source of funds.
When dealing with higher-risk or more complex customers, in addition to the type of information referred to above, FIs may obtain and include in the customer’s risk profile more detailed information about their customers’ activities, such as:
• Anticipated size and/or turnover of account balances or transactional activity;
• Expected types and volumes of transactions;
• Known or expected counterparties or third-party intermediaries with whom the customer conducts transactions;
• Known or expected locations related to transactional activity;
• Anticipated timing or seasonality of transactional activity.
Where lower-risk customers are concerned, FIs may consider applying more generic risk profiles in order to compare actual and expected types and levels of activity.
6.2 Circumstances and Timing for Undertaking CDD Measures
(AML-CFT Decision Article 5.1)
Under normal circumstances, FIs are obliged to undertake CDD measures (including verifying the identity of customers, Beneficial Owners, beneficiaries, and controlling persons) either prior to or during the establishment of a Business Relationship or the opening of an account, or prior to the execution of a transaction for a customer with whom there is no Business Relationship. Guidance in regard to these requirements and certain exceptional circumstances provided for in the AML-CFT Decision is provided in the sub-sections below.
6.2.1 Establishment of a Business Relationship
FIs establish a Business Relationship with a customer when they perform any act for, on behalf of, or at the direction or request of the customer, with the anticipation that it will be of an ongoing or recurring nature, whether permanent or temporary. Such acts may include, but are not limited to:
• Assigning an account number or opening an account in the customer’s name;
• Effecting any transaction in the customer’s name or on their behalf, or at the customer’s direction or request for the benefit of someone else;
• Providing any form of tangible or intangible product or service (including but not limited to granting credits, guarantees, or other forms of value) to or on behalf of the customer, or at the customer’s direction or request for the benefit of someone else;
• Signing any form of contract, agreement, letter of intent, memorandum of understanding, or other document with the customer in relation to the performance of a transaction or series of transactions, or to the provision of any form of tangible or intangible product or service as described above;
• Accepting any form of compensation or remuneration (including a promise of future payment) for the provision of tangible or intangible products or services, as described above, from or on behalf of the customer;
• Receiving funds or proceeds of any kind (including those held on a fiduciary basis, for safekeeping, or in escrow) from or on behalf of the customer, whether for their account or for the benefit of someone else;
• Any other act performed by FIs in the course of conducting their ordinary business, when done on behalf of, or at the request or direction of, a customer.
In such cases, and other than in the exceptional circumstances described below (see Section 6.2.3, Exceptional Circumstances), FIs are required to undertake appropriate risk-based CDD measures (see Section 6.3, Customer Due Diligence (CDD) Measures, Section 6.4, Enhanced Due Diligence (EDD) Measures, and Section 6.5, Simplified Due Diligence (SDD) Measures for further guidance).
In addition, CDD also needs to be conducted when
• there is a ML/FT suspicion (see Section 7.2, Identification of Suspicious Transactions);
• there are doubts about the veracity or adequacy of identification data previously obtained with regard to the customer.
Among other things, the CDD measures should include verifying the identity of the customer as well as the Beneficial Owners, beneficiaries, and controlling persons, and understanding the nature of their business and the purpose of the Business Relationship.
6.2.2 Occasional Transactions
During the course of business, FIs may be called upon to perform occasional or non-recurring transactions for customers with whom there is no ongoing account or Business Relationship. Examples of such transactions include, but are not limited to:
• Exchange of currencies;
• Issue or cashing/redemption of traveler’s cheques;
• Transfer of money or other value for a walk-in customer;
On such occasions, and other than in the exceptional circumstances described below (see Section 6.2.3, Exceptional Circumstances), FIs are required to identify the customer and verify the customer’s identity as well as that of the Beneficial Owners, beneficiaries, and controlling persons. Furthermore, FIs are required to undertake appropriate risk-based CDD measures (see Section 6.3, Customer Due Diligence (CDD) Measures, Section 6.4, Enhanced Due Diligence (EDD) Measures, and Section 6.5, Simplified Due Diligence (SDD) Measures for further guidance), including among other things understanding the nature of the customer’s business and the purpose of the transaction, in the cases specified in Article 6 of the AML-CFT Decision, as follows:
• When carrying out occasional transactions in favour of a Customer for amounts equal to or exceeding AED 55,000 (or equivalent in any other currency), whether the transaction is carried out in a single transaction or in several transactions that appear to be linked;
• When carrying out occasional transactions in the form of Wire Transfers for amounts equal to or exceeding AED 3,500 (or equivalent in any other currency) (see Section 6.3.2, CDD Requirements Concerning Wire Transfers);
• When there is a ML/FT suspicion (see Section 7.2, Identification of Suspicious Transactions);
• When there are doubts about the veracity or adequacy of identification data previously obtained with regard to the customer.
Some of the indicators of transactions that may appear to be linked include, but are not limited to the following:
- Multiple transactions with the same or similar customer reference codes; - Transactions executed sequentially or in close time proximity, and involving the same or related counterparties; - Multiple transactions attempted by a customer with whom there is no Business Relationship at different branches of the same FI on the same day.
6.2.3 Exceptional Circumstances
(AML-CFT Decision Articles 4.3, 5.1(a)-(c), 10, 11.1(b), 13.2)
From time to time, certain situations may arise which fall outside of the normal course of CDD processes. Under these circumstances, described below, FIs are permitted to handle the timing, customer identification, and other aspects of customer due diligence procedures exceptionally. Specifically:
• When there is no ML/FT suspicion, and the ML/FT risks are identified as low, FIs may complete the verification of the customer’s identity after establishing the Business Relationship under the conditions specified in the relevant provisions of the AML-CFT Decision. In such circumstances, the verification of the identity must be conducted in a timely fashion, and FIs must ensure that they implement appropriate and effective measures to manage and mitigate the risks of crime and of the customer benefiting from the Business Relationship prior to the completion of the verification process. Examples of such measures which FIs may consider taking in this regard are, among others:
- Holding funds in suspense or in escrow until the verification of the identity is completed; - Making the completion of the verification of the identity a condition precedent to the closing of a transaction.
• In the case of Legal Arrangements, such as Trusts or foundations, or of life insurance policies (including funds-generating transactions, such as life insurance products relating to investments and family Takaful insurance) in which there are beneficiaries who are not named, but instead belong to a designated class of future or contingent beneficiaries, FIs are required to obtain sufficient information about the details of the class of beneficiaries so as to be in a position to establish the identity of each beneficiary at the time of the settlement, pay-out, or exercise of their legally acquired rights. Furthermore, FIs must verify the identity of the beneficiaries at the time of settlement or pay-out and prior to the exercise of any related legally acquired rights. They should also ensure that they implement appropriate and effective measures to manage and mitigate the risks of crime and of the customer benefiting from the Business Relationship prior to the completion of the verification process. Examples of such measures which FIs may consider taking in this regard are, among others:
- Holding funds in suspense or in escrow until the verification of the identity is completed; - Making the completion of the verification of the identity a condition precedent to the closing of a transaction.
• When a legal entity customer or its controlling stakeholder meets the conditions specified in Article 10.1-2 of the AML-CFT Decision with regard to publicly listed companies (including the condition that information concerning the identity of the shareholders, partners, or Beneficial Owners with an interest of 25% or more is available from reliable sources), FIs are exempted from taking the normally required identity verification measures. In this regard, FIs should ensure that the disclosure and transparency requirements of the regulated stock exchange are at least equivalent to those of the State, and should document the evidence they obtain concerning the relevant disclosure and transparency requirements.
It is important to note that, while FIs are exempted in such situations from identifying and verifying the identity of the shareholders, partners or Beneficial Owners (or in the event that no such person can be identified, of the relevant senior management officers), they are not exempted from ascertaining the identity of senior management.
Examples of reliable information sources in this regard include, but are not limited to:
- Stock exchange disclosure reports or websites; - Corporate annual reports, websites, or other forms of official public disclosure; - Official or public registries; - Credit reporting agencies; - Recognized, well-established media outlets.
• When FIs suspect that a customer or Beneficial Owner is involved in the commitment of a crime related to money laundering, the financing of terrorism, or the financing of illegal organisations, and they have reasonable grounds to believe that undertaking customer due diligence measures would tip off the customer, then they should not apply CDD measures, but should instead report their suspicion to the FIU along with the reasons that prevented them from carrying out the CDD measures.
6.3 Customer Due Diligence (CDD) Measures
The application of risk-based CDD measures is comprised of several components, in keeping with the customer’s ML/FT risk classification and the specific risk indicators that are identified. Generally, these components include, but are not limited to, the following categories:
• Identification of the customer, Beneficial Owners, beneficiaries, and controlling persons; and the verification of their identity on the basis of documents, data or information from reliable and independent sources (see Section 6.3.1, Customer and Beneficial Owner Identification/Verification).
• Screening of the customer, Beneficial Owners, beneficiaries, and controlling persons, to screen for the applicability of targeted or other international financial sanctions, and, particularly in higher risk situations, to identify any potentially adverse information such as criminal history (see Section 6.4, Enhanced Due Diligence (EDD) Measures).
• Obtaining an understanding of the intended purpose and nature of the Business Relationship, as well as, in the case of legal persons or arrangements, of the nature of the customer’s business and its ownership and control structure (see Section 6.3.3, Establishing a Customer Due Diligence Profile).
• Monitoring and supervision of the Business Relationship, to ensure consistency between the transactions or activities conducted and the information that has been gathered about the customer and their expected behaviour (see Section 6.3.4, Ongoing Monitoring of the Business Relationship).
• Scrutinising transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the FI’s knowledge of the customer, their business and risk profile, including where necessary, the source of funds.
• Ensuring that documents, data or information collected under the CDD process is kept up-to-date and relevant, by undertaking reviews of existing records, particularly for higher risk categories of customers.
In cases involving higher levels of risk, FIs are generally required to exercise enhanced levels of customer due diligence, such as identifying and/or verifying the customer’s source of funds and taking other appropriate risk-mitigation measures (see Section 6.4, Enhanced Due Diligence (EDD) Measures).
As part of their overall AML/CFT framework, FIs should take a risk-based approach in developing the internal CDD policies, procedures and controls. Factors to take into account, include:
• The outcomes of the ML/TF business risk assessment;
• Circumstances, timing, and composition in regard to the application of CDD measures;
• Frequency of reviews and updates in relation to CDD information;
• Extent and frequency of ongoing supervision of the Business Relationship and monitoring of transactions in relation to customers to which CDD measures are applied.
Such policies, procedures and methodologies should be reasonable and proportionate to the risks involved, and, in formulating them, supervised institutions should consider the results of both the NRA and any Topical Risk Assessment. Commensurate with the nature and size of the FIs’ businesses, the policies, procedures and methodologies should also be documented, approved by senior management, and communicated at the appropriate levels of the organisation.
Additional guidance related to these and other key aspects of risk-based CDD measures is provided in the following sub-sections.
6.3.1 Customer and Beneficial Owner Identification and Verification of the Identity
(AML-CFT Decision Articles 4.2(b), 3(a), 5.1, 8.1, 9, 10, 11.2, 13.1, 14.2)
Grounded on the principles of “Know Your Customer” and risk-based CDD, the identification and verification of the identity of customers is a fundamental component of an effective ML/FT risk management and mitigation programme. In accordance with Cabinet Resolution no. 58 of 2020 regulating the Beneficial Owner Procedures (the UBO Resolution), FIs are obliged to identify customers, including the Beneficial Owners, beneficiaries, and controlling persons, whether permanent or walk-in, and whether a natural or legal person or Legal Arrangement, and to verify their identity using documents, data or information obtained from reliable and independent sources.
The specific requirements concerning the timing, extent, and methods of identifying and verifying the identity of customers and Beneficial Owners depend in part on the type of customer (whether a natural or legal person) and on the level of risk involved (also see Sections 6.4, Enhanced Due Diligence (EDD) Measures, and 6.5, Simplified Due Diligence (SDD) Measures). Thus, the type and nature of the customer (including Beneficial Owners, beneficiaries, and controlling persons) should be considered as risk factors in determining the type of CDD that should be applied, whether standard CDD, EDD or SDD. However, the core components of a customer’s identification generally remain the same in all cases. They are:
• Personal data, including details such as the name, passport or identity card number, country of issuance, date issuance and expiry date of the identity card or passport, nationality, date and place of birth (or date and place of establishment or incorporation, in the case of a legal person or arrangement); and
• Principal address, including evidence of the permanent residential address of a natural person, or the registered address of a legal person or arrangement.
In taking adequate CDD measures, FIs are obliged at a minimum to identify and verify the identity of the customer as specified in the relevant articles of the AML-CFT Decision. In fulfilling these requirements, FIs should use a risk-based approach to determine the internal policies, procedures and controls they implement in relation to the identification and verification of customers (including the Beneficial Owners, beneficiaries, and controlling persons). The CDD policies and procedures that FIs apply should be reasonable and proportionate to the risks involved, and, in formulating them, entities should consider the following guiding principles.
In relation to natural persons:
• The verification of a customer’s identity, including their address, should be based on original, official (i.e. government-issued) documents whenever possible. When that is not possible, FIs should augment the number of verifying documents or the amount of information they obtain from different independent sources. In particular, when verifying the UAE ID card, FIs licensed by the Central Bank must use the online validation gateway of the Federal Authority for Identity & Citizenship and keep a copy of the UAE ID and its digital verification.They should also identify the lack of official documents and the use of alternative means of verification as risk factors when assessing the customer’s ML/FT risk classification.
An example of alternative verification means is verification by way of digital identification systems. Such a digital identification systems should rely upon technology, adequate governance, processes and procedures that provide appropriate levels of confidence that the system produces accurate results. The FATF Guidance on Digital Identity of March 2020 provides further information on how to making a risk-based determination of whether a particular digital ID system provides an appropriate level of reliability and independence.
• The identification data should include the name, nationality, date of birth and place of birth, and national identification number of a natural person.
• With regard to the identification and verification of the identity of foreign nationals, whether customers or Beneficial Owners, beneficiaries or controlling persons, FIs should take steps to understand and request only those types of identification documents that are legally valid in the relevant jurisdictions. Furthermore, when verifying the identity of foreign nationals associated with high-risk factors, FIs should validate the authenticity of customer identification documents obtained. Some of the methods that FIs may consider in order to do so, commensurate with the nature and size of their businesses, include but are not limited to:
- Relying on information from the relevant foreign embassy or consulate, or the relevant issuing authority; - Using commercially available applications to validate the information in machine-readable zones (MRZs) or biometric data chips of foreign identification documents.
• The types of address verification that may generally be considered acceptable include, but are not limited to, the following categories of documents issued in the name of the customer:
- Bills or account statements from public utilities, including electricity, water, gas, or telephone line providers; - Local and national government-issued documents, including municipal tax records; - Registered property purchase, lease or rental agreements; - Documents from supervised third-party financial institutions, such as bank statements, credit or debit card statements, or insurance policies.
In situations where natural persons do not have this documentation in their own name, for instance because they share accommodation or do not (yet) have a permanent or own residence, other evidence of address may be used as long as this evidence gives the FI reasonable confidence. Where the FI has determined that an individual has a valid reason for being unable to produce the usual documentation to verify the address and who would otherwise be excluded from establishing a business relationship with the FI, the address can be verified by other means, provided the FI is satisfied that the method employed adequately verifies the address of the natural person and any additional risk has been appropriately mitigated.
This can for instance be evidence of entitlement to a state or local authority-funded benefit, pension, educational or other grant, or a letter from a reputable employer or school stating the address.
In relation to legal persons and legal arrangements:
• In addition to the identifying and verifying the identity of customers, Beneficial Owners, beneficiaries, and controlling persons, FIs should verify the identity of any person legally empowered to act or transact business on behalf of the customer, whether the customer is a legal or natural person. Such persons may include:
- Signatories or other authorized persons, or persons with authorised remote access credentials to an account, such as internet or phone banking users; - Parents or legal guardians of a minor child, or legal guardians of a physically or mentally disabled or incapacitated person; - Attorneys or other legal representatives, including liquidators or official receivers of a legal person or arrangement.
In the event that a legally empowered representative is also a legal person or Legal Arrangement, the normal CDD procedures for such entities should be applied.
• When verifying that a person purporting to act on behalf of a customer is so authorised, the following types of documents may generally be considered to be acceptable:
- A legally valid power-of-attorney; - A properly executed resolution of a legal person’s or Legal Arrangement’s governing board or committee; - A document from an official registry or other official source, evidencing ownership or the person’s status as an authorised legal representative; - A court order or other official decision.
• As part of their procedures for identifying and verifying the identity of customers, and for authenticating the original documents upon which the verification is based, FIs should include procedures for the certification of the customer identification and address documentation they obtain. Such procedures may encompass certification by employees of the FI (for example, by including the name, title of position, date and signature of the verifying employee(s) on the copies of documents maintained on file), as well as by reputable third parties (for example, by including the name, organization, title of position, date and signature of the verifying person, along with a statement representing that the copy of the document is a “true copy of the original”). In cases where documents are obtained from foreign sources in countries which are members of The Hague Apostille Convention, consideration should be given to requesting documents certified by Apostille seal.
• Whenever possible, FIs should incorporate a “four-eyes” principle (review by at least two people) into their procedures with regard to the verification of customer identification documentation and other CDD information, as well as with regard to the entry of the relevant data into their information systems.
6.3.2 CDD Measures Concerning Wire Transfers
(AML-CFT Decision Articles 27-30)
Financial institutions are obliged to undertake certain CDD measures concerning wire transfers, as laid out in detail in the above-referenced articles of the AML-CFT Decision. In particular, these measures relate to the identification of the originators and beneficiaries; the maintenance of information in regard to the same; and the implementation of risk-based policies and procedures for handling the disposition of wire transfers and for taking appropriate follow-up action.
The purpose of these measures are to ensure that information on the originator and the beneficiary shall accompany (meaning sent at the same time but not necessarily in the same message) cross-border wire transfers at all stages of its execution in case the amount of the transfer of funds equals or exceeds AED 3,500 or equivalent in any other currency.
The FI of the originator (or payer) shall ensure that the transfer of funds is accompanied by the information on the originator and beneficiary (or payee) as follows:
Information on the originator:
• The name of the originator (in case of natural person – the name and surname);
• The originator’s account number (or in absence thereof the transfer shall be accompanied by a unique transaction reference number);
• The originator’s address, identification document number or customer identification number, and date and place of birth.
Information on the beneficiary:
• The name of the beneficiary (in case of natural person – the name and surname); • The beneficiary’s account number (or in absence thereof, a unique transaction reference number).
In case of cross-border wire transfers of less than AED 3,500 or equivalent it not required to verify the accuracy of the above-mentioned information, unless there are suspicions of ML or TF.
Also for domestic wire transfers, the FI of the originator shall ensure that above-mentioned information is included, unless this information can be made available to the FI of the and by other means.
The FI of the originator shall not execute the transfer if it has not verified the identity of the originator. The FI of the beneficiary shall not credit the beneficiary’s account or make the funds available for the beneficiary if it has not conducted verification of the beneficiary’s identity.
The FI of the beneficiary is required to implement effective procedures to identify the received transfers that lack information about the originator and the beneficiary, in real-time or as part of the post-event monitoring process. This will include risk-based procedures whether transactions that lack the required information are to be executed, returned, suspended or transferred to the account of the beneficiary, as well as procedures related to the follow-up actions regarding these transfers, including to request the information on the originator and the beneficiary.
An intermediary FI ensures that all information about the originator and the beneficiary accompanied with the cross-border wire transfer is transferred to the beneficiary or other intermediary provider. Should there be technical limitations that prevent the required information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, the intermediary FI shall keep a record of all the information received from the ordering FI or another cross-border intermediary FI.
The intermediary FI is required to implement effective risk-based procedures to identify the received transfers that lack information about the originator and the beneficiary, in real-time or as part of the post-event monitoring process.
The procedures can include defining and documenting specific AML/CFT system parameters (such as transaction value, aggregate transaction amounts at the customer level, customer risk classification, or others) which would trigger an exception to straight-through processing and require manual review and intervention. This will also include procedures for determining when to execute, reject, or suspend a wire transfer lacking required information and the appropriate follow-up action.
Where an FI repeatedly fails to provide the required information on the originator and the beneficiary, the beneficiary’s or intermediary FI, taking into consideration the risks and frequency of the violations by the FI of the originator, shall take steps, which may initially include the issuing of warnings and setting deadlines. These steps can ultimately consist of rejecting any future transactions from the FI or restricting or terminating its business relationship with that FI.
Similar requirements apply to VASPs. Originating VASPs obtain and hold required and accurate originator information and required beneficiary information on virtual asset transfers, submit the above information to the beneficiary VASP or FI (if any) immediately and securely. Beneficiary VASPs obtain and hold required originator information and required and accurate beneficiary information on virtual asset transfers. For the purposes of applying the wire transfer requirements to VASPs, all virtual asset transfers are to be treated as cross-border.
In addition to the above, as part of their ongoing account monitoring procedures, FIs should also review the purpose of wire transfers, as indicated in their description fields, for potential red-flag indicators (see Section 7.2, Identification of Suspicious Transactions).
6.3.3 CDD Measures Concerning Legal Persons and Arrangements
(AML-CFT Decision Articles 8, 9, 37.1-3)
FIs are obliged to undertake CDD measures concerning legal persons and Legal Arrangements, including identification and verification of the identity of the Beneficial Owners, beneficiaries, and other controlling persons, in accordance with the provisions of the AML-CFT Decision. In fulfilling these requirements, they should take the following guidance into consideration:
• Without prejudice to the provisions of Article 9.1(b) of the AML-CFT Decision, when customers that are legal persons are owned or controlled by other legal persons or Legal Arrangements (for example, when customers are subsidiaries of a parent company or a Trust), FIs should make reasonable efforts to identify and verify the Beneficial Owners by looking through each layer of legal persons or Legal Arrangements (intermediate entities) until the natural persons with owning or controlling interests of 25% or more in aggregate are identified. Furthermore, in the event of multiple legal persons or arrangements with ownership or controlling interests, even where each legal person or Legal Arrangement owns or controls less than 25%, FIs should consider whether there are indications that the entities may be related by common ownership, which could reach or surpass the Beneficial Ownership threshold level of 25% in aggregate.
• When undertaking CDD measures on Legal Arrangements which allow funds or other forms of assets to be added or contributed to the arrangement after the initial settlement and by any persons other than the identified settlor(s), FIs should take the necessary steps to ascertain and verify the identity of the Beneficial Owners, and to understand the nature of their relationship with the Legal Arrangement. For customers that are trusts or other legal arrangements, the FI should verify the identity of beneficial owners, being the settlor, the trustee(s), the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust (including through a chain of control/ownership), or equivalent or similar positions for other legal arrangements. For beneficiaries of trusts or other legal arrangements that are designated by characteristics or by class, the FI should obtain sufficient information concerning the beneficiary to satisfy the FI that it will be able to establish the identity of the beneficiary at the time of the payout or when the beneficiary intends to exercise vested rights.
• The AML-CFT Decision obliges trustees in Legal Arrangements to maintain basic information relating to intermediaries, who are subject to supervision, and service providers, including consultants, investors or investment advisors, directors, accountants and tax advisors, who have responsibilities in relation to its management. In order to understand the control structure of a customer that is a Legal Arrangement, FIs should obtain this information from the trustees, representatives, or governing or managing officials and including it in the customer’s CDD profile. They should also give the same consideration to other forms of Legal Arrangements and their controlling persons (such as, for example, foundations, membership clubs, religious institutions, or others, along with their founders, representatives and other governing or managing officials).
6.3.4 CDD Measures for Life Insurance Activities
For life or other investment-related insurance business, FIs should, in addition to the CDD measures required for the customer and the beneficial owner, conduct the following CDD measures on the beneficiary(ies) of life insurance and other investment related insurance policies, as soon as the beneficiary(ies) are identified/designated:
(a) For beneficiary(ies) that are identified as specifically named natural or legal persons or legal arrangements – taking the name of the person;
(b) For beneficiary(ies) that are designated by characteristics or by class (e.g. spouse or children at the time that the insured event occurs) or by other means (e.g. under a will) – obtaining sufficient information concerning the beneficiary to satisfy the financial institution that it will be able to establish the identity of the beneficiary at the time of the payout. The information collected under (a) and/or (b) should be recorded and maintained.
For both the cases referred to above, the verification of the identity of the beneficiary(ies) should occur at the time of the payout.
In determining whether enhanced CDD measures are applicable, an FI should take into account as a factor the beneficiary of a life insurance policy. If an FI determines that a beneficiary who is a legal person or a Legal Arrangement presents a higher risk, then the enhanced CDD measures should include reasonable measures to identify and verify the identity of the beneficial owner of the beneficiary, at the time of payout.
In case an FI cannot comply with this, the FI should consider filing an STR with the FIU.
6.3.5 Ongoing Monitoring of the Business Relationship
(AML-CFT Decision Article 4.2(b), Article 4.3(c), 7.1)
With regard to established Business Relationships, FIs are obliged to undertake ongoing supervision of customers’ activity, including monitoring of transactions executed throughout the course of the relationship to ensure that they are consistent with the information, types of activity, and the risk profiles of the customers. FIs should use a risk-based approach to determine the policies, methods, procedures and controls they implement in relation to monitoring customers’ transactions and activities, as well as in regard to the extent of monitoring for specific customers or categories of customers.
As part of a risk-based approach to AML/CFT, in the case of customers or Business Relationships identified as high risk, FIs are expected to investigate and obtain more information about the purpose of transactions, and to enhance ongoing monitoring and review of transactions in order to identify potentially unusual or suspicious activities. In the case of customers or Business Relationships that are identified as low risk, FIs may consider monitoring and reviewing transactions at a reduced frequency.
Thus, in keeping with the level of risk involved, FIs should monitor and examine transactions in relation to the CDD information and risk profile of the customer (see Section 6.3, Customer Due Diligence (CDD) Measures, Section 6.4, Enhanced Due Diligence (EDD) Measures, and Section 6.5, Simplified Due Diligence (SDD) Measures). Where necessary, FIs should also obtain sufficient information on the counterparties and/or other parties involved (including but not limited to information from public sources, such as internet searches), in order to determine whether the transactions appear to be:
• Normal (consideration should be given as to whether the transactions are typical for the customer, for the other parties involved, and for similar types of customers);
• Reasonable (consideration should be given as to whether the transactions have a clear rationale and are compatible with the types of activities that the customer and the counterparties are usually engaged in);
• Legitimate (consideration should be given as to whether the customer and the counterparties are permitted to engage in such transactions, such as when specific licenses, permits, or official authorisations are required).
Examples of some of the methods that may be employed for the ongoing monitoring of transactions include, but are not limited to:
• Threshold-based rules, in which transactions above certain pre-determined values, numerical volumes, or aggregate amounts are examined;
• Transaction-based rules, in which the transactions of a certain type are examined;
• Location-based rules, in which the transactions involving a specific location (either as origin or destination) are examined;
• Customer-based rules, in which the transactions of particular customers are examined.
FIs may use all or any combination of the above methods, or any others that are appropriate to their particular circumstances, to effect ongoing monitoring of the Business Relationship. Furthermore, monitoring systems and methods may be automated, semi-automated, or manual, depending on the nature and size of their businesses. Whichever methods FIs elect to use, however, FIs should document them (see Section 9, Record Keeping), obtain senior management approval for them, and periodically review and update them to ensure their effectiveness. FIs should also establish specific monitoring procedures for customers and business relationships which have been reported as suspicious to the FIU (see Section 7.11, Handling of Transactions and Business Relationships after Filing of STRs).
6.3.6 Reviewing and Updating the Customer Due Diligence Information
(AML-CFT Decision Articles 4.2(b), 4.3(b), 7.2, 12)
The timely review and update of CDD information is a fundamental component of an effective ML/FT risk management and mitigation programme. FIs are obliged to maintain the CDD documents, data and information obtained on customers, and their Beneficial Owners or beneficiaries in the case of legal persons or arrangements, up to date. The AML-CFT Decision provides that FIs should update the CDD information on High Risk Customers more frequently, and that, in the absence of a ML/FT suspicion, FIs may update the CDD information of identified low-risk customers less frequently.
In order to be able to update the CDD information of customer in a risk-based manner, FIs should develop internal policies, procedures and controls in relation to the periodic or event-driven review and updating of CDD information. These policies and procedures should be reasonable and proportionate to the risks involved, and, in formulating them, FIs are advised to consider parameters such as:
• Circumstances, timing and frequency of reviews and updates. Generally, FIs should establish clear rules per customer risk category with respect to the maximum period of time that should be allowed to elapse between CDD reviews and updates of customer records. The expiry of a customer’s or Beneficial Owner’s identification documents is a circumstance that call for updating the customer information. Changes in legislation or internal procedures are also a cause for reviewing and updating customer files.
• Additionally, FIs should also establish clear rules with respect to circumstances that would trigger an interim or event-driven review, or the acceleration of a particular customer’s review cycle. Circumstances or events that might trigger an interim review include:
- Discovery of information about a customer that is either contradictory or otherwise puts in doubt the appropriateness of the customer’s existing risk classification or the accuracy of previously gathered CDD information; - Material change in ownership, legal structure, or other relevant data (such as name, registered address, purpose, capital structure) of a legal person or arrangement; - Initiation of legal or judicial proceedings against a customer or Beneficial Owner; - Finding materially adverse information about a customer or Beneficial Owner, such as media reports about allegations or investigations of fraud, corruption or other crimes; - Qualified opinion from an independent auditor on the financial statements of a legal entity customer; - Transactions that indicate potentially unusual or suspicious transactions or activities.
• Components and extent of reviews and updates. In keeping with the nature and size of their businesses, FIs should clearly define the moments, contents and extent of CDD reviews for Business Relationships in different risk categories, including which data elements, documents, or information should be examined and updated if necessary. In this regard, FIs are advised that tools such as checklists and procedural manuals will help to enhance the effectiveness of CDD reviews and updates. Examples of procedures might include, but are not necessarily limited to:
- When the source of wealth or the source funds of a customer should be verified; - When additional inquiries or investigations should be made pertaining to the nature of a customer’s business, the purpose of a Business Relationship, or the reasons for a transaction; - How much of a customer’s transactional history, including how many and which specific transactions or transaction types, should be reviewed as part of a periodic or an interim review.
• Organisational responsibilities. In keeping with the nature and size of their businesses, FIs should consider clearly defining the relevant organisational arrangements in relation to the CDD review and update process. Examples of such responsibilities might include, but are not necessarily limited to:
- Carrying out reviews and updates; - Escalating and/or reporting situations in which risk classifications should be changed, Business Relationships should be suspended or terminated, or potentially unusual or suspicious activities should be further investigated; - Approving or rejecting reviews of Business Relationships (including senior management involvement with regard to PEPs and other High Risk Customers); - Undertaking CDD file remediation measures when necessary; - Auditing the quality of CDD reviews and updates; - Maintaining records with regard to CDD reviews and updates, in accordance with statutory record-keeping requirements (see Section 9, Record Keeping).
6.4 Enhanced Due Diligence (EDD) Measures
(AML-CFT Decision Articles 4.2(b), 7.2, 15, 22, 25)
In keeping with a risk-based approach to CDD, FIs are obliged to enhance their CDD measures with regard to customers identified as high-risk, including the specific categories of customers as provided for in the relevant articles of the AML-CFT Decision, such as politically exposed persons (PEPs) (see Section 6.4.1, Requirements for Politically Exposed Persons), customers associated with high-risk countries (see Section 6.4.3, Requirements for High-Risk Countries), and correspondent relationships (see Section 6.4.4, Requirements for Correspondent Relationships).
Generally speaking, EDD involves a more rigorous application of CDD measures, including elements such as:
• Increased scrutiny and higher standards of verification and documentation from reliable and independent sources with regard to customer identity;
• More detailed inquiry and evaluation of reasonableness in regard to the purpose of the Business Relationship, the nature of the customer’s business, the customer’s source of funds and source of wealth, and the purpose of individual transactions;
• Increased supervision of the Business Relationship, including the requirement for higher levels of management approval, more frequent monitoring of transactions, and more frequent review and updating of customer due diligence information.
EDD means that FIs should intensify their measures, specifically by obtaining further evidence and supporting documentation. FIs should obtain additional information and evidence from high-risk customers such as:
○ Source of funds (revenue) and source of wealth; ○ Identifying information on individuals with control over the customer (legal person or arrangement) or account, such as signatories or guarantors; ○ Occupation or type of business; ○ Financial statements; ○ Banking references; ○ Domicile; ○ Proximity of the customer’s residence, place of employment or place of business to the FI; ○ Description of the customer’s primary trade area and whether international transactions are expected to be routine; ○ Description of the business operations, the anticipated volume of currency and total sales, and a list of major customers and suppliers; and ○ Explanations for changes in account activity.
In addition, FIs should also apply specific EDD measures in case there are doubts about the accuracy or appropriateness of a customer’s ML/FT risk classification in order to determine the appropriate risk classification. EDD should also be applied when there are red-flag indicators of potentially unusual or suspicious transactions or activities. In all cases in which EDD is applied, FIs should ensure that they take reasonable measures to obtain adequate, substantiated, information about the customer, commensurate with the level of the risks identified.
As part of their overall AML/CFT framework, FIs should develop risk-based internal policies, procedures and controls in connection with the application of EDD measures. Examples of the some of the factors they should consider when developing the risk-based policies include:
• the ML/FT risks identified in the ML/TF business risk assessment;
• Circumstances, timing, and composition regarding the application of EDD measures;
• Frequency of reviews and updates in relation to information on high-risk customers;
• Extent and frequency of ongoing monitoring of the Business Relationship and monitoring of transactions in relation to high-risk customers.
Such policies, procedures and methodologies should be reasonable and proportionate to the risks involved, and, in formulating them, FIs should consider the results of the NRA, any Topical Risk Assessment and their own ML/FT business risk assessments. Commensurate with the nature and size of the FIs’ businesses, the policies, procedures and methodologies should also be documented, approved by senior management, and communicated at the appropriate levels of the organisation.
Additional guidance regarding the application of EDD measures to statutory high-risk Business Relationship categories is provided in the following sub-sections.
6.4.1 Requirements for Politically Exposed Persons (PEPs)
Due to their potential ability to influence government policies, determine the outcome of public funding or procurement decisions, or obtain access to public funds, politically exposed persons (PEPs) are classified as high-risk individuals from an AML/CFT perspective. The AML-CFT Law and the AML-CFT Decision define PEPs as:
“Natural persons who are or have been entrusted with prominent public functions in the State 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 organisation or any prominent function within such an organisation; and the definition also includes the following:
• Direct family members (of the PEP, who are spouses, children, spouses of children, parents).
• Associates known to be close to the PEP, which include:
- Individuals having joint ownership rights in a legal person or arrangement or any other close Business Relationship with the PEP. - Individuals having individual ownership rights in a legal person or arrangement established in favour of the PEP.
FIs are obliged to put in place appropriate risk management systems to determine whether a customer, Beneficial Owner, beneficiary, or controlling person is a PEP. In addition to undertaking standard CDD procedures, FIs are also required to take reasonable measures to establish the source of funds and the source of wealth of customers and Beneficial Owners identified as PEPs. In this regard, and commensurate with the nature and size of their businesses, FIs should take measures that include:
• Implementing automated screening systems which screen customer and transaction information for matches with known PEPs;
• Incorporating thorough background searches into their CDD procedures, using tools such as:
- Manual internet search protocols; - Public or private databases; - Publicly accessible or subscription information aggregation services; - Commercially available background investigation services.
If a customer, Beneficial Owner, beneficiary, or controlling person is identified as a PEP, FIs are required to take reasonable measures to establish the PEP’s source of funds and source of wealth. In this regard, they should also evaluate the legitimacy of the source of funds and source of wealth, including making reasonable investigations into the individual’s professional and financial background.
Furthermore, FIs are also required to obtain senior management approval before establishing a Business Relationship with a PEP, or before continuing an existing one. In regard to the latter, senior management should be notified and their approval should be obtained for the continuance of a PEP relationship each time any of the following situations occur:
• An existing customer, Beneficial Owner, beneficiary, or controlling person becomes, or is newly identified as, a PEP;
• An existing PEP Business Relationship is reviewed and the CDD information is updated, either on a periodic or an interim basis, according to the organisation’s internal policies and procedures;
• A material transaction that appears unusual or illogical for the PEP Business Relationship is identified;
• The beneficiary or Beneficial Owner of a life insurance policy or family takaful insurance policy is identified as a PEP, and in case higher risks are identified, the overall Business Relationship should also be thoroughly examined and consideration given to filing an STR. Senior management should be informed before the payout of the policy proceeds.
With regard to identified Domestic PEPs and individuals who were previously (but are no longer) entrusted with prominent functions at international organisations, the AML-CFT Decision provides that FIs should implement the measures described above when, apart from their PEP status, the Business Relationships associated with such persons could be classified as high-risk for any other reason.
The handling of a customer who is no longer entrusted with a prominent public function should be based on an assessment of risk. This risk based approach requires that FIs assess the ML/FT risk of a PEP who is no longer entrusted with a prominent public function, and take effective action to mitigate this risk. Possible risk factors are the level of (informal) influence that the individual could still exercise; the seniority of the position that the individual held as a PEP; or whether the individual’s previous and current function are linked in any way (e.g., formally by appointment of the PEPs successor, or informally by the fact that the PEP continues to deal with the same substantive matters).
6.4.2 EDD Measures for High-Risk Customers or Transactions
(AML-CFT Decision Article 4.2(b))
FIs are obliged to apply EDD measures to manage and mitigate the risks associated with identified High Risk Customers and/or transactions. The AML-CFT Decision defines a High Risk Customers as including those who represent a risk:
“…either in person, activity, Business Relationship, nature or geographical area, such as a customer from a high-risk country or non-resident in a country that does not hold an identity card, or a customer having a complex structure, performing complex operations or having unclear economic objective, or who conducts cash-intensive operations, or operations with an unknown third party...”
Examples of the EDD measures that should be taken by FIs are laid out in the relevant article of the AML-CFT Decision. When carrying out such measures (especially as regards obtaining and investigating more information about the nature of the customer’s business, purpose of the Business Relationship, or reason for the transaction), FIs should pay particular attention to the reasonableness of the information obtained, and should evaluate it for possible inconsistencies and for potentially unusual or suspicious circumstances. Examples of factors that FIs should take into consideration in this regard include, but are not limited to:
• An illogical reason for a foreign customer’s or Beneficial Owner’s presence, or establishment of a Business Relationship, in the UAE;
• Consistency between the nature of the customer’s business and transactions and the customer’s or Beneficial Owner’s professional background and employment history, in regard to which FIs may find it helpful to obtain background information from reliable and independent sources, as well as from internet and social media searches, and from the customer’s or Beneficial Owner’s CV;
• The level of complexity and transparency of the customer’s transactions, especially in comparison with the customer’s or Beneficial Owner’s educational and professional background;
• The level of complexity and transparency of the customer’s legal structure of legal persons or arrangements;
• The nature of any other business interests of the customer or Beneficial Owner, including any other legal persons or arrangements owned or controlled;
• Consistency between the customer’s line of business and that of the counterparty to the customer’s transactions (as identified, for example, through internet searches).
Additionally, and commensurate with the nature and size of their businesses, when carrying out EDD measures in respect of High Risk Customers or Beneficial Owners, FIs should take appropriate risk-mitigation measures such as, but not limited to:
• Performing background checks (among other via internet searches, public databases, or subscription information aggregation services) to screen for possible matches with targeted and other international financial sanctions lists, indications of criminal activity (including financial crime), or other adverse information;
• Using more rigorous methods for the verification of the customer’s or Beneficial Owner’s identity in regard to High Risk Customers (see Section 6.3.1, Customer and Beneficial Owner Identification/Verification for more information).
6.4.3 Requirements for High-Risk Countries
(AML-CFT Law Article 16.1(e); AML-CFT Decision Article 22, 44.7, 60)
FIs are obliged to implement EDD measures commensurate with the ML/FT risks associated with Business Relationships and transactions with customers from high-risk countries subject to a Call for Action and Jurisdictions under Increased Monitoring and the countries identified by NAMLCFTFC. In the case of legal persons and arrangements, their Beneficial Owners, beneficiaries and other controlling persons from high-risk countries.
FIs can obtain guidance on high risk countries from NAMLCFTFC, from the FATF list of High-Risk Jurisdictions subject to a Call for Action and Jurisdictions under Increased Monitoring, and from NRA report. In addition, reference can also be made to the Organisation for Economic Cooperation and Development (OECD) list of jurisdictions classified as tax havens. The Basel AML index can be a useful source to determine the risk of a country.
Examples of some of the measures FIs should apply in this regard include:
• Increased scrutiny and higher standards of verification and documentation from reliable and independent sources with regard to the identity of customers, Beneficial Owners, beneficiaries and other controlling persons;
• More detailed inquiry and evaluation of reasonableness in regard to the purpose of the Business Relationship, the nature of the customer’s business, the customer’s source of funds, and the purpose of individual transactions;
• Increased investigation to ascertain whether the customers or related persons (Beneficial Owners, beneficiaries and other controlling persons, in the case of legal persons and arrangements) are foreign PEPs;
• Increased supervision of the Business Relationship, including the requirement for higher levels of internal reporting and management approval, more frequent monitoring of transactions, and more frequent review/ updating of customer due diligence information.
Additionally, FIs are obliged to implement all specific CDD measures and countermeasures regarding High Risk Countries as defined by the National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organisations, including those related to the implementation of the decisions of the UN Security Council under Chapter VII of the Charter of the United Nations, the International Convention for the Suppression of the Financing of Terrorism and the Treaty on the Non-Proliferation of Nuclear Weapons, and other related directives, and those called for by the Financial Action Task Force (FATF) and/or other FSRBs.
In order to fulfil these obligations, and commensurate with the nature and size of their businesses and the risks involved, FIs should establish adequate internal policies, procedures and controls in relation to the application of EDD measures and risk-proportionate effective countermeasures to customers and Business Relationships associated with high-risk countries. Some of the factors to which FIs should give consideration when formulating such policies, procedures and controls, include but are not limited to the following:
• The organisation’s risk appetite with respect to Business Relationships involving high-risk countries;
• Methodologies and procedures for assessing and categorising country risk, and identifying high-risk countries, including the statutorily defined High Risk Countries as established by the NAMLCFTC, and taking into consideration advice or notifications of concerns about weaknesses in the AML/CFT system of other countries issued by the relevant Supervisory Authorities and/or Competent Authorities;
• Determination and implementation of appropriate risk-based controls (for example, certain product or service restrictions, transaction limits, or others) with regard to customers and Business Relationships associated with high-risk countries;
• Organisational roles and responsibilities in relation to the monitoring, management reporting, and risk management of high-risk country Business Relationships;
• Appropriate procedures for the enhanced investigation of Business Relationships involving high-risk countries in relation to their assessment for possible PEP associations;
• Independent audit policies in respect of EDD procedures pertaining to customers/Business Relationships involving high-risk countries and the business units that deal with them.
For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply EDD, and in the most serious cases, countries are called upon to apply countermeasures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country. However, specific countermeasures which need to be applied by FIs shall be advised by the corresponding supervisory authorities, the FIU or the NAMLCFTC.
6.4.4 Requirements for Correspondent Relationships
Financial Institutions are obliged to fulfil certain due diligence requirements with regard to the correspondent banking relationships and other similar relationships they maintain, regardless of whether these involve foreign or domestic financial institutions. Additional guidance in respect of the measures specified in the relevant article of the AML-CFT Decision is provided below. Similar relationships to which FIs should apply the guidance below include, for example those established for securities transactions or funds transfers.
FIs are prohibited from entering into or maintaining correspondent relationships with shell banks, or with institutions that allow their accounts to be used by shell banks. The AML-CFT Decision defines a shell bank as a “bank that has no physical presence in the country in which it is incorporated and licensed, and is unaffiliated with a regulated financial group that is subject to effective consolidated supervision.”
• FIs are required to collect sufficient information about any receiving correspondent institution for the purpose of identifying and achieving a full understanding of the nature of its business, and to determine, through publicly available information, its reputation and level of AML/CFT controls, including whether it has been subject to a ML/FT investigation or regulatory action.
• FIs are obliged to evaluate the AML/CFT controls applied by the receiving correspondent institution.
• FIs are required to obtain approval from senior management before establishing new correspondent relationships.
• FIs are obliged to understand the responsibilities of each institution in the field of combating the crimes of money laundering, the financing of terrorism and of illegal organisations.
Regulatory and supervisory environments governing the operation of financial institutions around the world vary greatly. Thus, not all foreign financial institutions are subject to the same AML/CFT requirements as FIs in the UAE; and as a consequence, some of these foreign institutions may pose a higher ML/FT risk. To mitigate against these risks, FIs that maintain correspondent relationships with foreign financial institutions should consider implementing adequate procedures to assess and periodically review the relevant regulatory and supervisory frameworks of the countries concerned.
Furthermore, when gathering information about financial institutions with which they maintain correspondent relationships, whether foreign or domestic, FIs should take appropriate steps to assess the nature, size and extent of their businesses in the countries where they are incorporated and licensed, as well as their ownership and management structures (taking into consideration the nature and extent of any PEP involvement), in order to evaluate whether they exhibit the characteristics of shell banks, and whether they offer downstream correspondent services (also known as “nested accounts”) to other banks. If they do offer downstream correspondent services, FIs should also take reasonable steps to understand the types of services offered, the number and types of financial institutions they are offered to, the types of customers those institutions serve, and to identify the associated ML/FT risk issues.
In order to collect sufficient information about the nature of a financial institution and the AML/CFT controls it applies, and to assess the ML/FT risks associated with it, FIs should take appropriate measures such as implementing a suitable correspondent relationships questionnaire and, when necessary, conducting follow-up interviews. (FIs may find the correspondent banking questionnaire which has been developed by the Wolfsberg Group, as well as the Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, instructive in this regard. See Appendix 11.2, Useful Links.)
In addition to obtaining senior management approval prior to establishing new correspondent relationships, FIs should also periodically review and update their due diligence information in relation to the financial institutions with which they maintain correspondent relationships, commensurate with the risks involved (see 6.3.6 Reviewing and Updating the Customer Due Diligence Information). In the event of a deterioration in the risk profile of a financial institution with which a correspondent relationship is maintained, including the discovery of material adverse information concerning the institution, FIs should ensure that senior management is informed and appropriate risk-based measures are taken to assess and mitigate the ML/FT risks involved.
FIs should also maintain agreements or contracts with financial institutions with which they maintain correspondent relationships. In addition to operational details concerning the products and services covered, these agreements should clearly describe each party’s responsibilities in regard to ML/FT risk mitigation, due diligence procedures, and the detailed conditions related to any permitted third-party usage of the correspondent account.
6.4.5 Requirements for Money or Value Transfer Services
(AML-CFT Decision Articles 26, 30)
As part of a risk-based AML/CFT approach, FIs that enter into or maintain Business Relationships with Money or Value Transfer Services (MVTSs) should take adequate CDD measures that are commensurate with the risks involved (see Sections 6.3, Customer Due Diligence (CDD) Measures and 6.4, Enhanced Due Diligence (EDD) Measures). Examples of measures that FIs should consider in this regard include, but are not limited to:
• Ensuring that the MVTS is properly licensed or registered; in particular, when opening any accounts for Hawala Providers, FIs licensed by the Central Bank must physically check the original Hawala Provider registration certificate issued by the Central Bank and keep a copy thereof;
• Obtaining information about and assessing the adequacy of the MVTS’s AML/CFT policies, procedures and controls, including those related to Wire Transfers as stipulated in the relevant provisions of the AML-CFT Decision;
• Obtaining the MVTS’s list of agents, and identifying and assessing the associated ML/FT risks, especially with regard to high-risk countries or other identified high-risk factors;
• Obtaining sufficient information about the MVTS’s ownership and management structure (including taking into consideration the possibility of PEP involvement), the nature and scope of its business, the nature of its customer base, and the geographic areas in which it operates, so as to be in a position to identify, assess, and manage or mitigate the associated ML/FT risks.
FIs that enter into or maintain relationships with MTVSs should also use a risk-based approach to determine the appropriate internal AML/CFT policies, procedures and controls FIs implement in relation to the risk assessment, risk classification, and the type and extent of CDD they perform on the MVTSs. The policies and procedures that FIs apply should be reasonable and proportionate to the risks involved, and should be adequately documented, senior management approved, and communicated to the relevant employees of the organisation.
6.4.6 Requirements for Non-Profit Organisations
Non-Profit Organisations (NPOs) can often pose increased risks in regard to money laundering, the financing of terrorism, and the financing of illegal organisations. As part of an effective risk-based approach to AML/CFT, FIs that enter into or maintain Business Relationships with NPOs should take adequate CDD measures that are commensurate with the risks involved (see Sections 6.3, Customer Due Diligence (CDD) Measures and 6.4, Enhanced Due Diligence (EDD) Measures). Examples of measures that FIs should consider include, but are not limited to:
• Ensuring that the NPO is properly licensed or registered; in particular, when opening any accounts for Non-Profit Organisations, FIs licensed by the Central Bank must obtain an original signed letter from the Ministry of Community Development for opening accounts to collect donations and an authorization from the UAE Red Crescent for conducting financial transfers out of the UAE through some of these accounts;
• Obtaining information about and assessing the adequacy of the NPO’s AML/CFT policies, procedures and controls;
• Obtaining sufficient information about the NPO’s legal, regulatory and supervisory status, including requirements relating to regulatory disclosure, accounting, financial reporting and audit (especially where community/social or religious/cultural organisations are involved, and when those organisations are based, or have significant operations, in jurisdictions that are unfamiliar or in which transparency or access to information may be limited for any reason);
• Obtaining sufficient information about the NPO’s ownership and management structure (including taking into consideration the possibility of PEP involvement); the nature and scope of its activities; the nature of its donor base, as well as of that of the beneficiaries of its activities and programmes; and the geographic areas in which it operates, so as to be in a position to identify, assess, and manage or mitigate the associated ML/FT risks;
• Performing thorough background checks (including but not limited to the use of internet searches, public databases, or subscription information aggregation services) on the NPO’s key persons, such as senior management, branch or field managers, major donors and major beneficiaries, to screen for possible matches with targeted and other international financial sanctions lists, indications of criminal activity (including financial crime), or other adverse information.
FIs that enter into or maintain relationships with NPOs should also use a risk-based approach to determine the appropriate internal AML/CFT policies, procedures and controls the FIs implement in relation to the risk assessment, risk classification, and the type and extent of CDD they perform on NPOs. The policies and procedures that FIs apply should be reasonable and proportionate to the risks involved, and should be adequately documented, senior management approved, and communicated to the relevant employees of the organisation.
6.5 Simplified Due Diligence (SDD) Measures
(AML-CFT Decision Articles 4.3, 5, 10)
In keeping with a risk-based approach to CDD, under certain circumstances and in the absence of a ML/FT suspicion, FIs are only permitted to exercise simplified customer due diligence measures (SDD) with regard to customers identified as low-risk through an adequate analysis of risks.
SDD generally involves a more lenient application of certain aspects of CDD measures, including elements as:
• A reduction in verification requirements with regard to customer or Beneficial Owner identification;
• Fewer and less detailed inquiries in regard to the purpose of the Business Relationship, the nature of the customer’s business, the customer’s source of funds, and the purpose of individual transactions;
• More limited supervision of the Business Relationship, including less frequent monitoring of transactions, and less frequent review/updating of customer due diligence information.
Specifically, the AML-CFT Decision permits the application of SDD in the following circumstances:
• Identified low-risk customers. When the customer or Beneficial Owner is identified as posing a low risk of ML/FT, FIs are permitted to complete the verification of their identity after the establishment of a Business Relationship under the conditions specified in the relevant provisions of the AML-CFT Decision. In this regard, FIs are required to implement appropriate and effective measures to control the risks of ML/FT, including the risks in regard to the customer or Beneficial Owner benefitting from the Business Relationship prior to the completion of the verification process. Examples of such measures which FIs may consider taking in this regard are, among others:
- Holding funds in suspense or in escrow until the verification of the identity is completed; - Making the completion of verification of the identity a condition precedent to the closing of a transaction.
It should be noted that the provision allowing a relaxation of the timing for the completion of the identity verification procedures does not imply that FIs are permitted to establish a Business Relationship without any customer identification at all. On the contrary, in all cases, the basic identification information in relation to the customer (whether a natural or legal person or arrangement) should be obtained; however under the specified conditions, FIs are permitted to establish the Business Relationship prior to the completion of the verification process, which may include such steps as: obtaining appropriate supporting documentation, certifications or attestations, when necessary (for example, as regards the corporate documents of a legal person); or obtaining all the necessary information related to the relevant parties of a legal person or Legal Arrangement, such as Beneficial Owners, settlors, trustees or executors, protectors, beneficiaries, or other controlling persons.
• Listed companies. FIs are exempted from identifying and verifying the identity of any shareholder, partner or Beneficial Owner of a legal person under the conditions specified in the relevant provisions of the AML-CFT Decision. Namely:
- When the relevant information on the shareholder, partner or Beneficial Owner is obtained from reliable sources; and - When the customer, or the owner holding the controlling interest of the customer, is a company listed on a regulated stock exchange subject to adequate disclosure and transparency requirements related to Beneficial Ownership; or when the customer, or the owner holding the controlling interest of a legal entity customer, is the majority-held subsidiary of such a listed company.
Without prejudice to the above, in the case of foreign stock exchanges, FIs should take steps to adequately assess and document the relevant disclosure and transparency requirements related to Beneficial Ownership, and to ensure that they are at least equivalent to those of the UAE.
In addition, FIs should be aware that, regardless of the exemption mentioned above, FIs are required with respect to listed companies to verify that any person purporting to act on behalf of the customer is so authorised, and verify the identity of that person.
As part of their overall AML/CFT framework, FIs should use a risk-based approach to determine the internal policies, procedures and controls they implement in connection with the application of SDD procedures. Examples of some of the factors they should consider when developing their risk-based policies include:
• the ML/FT risks identified in the ML/TF business risk assessment, especially with regard to low-risk categories of customers;
• Circumstances, timing, and composition in regard to the application of SDD measures;
• Frequency of reviews and updates in relation to customer SDD information;
• Extent and frequency of ongoing supervision of the Business Relationship and monitoring of transactions in relation to customers to which SDD measures are applied.
Such policies, procedures and methodologies should be reasonable and proportionate to the risks involved, and, in formulating them, FIs should consider the results of both the NRA and any Topical Risk Assessment and their own ML/FT business risk assessments. Commensurate with the nature and size of the FIs’ businesses, the policies, procedures and methodologies should also be documented, approved by senior management, and communicated at the appropriate levels of the organisation.
6.6 Reliance on a Third Party
(AML-CFT Decision Articles 19)
Under certain conditions, the AML-CFT Decision permits FIs to rely on third parties to undertake the required CDD measures, including those measures specifically laid out in regard to identified high-risk countries (see Section 6.4.3, Requirements for High-Risk Countries), with the responsibility for the validity of the measures resting directly with the FIs. Among the conditions set forth in the AML-CFT Decision concerning the reliance on third parties, it is stipulated that FIs shall:
“Ensure that the third party is regulated and supervised, and adheres to the CDD measures towards Customers and record-keeping provisions of the present Decision.”
In order to fulfil this obligation, FIs that rely on third parties to undertake CDD measures on their behalf should implement adequate measures, in keeping with the nature and size of their businesses, to ensure the third party’s adherence to the requirements of the AML-CFT Law and the AML-CFT Decision in relation to CDD measures. Examples of such measures include:
• Clearly defined procedures for determining the adequacy of a third-party’s CDD and record-keeping measures, including the evaluation of such factors as the comprehensiveness and quality of its AML/CFT policies, procedures and controls; the number of personnel dedicated to CDD; and its audit and/or quality assurance policies in regard to CDD. In this regard, FIs are advised that tools such as questionnaires, scorecards, and on-site visits may be useful in evaluating the adequacy of a third party’s adherence.
• Service-level agreements, clearly setting out the roles and responsibilities of the FI and the third party and specifying the nature of the CDD and record-keeping requirements to be fulfilled.
• Procedures for the certification by third parties of documents and other records pertaining to the CDD measures undertaken.
In addition to the above, when relying on foreign third parties for the undertaking of CDD measures, FIs should take steps to ensure that the AML/CFT regulatory and supervisory framework under which the third party operates is at least equivalent to that of the State. This means that FIs should ensure that the third party is regulated and supervised for AML/CFT purposes, and adheres to the equivalent CDD and record-keeping measures.
Whichever methods are utilized to ensure the adherence of third parties to the statutory CDD and record-keeping requirements, FIs should document and periodically review them for effectiveness.
Reliance on a third party refers to an FI’s reliance on a third party of the entire or part of the CDD process as well as reliance on a third party when to introducing business. FIs should therefore take adequate steps to satisfy themselves that copies of identification data and other relevant documentation relating to the CDD requirements will be made available from the third party upon request without delay. This includes the identification and verification of the identity of customers and Beneficial Owners, beneficiaries or controlling persons of legal entities or arrangements, as well as the investigation and assembly of other relevant customer documents, information and data, as per the statutory CDD and record-keeping requirements. Nevertheless, FIs remain ultimately responsible for the outcome of the CDD process. Furthermore, FIs should themselves assess the risks of the customer, including the customer’s risk profile. FIs should thus document their rationale for the assignment of relevant customer risk classifications, as well as their analysis of the CDD information obtained from the third parties. Moreover, FIs remain themselves responsible for conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship.
For the purpose of this guidance, it is important to note that FIs are expected to use documents, data or information from reliable and independent sources in carrying out their CDD obligations, which include, among other things, verifying the identity of customers and Beneficial Owners, beneficiaries or controlling persons of legal entities or arrangements.
Reliable and independent sources may include, but are not necessarily limited to, official bodies such as Competent Authorities, governmental departments or agencies, governmental or state-sponsored business registries, public utilities or similar official enterprises; as well as non-official organisations, such as publicly accessible free or subscription information aggregation services, credit reporting agencies, and others.
FIs are reminded that simply obtaining CDD documents and supporting information from reliable and independent sources during the course of performing their own CDD procedures is not necessarily considered as reliance on a third party. On occasion that FIs during the course of carrying out their own CDD procedures, receive certain documents, information or data from a third-party, FIs should obtain evidence of the third party’s regulatory and supervisory status and good standing, and they should also consider obtaining the third party’s certification that any CDD documents provided by them (such as identification documents, proof of address, or documents corroborating a customer’s source of funds) are true copies of the originals.
Part IV—AML/CFT Administration and Reporting
7. Suspicious Transaction Reporting
(AML-CFT Law Articles 9.1, 15, 30; AML-CFT Decision Articles 16-18)
Under the AML/CFT legal and regulatory framework of the UAE, all FIs are obliged to promptly report to the Financial Intelligence Unit (FIU) suspicious transactions and any additional information required in relation to them, when there are suspicions, or reasonable grounds to suspect, that the proceeds are related to a crime, or to the attempt or intention to use funds or proceeds for the purpose of committing, concealing or benefitting from a crime. FIs are required to put in place and update indicators that can be used to identify possible suspicious transactions.
In order to fulfil these obligations, FIs should implement adequate internal policies, procedures and controls in relation to the identification and the immediate reporting of suspicious transactions. The following sub-sections provide additional guidance in this regard.
7.1 Role of the Financial Intelligence Unit
(AML-CFT Law Articles 9-10; AML-CFT Decision Articles 13, 16, 17.1, 21.2 and 5, 40-43, 46.1-4, 49.2-3)
The FIU of the UAE is established within the premises of the Central Bank, however, the FIU operates independently by legal and regulatory mandate as the central national agency with sole responsibility for performing the following functions:
• Receiving and analysing STRs from FIs and DNFBPs, and disseminating the results of its analysis to the Competent Authorities of the State;
• Receiving and analysing reports of suspicious cases from the Federal Customs Authority;
• Requesting additional information and documents relating to STRs, or any other data or information it deems necessary to perform its duties, from FIs, DNFBPs, and Competent Authorities, including information relating to customs disclosures;
• Cooperating and coordinating with Supervisory Authorities by disseminating the outcomes of its analysis, specifically with respect to the quality of STRs, to ensure the compliance of FIs and DNFBPs with their statutory AML/CFT obligations;
• Sending data relating to STRs and the outcomes of its analyses and other relevant data, including information obtained from foreign FIUs, to national Law Enforcement Authorities, prosecutorial authorities and judiciary authorities when actions are required by those authorities in relation to a suspected crime;
• Exchanging information with its counterparts in other countries, with respect to STRs or any other information to which it has access.
Under the aegis of the National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organisations, and for the effective performance of its functions, the FIU maintains operational protocols with numerous national and international Competent Authorities.
The FIU has launched the GoAML system for the purposes of facilitating the filing of STRs by all FIs. FIs shall register themselves on the GoAML system by following the procedure manual and maintain their registration in an active status. The Compliance Officer of the company can register as the user of the system. GoAML provides a secure link of each FI to the FIU through their respective supervisory authorities. The system hosts processes for facilitating filing of STRs. It also has an .xml schema for filing batches of STRs. The guidance documents for filing of STRs are posted on the dashboard of this system. All new licensed FIs shall register themselves immediately after obtaining their financial services license so as to confirm their readiness for filing of STRs from the beginning.
The STRs are received by the FIU and processed for any required further information or documents or for further action by Law Enforcement or Supervisory Authorities. The FIU maintains a record of these STRs, performs a trend analysis to understand the prevailing trends in transactions and sectors or Institutions where possibility of ML or FT exists and this trend analysis is shared with all the registered users of GoAML through the system by means of a periodic trends and typologies report.
7.2 Processing of STRs by the FIU
(AML-CFT Law Articles 9-10; AML-CFT Decision Articles 42, 43.1-3, 49.3)
A core function of the FIU is to conduct operational analysis on STRs and information received from FIs, DNFBPs, as well as from Competent Authorities, and to support the investigations of Law Enforcement Authorities. It does so by identifying specific targets (such as persons, funds, or criminal networks) and by following the trail of specific transactions in order to determine the linkages between those targets and the possible proceeds of crime, money laundering, predicate offences and terrorist financing.
Upon the receipt of STRs or information from reporting institutions or other sources, the FIU assesses the information, prioritises the risk, and performs its own analyses using a variety of information sources and analytical techniques.
In certain cases, the FIU may request additional information from the reporting entity, Competent Authorities, or even from other FIs which also have a business relationship with the subject of its analysis or investigation, through the Integrated Enquiries Management System (IEMS). Upon concluding its analysis or investigation, the FIU may disseminate information about the case to Law Enforcement Authorities or foreign FIUs, and may, at its own discretion, also provide feedback to the reporting entity in the form of instructions regarding required actions to be taken, or recommendations and guidance.
In addition to the above, the FIU also performs strategic analysis, using data aggregated from the STRs and other information it receives, including from national and international Competent Authorities and FIUs of other countries, to identify trends and patterns relating to ML/FT. As a result of this analysis, the FIU may from time to time disseminate enhanced due diligence and fraud alerts to FIs as a preventive measure, and may also disseminate information to FIs about prevalent or new and emerging ML/FT typologies, or other specific risks which FIs should take into consideration.
7.3 Meaning of Suspicious Transaction
(AML-CFT Law Article 16; AML-CFT Decision Article 17.1)
Within the meaning of the AML-CFT Law and its implementing AML-CFT Decision, a suspicious transaction refers to any transaction, attempted transaction, or funds which an FI has reasonable grounds to suspect as constituting—in whole or in part, and regardless of the amount or the timing—any of the following:
• The proceeds of crime (whether designated as a misdemeanour or felony, and whether committed within the State or in another country in which it is also a crime);
• Being related to the crimes of money laundering, the financing of terrorism, or the financing of illegal organisations;
• Being intended to be used in an activity related to such crimes.
It should be noted that the only requirement for a transaction to be considered as suspicious is “reasonable grounds” in relation to the conditions referenced above. Thus, the suspicious nature of a transaction can be inferred from certain information, including indicators, behavioural patterns, or CDD information, and it is not dependent on obtaining evidence that a predicate offence has actually occurred or on proving the illicit source of the proceeds involved. FIs do not need to have knowledge of the underlying criminal activity nor any founded suspicion that the proceeds originate from a criminal activity; reasonable grounds are sufficient.
FIs should also note that transactions need not be completed, in progress or pending completion in order to be considered as suspicious. Attempted transactions, transactions that are not executed and past transactions, regardless of their timing or completion status, which are found upon review to cause reasonable grounds for suspicion, must be reported in accordance with the relevant requirements.
7.4 Identification of Suspicious Transactions
FIs are obliged to put in place indicators that can be used to identify suspicious transactions, and to update those indicators on an ongoing basis in accordance with the instructions of the Supervisory Authorities or the FIU, as well as in keeping with relevant developments concerning ML/FT typologies. FIs should also consider the results of the NRA, any Topical Risk Assessment and their own ML/FT business risk assessments in this regard.
As part of their overall AML/CFT framework, and commensurate with the nature and size of their businesses, FIs should determine the internal policies, procedures and controls they apply in connection with the identification, implementation, and updating of indicators, as well as with the identification and evaluation of potentially suspicious transactions. Some factors that should be considered include, but are not limited to:
• Organisational roles and responsibilities with respect to the implementation and review/updating of the relevant indicators, especially in relation to obligatory indicators required by the Supervisory Authorities or the FIU;
• Operational and IT systems procedures and controls in connection with the application of relevant indicators to processes such as transaction handling and monitoring, customer due diligence measures and review, and alert escalation;
• Staff training in relation to the identification and reporting of suspicious transactions (including attempted transactions), the appropriate use and assessment of the relevant indicators, and the degree and extent of internal investigation that is appropriate prior to the reporting of a suspicious transaction.
FIs should ensure that they have an adequate process and dedicated, experienced staff for the investigation of and dealing with alerts. The investigation of alerts and the conclusion of the investigation should be documented, including the decision to close the alert or to promptly report the transaction as suspicious.
Prompt reporting to the FIU is one of the key elements of the AML/CFT process. This means that FIs must report to the FIU the transaction immediately once the suspicious nature of the transaction becomes clear. This will be the case when from an objective point of view, taking the available information into account, there is a reason to believe that a transaction is suspicious. This means that FIs expeditiously investigate alerts and possible indications of ML/FT and immediately report the transaction upon determining that the transaction should be reported to the FIU. FIs therefore need to able to show that from the moment of the alert immediate and continuous action has been taken.
In this respect, FIs must have a procedure in place that defines the reporting process, and what steps to take in such cases. When investigating alerts it is important to examine the customer’s earlier and related transactions, and to reconsider the customer’s risk profile.
When identifying suspicious transactions, FIs, and their management and employees, should be aware of the facts that, in relation to ML/FT crimes, there is no minimum threshold or monetary value for reporting, and that no amount or transaction size should be considered too small for suspicion. This is of particular significance where the crimes of the financing of terrorism and of illegal organisations is concerned, since typologies related to them may often involve very small amounts of money.
Furthermore, with the exception of obligatory indicators for which reporting is required by the relevant Supervisory Authorities or the FIU, FIs should note that the presence of an indicator means that a transaction needs to be immediately investigated in order to determine whether the transaction needs to be reported. When determining whether a transaction is suspicious or whether there is reasonable ground for a suspicion, FIs should give consideration to the nature of the specific circumstances, including the products or services involved, and the details of the customer in the context of its risk profile. In some cases, patterns of activity or behaviour that might be considered as suspicious in relation to a specific customer or a particular product type, might not be suspicious in regard to another. For this reason, clear internal policies and procedures with regard to alert escalation and investigation, and internal suspicious transaction reporting are critical to an effective ML/FT risk-mitigation programme. This includes an adequate training program that will allow staff to detect possible unusual or suspicious transactions.
While it is impossible to list all the indicators of suspicion in these Guidelines, some useful links to sources of AML/CFT suspicious transaction indicators are provided in Appendix 11.2, Useful Links. A few examples of potentially suspicious transaction types that FIs should take into consideration include:
• Transactions or series of transactions that appear to be unnecessarily complex, that make it difficult to identify the Beneficial Owner, or that do not appear to have an economic or commercial rationale;
• Numbers, sizes, or types of transactions that appear to be inconsistent with the customer’s expected activity and/or previous activity;
• Transactions that appear to be exceptionally large in relation to a customer’s declared income or turnover;
• Large unexplained cash deposits and/or withdrawals, especially when they are inconsistent with the nature of the customer’s business;
• Loan repayments that appear to be inconsistent with a customer’s declared income or turnover;
• Early repayment of a loan followed by an application for another loan;
• Third-party loan agreements, especially when there are amendments to or assignments of the loan agreement;
• Requests for third-party payments, including those involving transactions related to loans, investments, or insurance policies;
• Transactions involving high-risk countries, including those involving “own funds” transfers, particularly in circumstances in which there are no clear reasons for the specific transaction routing;
• Frequent or unexplained changes in ownership or management of Business Relationships;
• Illogical changes in business activities, especially where high-risk activities are involved;
• Situations in which CDD measures cannot be performed, such as when the customers or Beneficial Owners refuse to provide CDD documentation, or provide documentation that is false, misleading, fraudulent or forged.
When reporting an STR in the GoAML system, the user is required to select the most appropriate reason for reporting available from the menu selection provided. More than one reason may also be provided, if deemed necessary. In order to select the appropriate indicator, click ‘Add’ to select the appropriate reason for the report.
Select the reason(s) applicable and then press ‘Close’. Alternatively, the user may search for reasons using the search bar available on the top left when expanding the form. It is imperative that a minimum of one reason for reporting must be selected to avoid rejection of the report by the GoAML system.
7.5 Requirement to Report
(AML-CFT Law Articles 9.1, 15, 24; AML-CFT Decision Articles 13.2, 17.1, 20.2)
FIs are obliged to report transactions to the FIU without delay when there are suspicions, or reasonable grounds to suspect, that the proceeds are related to a crime, or to the attempt or intention to use funds or proceeds for the purpose of committing, concealing or benefitting from a crime. There is no minimum reporting threshold; all suspicious transactions, including attempted transactions, should be reported regardless of the amount of the transaction. There is also no statute of limitations with regard to when the possible crimes or the suspicious transaction took place.
Under federal law and regulations, whether the FI operates in the mainland UAE or in a Financial or Commercial Free Zone, the designated Competent Authority for the reporting of suspicious transactions is the FIU.
Failure to – immediately - report a suspicious transaction, whether intentionally or by gross negligence, is a federal crime. Any person, including FIs or their managers and employees, who fails to perform their statutory obligation to report a suspicion of money laundering, or the financing of terrorism or of illegal organisations, is liable to a fine of no less than AED100,000 and no more than AED1,000,000 and/or imprisonment.
There are no exemptions from the statutory reporting requirement provided for FIs under the AML-CFT Law or AML-CFT Cabinet Decision.
7.6 Procedures for the Reporting of Suspicious Transactions
(AML-CFT Law Article 9; AML-CFT Decision Articles 17.1(a), 21.2)
As the designated Competent Authority for receiving and analysing STRs from all FIs, it is within the purview of the FIU to determine the procedures for the reporting of suspicious transactions. As stated in the AML-CFT Decision, FIs shall report STRs “via the electronic system of the FIU or by any other means approved by the FIU”, which is the FIU’s GoAML system.
Without prejudice to the above, it should be noted that the AML-CFT Decision provides for the reporting of STRs to be effected by the designated compliance officer of the FI. Specifically, the Cabinet Decision states that the duty of a compliance officer is to:
“Review, scrutinise and study records, receive data concerning Suspicious Transactions, and take decisions to either notify the FIU or maintain the Transaction with the reasons for maintaining while maintaining complete confidentiality.”
In this regard, as part of their overall risk-based AML/CFT framework and commensurate with the nature and size of their businesses, FIs should establish appropriate policies, procedures and controls pertaining to the internal reporting by their managers and employees of potentially suspicious transactions, including the provision of the necessary records and data, to the designated AML/CFT compliance officer for further analysis and reporting decisions, as well as to the reporting of STRs by the compliance officer to the FIU. The relevant policies, procedures and controls should take into consideration such factors as:
• Policies and procedures for the internal investigation of potentially suspicious transactions prior to the reporting of STRs;
• Conditions, timing, and methods for filing internal potentially suspicious transactions;
• Content requirements and format of internal potentially suspicious transactions;
• Appropriate controls for ensuring confidentiality and the protection of data from unauthorized access (also see Section 7.8, Confidentiality and Prohibition against “Tipping Off”);
• Procedures related to the provision of additional information, follow-up actions pertaining to the transactions, and the handling of Business Relationships after the filing of STRs;
• Policies and procedures for the analysis and decision-making of suspicious transactions by the compliance officer in regard to reporting to the FIU;
• Other conditions deemed appropriate by the AML/CFT compliance officer.
Such policies, procedures and controls should be documented, approved by senior management, and communicated to the appropriate levels of the organisation, in keeping with the nature and size of the FI’s business.
7.7 Timing of Suspicious Transaction Reports (STRs)
(AML-CFT Law 9; AML-CFT Decision 17.1(a), 21.2)
FIs are obliged to report STRs to the FIU without delay. Since it is the responsibility of the designated AML/CFT compliance officer to “review, scrutinise and study records, receive data concerning suspicious transactions, and take decisions to either notify the FIU or maintain the transaction,” (see Section 8.1, Compliance Officer) it follows that the STRs should be immediately reported once the suspicious nature of the transaction becomes clear. This means that the internal reporting of suspicious transactions to the compliance officer should be done directly once the suspicion or reasonable grounds for suspicion are established, and immediately the designated AML/CFT compliance officer has confirmed that the transaction (whether pending, in progress, or past) is suspicious, it should be reported.
Without prejudice to the above, FIs should note that, with the exception of any obligatory indicators for which immediate reporting to the FIU is required by the relevant Competent Authorities, some potentially suspicious transactions or indicators of suspicion may require a degree of internal investigation before a suspicion or reasonable grounds for suspicion are established and an internal STR is reported to the designated AML/CFT compliance officer. The FI should however be able to demonstrate that this investigation is started immediately and has been ongoing continuously until the transaction is reported to the FIU. In this regard, and commensurate with the nature and size of their businesses, FIs should establish clear policies, procedures and staff training programmes pertaining to the identification, investigation and internal reporting of suspicious transactions (including attempted transactions), and the degree and extent of investigations that are appropriate prior to the internal reporting of a suspicious transaction (also see Section 7.2, Identification of Suspicious Transactions). These policies and procedures should be documented, approved by senior management, and communicated to the appropriate levels of the organisation.
7.8 Confidentiality and Prohibition against “Tipping Off”
(AML-CFT Law Article 25; AML-CFT Decision Articles 17.2, 21.2, 31.3, 39)
When reporting suspicious transactions to the FIU, FIs are obliged to maintain confidentiality with regard to both the information being reported and to the act of reporting itself, and to make reasonable efforts to ensure the information and data reported are protected from access by any unauthorized person.
As part of their risk-based AML/CFT framework, and in keeping with the nature and size of their businesses, FIs, and their foreign branches or group affiliates where applicable, should establish adequate policies, procedures and controls to ensure the confidentiality and protection of information and data related to STRs. These policies, procedures and controls should be documented, approved by senior management, and communicated to the appropriate levels of the organisation.
FIs must ensure that all relevant information relating to STRs is kept confidential, with due regard to the conditions and exceptions provided for in the law, and the guiding principles for this must be established in policies and procedures. FIs need to ensure that policy and procedures are reflected in for example, appropriate access rights with regard to core systems used for case management and notifications, secure information flows and guidance/training to all staff members involved. This guidance and training is primarily important for the first-line staff who have contact with customers. It is essential that these staff know when there may be cases of suspicious transactions, what questions they have to ask the customer and which information they must not under any circumstances disclose to the customer.
It should be noted that the confidentiality requirement does not pertain to communication within the FI or its affiliated group members (foreign branches, subsidiaries, or parent company) for the purpose of sharing information relevant to the identification, prevention or reporting of suspicious transactions and/or crimes related to ML/FT.
It is a federal crime for FIs or their managers, employees or representatives, to inform a customer or any other person, whether directly or indirectly, that a report has been made or will be made, or of the information or data contained in the report, or that an investigation is under way concerning the transaction. Any person violating this prohibition is liable to a penalty of no less than AED100,000 and no more than AED500,000 and imprisonment for a term of not less than six months.
7.9 Protection against Liability for Reporting Persons
(AML-CFT Law Article 27; AML-CFT Decision Article 17.3)
FIs, as well as their board members, employees and authorised representatives, are protected by the relevant articles of the AML-CFT Law and AML-CFT Decision from any administrative, civil or criminal liability resulting from their good-faith performance of their statutory obligation to report suspicious activity to the FIU. This is also the case even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred. However, it should be noted that such protections do not extend to the unlawful disclosure to the customer or any other person, whether directly or indirectly, that they have reported or intend to report a suspicious transaction, or of the information or data the report contains, or that an investigation is being conducted in relation to the transaction.
7.10 Handling of Transactions and Business Relationships after Filing of STRs
Once a Suspicious Transaction or other suspicious information related to a Customer or Business Relationship has been reported to the FIU, there are two immediate consequences:
• FIs are obliged to follow the instructions, if any, of the FIU in relation to both the specific transaction and to the business relationship in general.
• The Customer or Business Relationship should immediately be classified as a High Risk Customer and appropriate risk-based enhanced due diligence and ongoing monitoring procedures should be implemented in order to mitigate the associated ML/FT risks (see Sections 6.4, Enhanced Due Diligence (EDD) Measures, especially 6.4.2, EDD Measures for High-Risk Customers or Transactions, and 6.3.5 Ongoing Monitoring of the Business Relationship). It is however not required to terminated the relationship.
Further guidance on both of these topics is provided below.
FIU Instructions
After receiving an STR from an FI, the FIU may or may not revert to the reporting institution with specific instructions, requests for additional information, feedback or further guidance related to the STR or to the business relationship in general. In such cases, these communications will generally be directed to the designated AML/CFT compliance officer of the FI.
Confidentiality of FIU’s Instructions
The responsibility for coordinating the FI’s prompt compliance with the FIU’s instructions or requests lies with the designated AML/CFT compliance officer. It should be noted that, depending on the nature of the case, the FIU may require the compliance officer to maintain certain information related to its instructions or requests privileged and/or confidential within the FI’s organisation. In other words, in some cases, the compliance officer could be restricted from divulging information about a transaction or business relationship to anyone other than certain members of senior management or the board of directors of the FI. Regardless of the circumstances surrounding the FIU’s instructions or requests, including whether or not the compliance officer is permitted to provide explanations to the staff of the FI, the FI is obliged at all times to follow the compliance officer’s instructions in regard to any follow-up actions required in relation to an STR.
Timing of FIU’s Instructions
Whether or not the FIU issues instructions or requests for additional information to a reporting institution, or how quickly this may occur after the STR is initially reported, both depend on numerous factors. These may include the prioritisation of the incoming STR among all of the STRs received by the FIU, the results of the ensuing analysis, or the possible need for information to be exchanged with other Competent Authorities or international FIUs, as well as the timing and the results of such exchanges.
When an STR involves an anticipated, pending, or already in-progress transaction, FIs should use their best efforts to delay the execution or completion of the transaction, in order to allow for a reasonable amount of time in which to receive feedback, instructions, or additional information requests from the FIU. In taking such measures, FIs should take the necessary steps to avoid “tipping off” or arousing the customer’s suspicion that the transaction is being investigated or reported. Examples of some of the measures FIs may consider taking, either singly or in combination, in order to delay the execution or completion of transactions include but are not limited to:
• Delaying processing of the transaction without explanation for as long as possible;
• Advising the customer that the transaction has been delayed due to an unspecified operational, technical or other problem, and that efforts are underway to resolve it;
• Requesting additional information and/or supporting documentation (for example, evidence of relevant licences or authorisations, shipping or customs documents, additional identification documents, bank or other references) relating to the transaction, the customer, or the counterparty;
• Advising the customer that paperwork related to the transaction has been lost and requesting that it be resubmitted;
• Advising the customer that the transaction is pending an internal approval process;
• Any other reasonable delaying tactics, bearing in mind the obligation to avoid “tipping off” the customer.
During the time interval during which an anticipated, pending, or in-progress STR that has already been reported to the FIU is being delayed by the FI, any additional suspicions that may arise should also be immediately reported to the FIU as a follow-up to the original STR. Examples of such additional suspicions may include, but are not limited to:
• New adverse information obtained in relation to the transaction, the business relationship, or the counterparty to the transaction;
• Unusual behaviour of the customer as a result of the transaction being delayed, such as but not limited to:
- Sudden material amendments or changes to the circumstances or details of the transaction; - Excessive pressure, intimidation, displays of anger (beyond what would normally be expected) or threats of any kind, aimed at forcing the FI or its employees to complete the transaction; - Abrupt cancellation of the transaction, termination of the business relationship, or sudden attempts to close out the customer’s account and/or withdraw the balance of funds or other assets held by the FI; - Any other indication or reasonable grounds to suspect that the customer has become aware that the transaction is being investigated or reported as suspicious.
If a reasonable amount of time has not yet elapsed before the receipt of feedback, instructions, or requests for additional information from the FIU in regard to an STR, and it becomes impossible for the FI to delay the execution or completion of the reported transaction any longer without arousing the customer’s suspicion that the transaction is being investigated or reported, then the FI should request specific instructions or permission from the FIU in regard to executing or rejecting the transaction.
No Instructions, Feedback or Additional Information Requests from the FIU
Due to the factors previously mentioned, FIs may not receive instructions, additional information requests, or other feedback from the FIU in regard to STRs that have been filed; or the receipt of such communications may be delayed beyond what they consider to be a reasonable time period. In such instances, FIs should determine the appropriate handling of the STR and of the business relationship in general, taking into consideration all of the risk factors involved.
In particular, FIs are reminded that, unless they are specifically instructed by the FIU to do so, they are under no obligation to carry out transactions they suspect, or have reasonable grounds to suspect, of being related to a Crime. Furthermore, unless they are specifically instructed by the FIU to maintain the business relationship (for example, so that the Competent Authorities may monitor the customer’s activity), FIs should take appropriate steps in order to decide whether or not to maintain the business relationship. These steps may include, but are not limited to:
• Reassessing the business relationship risk and re-evaluate the customer’s risk profile, where necessary;
• Initiating an enhanced customer due diligence review;
• Considering the performance of an enhanced background investigation (including, if appropriate, the use of a third-party investigation service);
• Any other reasonable steps, commensurate with the nature and size of their businesses, and bearing in mind the obligation to avoid “tipping off” the customer.
FIs should be aware that filing an STR does not automatically mean that the relationship with the customer needs to be terminated. However, when deciding to terminate a business relationship for which an STR has been filed and no feedback has been received from the FIU after a reasonable time period, FIs should formally advise the FIU of their intention to do so unless there is an official objection.
Reasonable Time Period for Receiving Feedback from the FIU
FIs should note that there are no pre-established processing times, and no statute of limitations, in regard to the time interval during which the FIU may provide feedback, including instructions or requests for additional information in response to an STR. Furthermore, the time period that may be considered reasonable in relation to such feedback depends on numerous factors, including but not limited to the:
• Type, size and circumstances of the transaction;
• Normal average processing times for the specific transaction type;
• Type of customer or business relationship;
• Nature and size of the FI’s business;
• Precise nature of the suspicion.
The time period considered to be reasonable could thus vary widely from one case to another.
As a general guideline, the reasonable time periods for feedback from the FIU concerning transaction types that are less complex, more routine, and have faster average processing times (such as account-to-account or wire transfers, the exchange of currencies, or over-the-counter purchases of precious metals or stones, for example) would normally be expected to be shorter than those for more complex, less routine transaction types (such as, for example, purchases of real estate or other complex assets, trade finance transactions, or various forms of loan or credit agreements). FIs that require further assistance in determining reasonable time periods should consult with the FIU or the relevant Supervisory Authorities.
High-Risk Classification of Reported Business Relationships
When a transaction or other information about a business relationship is reported to the FIU as suspicious, it means that, by definition, the customer or business relationship to which it pertains should be classified as high risk (in case the business relationship has not yet been classified as such). In situations in which no feedback or instructions have been received from the FIU, FIs that determine to maintain the business relationship should, commensurate with the nature and size of their businesses:
• Document the process by which the decision was made to maintain the business relationship, along with the rationale for, and any conditions related to, the decision;
• Implement adequate EDD measures to manage and mitigate the ML/FT risks associated with the business relationship.
In such cases, beyond the EDD measures described in previous sections (see Sections 6.4, Enhanced Due Diligence (EDD) Measures and 6.3.5, Ongoing Monitoring of the Business Relationship), FIs should also implement additional control measures such as, but not limited to:
• Requiring additional data, information or documents from the customer in order to carry out transactions (for example, evidence of relevant licenses or authorisations, customs documents, additional identification documents, bank or other references);
• Restricting the customer’s use of certain products or services;
• Placing restrictions and/or additional approval requirements on the processing of the customer’s transactions (for example, transaction size and/or volume limits, or limits to the number of transactions of certain types that can be executed during a given time period).
FIs should also document the specific EDD, ongoing monitoring, and additional control measures to be taken. In this regard, FIs should obtain senior management approval for the plan, including its specific conditions, duration and any requirements for its removal, as well as the roles and responsibilities for its implementation, monitoring and reporting, commensurate with the nature and degree of the ML/FT risks associated with the business relationship.
8. Governance
(AML-CFT Law Article 16.1(d); AML-CFT Decision Articles 4.2(a), 20, 21, 44.4)
In order for the AML/CFT framework of any organisation to be effective, it must be based on the foundation of a sound governance structure, and held together by a strong compliance culture.
The governance structure should take the following into consideration:
• Establish clear accountability lines and responsibilities to ensure that there is appropriate and effective oversight of staff who engage in activities which may pose a greater AML/CFT risk. • Have the mechanism to inform the board of directors (or a committee of the board) and senior management of compliance initiatives, compliance deficiencies, STRs filed and corrective actions taken; • Develop and maintain a system of reporting that provides accurate and timely information on the status of the AML/CFT program, including statistics on key elements of the program, such as the number of transactions monitored, alerts generated, cases created and STRs filed; • Develop and implement quality assurance testing programs to assess the effectiveness of the AML/CFT program’s implementation and execution of its requirements.
FIs should also make sure to have management structures which are accountable for clear ML/FT risk management and mitigation measures, as well as appropriate independent control functions. Implicit in both the AML-CFT Law and the AML-CFT Decision are the elements of both, concerning which additional guidance is provided in the sections below.
8.1 Compliance Officer
8.1.1 Appointment and Approval
FIs are obliged to appoint a compliance officer (CO) with the appropriate competencies and experience to perform the statutory duties and responsibilities associated with this role. The AML-CFT Decision stipulates that the CO performs these duties “under his or her own responsibility”, referring to the independent nature of the function and from which it should be understood that the position should be at a management level.
FIs must take all appropriate steps to identify and to prevent or manage confilicts of interests between:
• The FI, its’ personnel including its CO, or any other representatives, including any person who is directly or indirectly associated with the organization and who has control to make decisions, and the FI’s customer. • The CO and senior management of the organization including the Board of Directors. The CO must be independent and must hold a position of sufficient seniority within the organization, to ensure informed decisions are made without undue pressure to challenge decisions that are considered ill-suited, to protect the organization from possible ML/TF abuse. The MLRO’s independence of judgement is required to be free from conflicts of interest, whether it is pecuniary or otherwise.
The AML-CFT Decision further provides that the appointment of a person to the position of CO requires the prior consent of the relevant Supervisory Authority. Some FIs might also have appointed a Money Laundering Reporting Officer (MLRO).
In determining the competencies, level of experience, and organizational reporting structures that are appropriate for their COs, FIs should take several factors into consideration, including but not limited to:
• The results of the NRA and any topical risk assessment
• The nature, size, complexity, and risk profile of their industries and businesses, as well as those associated with the products and services they offer and the markets and customer segments they serve;
• The organisation’s governance framework and management structure, with particular consideration given to the independent nature of compliance as a control function;
• The specific duties and responsibilities of the CO’s role (described below).
Where appropriate, FIs may also consider engaging in dialogue with Supervisory Authorities, professional associations in their sectors, and industry peers, in relation to the competencies, experience, and governance structures that make for an effective compliance officer and an effective AML/CFT programme.
8.1.2 Responsibilities
(AML-CFT Decision Article 21.1-5)
The specific tasks of the CO are detailed in the relevant provisions of the AML-CFT Decision. In general, the CO will collaborate with the relevant Supervisory Authority and the FIU to ensure that these can perform their respective duties. The CO’s tasks can be grouped broadly into the following categories:
• ML/FT Reporting. The compliance officer is FI’s officer in charge of reviewing, scrutinizing and reporting STRs. In this capacity, the CO is ultimately responsible for the detection of transactions related to the crimes of money laundering and the financing of terrorism and of illegal organisations, for reporting suspicions to the FIU, and for cooperating with the Competent Authorities in relation to the performance of their duties in regard to AML/CFT.
• AML/CFT Programme Management. The CO should ensure the quality, strength and effectiveness of the FI’s AML/CFT programme. As such, the CO should be a stakeholder with respect to the FI’s ML/FT business risk assessment, and the overarching AML/CFT risk mitigation framework, including its AML/CFT policies, controls and CDD measures. The CO is in charge of informing and reporting to senior management on the level of compliance and report on that to the relevant Supervisory Authority.
• AML/CFT Training and Development. The CO is responsible for helping to establish and maintain a strong and effective AML/CFT compliance culture within the FI. This duty includes working with senior management and other internal and external stakeholders to ensure that the FI’s staff are well-qualified, well-trained, well-equipped, and well-aware of their responsibility to combat the threat posed by ML/FT.
8.2 Staff Screening and Training
(AML-CFT Decision Articles 20.4-5, 21.4)
In order for their ML/FT risk assessment and AML/CFT mitigation measures to be effective, FIs should ensure that their employees have a clear understanding of the ML/FT risks that the FI is exposed to and can exercise sound judgment, both when adhering to the FI’s AML/CFT risk mitigation measures and when identifying suspicious transactions. Furthermore, due to the ever-evolving nature of ML/FT risks, FIs should ensure that their employees are kept up to date on an ongoing basis in relation to emerging ML/FT typologies and new internal and external risks. . Depending on the nature, size and level of complexity of an FI, an FI should also screen staff to ensure high standards when hiring employees.
Thus, to ensure a high level of competence and AML/CFT programme effectiveness, FIs should formulate and implement appropriate policies, procedures and controls with regard to staff screening and training. An effective training program should not only explain the relevant AML/CFT laws and regulations, but also cover the institutions’ policies and procedures used to mitigate ML/FT risks, scope of target employees such as but not limited:
• Customer-facing staff. • AML/CFT compliance staff. • Senior management and board of directors
These measures should be applied across organisations and financial groups, including their foreign branches and majority-owned subsidiaries. Examples of some of the factors that should be considered when determining appropriate staff screening and training measures include, but are not limited to:
• The results of the NRA and any topical risk assessment
• The nature, size, complexity, and risk profile of FIs’ sectors and businesses, as well as those associated with the products and services they offer and the markets and customer segments they serve;
• Effective screening and selection methods in relation the AML/CFT cultural compatibility of their employment candidates;
• Assessment of staff AML/CFT competency in relation to training and development needs;
• The type, frequency, structure, content, and delivery channels of AML/CFT training programmes and development opportunities;
• The effective identification, deployment and management of both internal and external training resources;
• Appropriate methods and tools for assessing the effectiveness of staff hiring, training, and development programmes, including screening procedures to ensure high standards when hiring employees.
8.3 Group Oversight
(AML-CFT Decision Articles 20, 31, 32)
When an FI is part of a group, the FI is obliged to implement appropriate group-wide AML/CFT programmes, and to apply them in relation to all branches and majority-owned subsidiaries of the financial group. The specific requirements that must be met by FIs with respect to their foreign branches and majority-owned subsidiaries are set out in the relevant provisions of the AML-CFT Decision, and reflect those to which FIs are subject within the State.
In meeting these obligations with regard to their branches and majority-owned subsidiaries in foreign countries, FIs, and in particular FIs that are members of financial groups, should ensure that the measures they apply are consistent with the requirements of the AML-CFT Law and AML-CFT Decision. In this regard, FIs should establish appropriate policies and procedures for the exchange and sharing of data and information, including those required for the purposes of CDD and ML/FT risk management, between the foreign branches and subsidiaries and the head office, for the purpose of combating the crimes of money laundering and the financing of terrorism and of illegal organisations, and for reporting suspicious transactions.
In situations where these measures are not possible due to legislative or regulatory restrictions in the foreign countries in which their branches and majority-owned subsidiaries operate, FIs (including those which are members of Financial Groups) should implement the necessary additional measures, commensurate with the nature and size of their businesses, that will enable them to manage and mitigate appropriately the ML/FT risks that relate to their foreign operations. Examples of some of the measures that should be considered include but are not limited to:
• Assessing the effectiveness of foreign branches and majority-owned subsidiaries’ AML/CFT measures, including evaluating such factors as the comprehensiveness and quality of their policies, procedures and controls, and performing gap analyses in relation to the requirements of the AML-CFT Law and AML-CFT Decision;
• Establishing clear policies, procedures and controls in relation to the type and extent of access which managers and employees of foreign branches and majority-owned subsidiaries have to the FIs’ IT and operational systems, including CDD and transaction processing systems;
• Establishing clear policies, procedures and controls in relation to the type and extent of access which customers and Business Relationships of foreign branches and majority-owned subsidiaries have to the FIs’ products, services and transactional processing capabilities;
• Establishing clear policies, procedures and controls in relation to the type of CDD and transaction-related information, data, and analysis FIs accept from their foreign branches and majority-owned subsidiaries in relation to customer or Business Relationship referrals, and the extent of their reliance on such information (see Section 6.6, Reliance on a Third Party);
• Implementing service-level agreements, clearly setting out the roles and responsibilities of the parties and specifying the nature of the CDD and record-keeping requirements to be fulfilled in relation to customer or Business Relationship referrals;
• Establishing protocols for the certification by the foreign branches and subsidiaries of documents and other records pertaining to the CDD measures undertaken in relation to customer or Business Relationship referrals.
In particular, in cases in which the minimum AML/CFT requirements of host countries in which FIs maintain foreign operations are less strict than those of the State, FIs should take the necessary measures to ensure that their foreign branches and/or majority-owned subsidiaries in those countries implement requirements consistent with those of the State, to the extent permitted by the laws and regulations of the host countries. If such host countries do not permit the proper implementation of the AML/CFT requirements consistent with those of the State, FIs should apply appropriate additional measures to manage and mitigate the ML/FT risks (including but not limited to those described above). They should also inform the relevant Supervisory Authorities of the circumstances and comply with any additional supervisory actions, controls, or requirements of the Competent Authorities of the State (up to and including, if requested, terminating their operations in the host countries).
8.4 Independent Audit Function
(AML-CFT Decision Article 20.6)
A robust and independent audit function is a key component to a well-functioning governance structure and an effective AML/CFT framework. FIs are obliged to have in place an independent audit function to test the effectiveness and adequacy of their internal polices, controls and procedures relating to combating the crimes of money laundering and the financing of terrorism and of illegal organisations. In this regard, FIs should ensure that their independent audit function is appropriately staffed and organized, and that it has the requisite competencies and experience to carry out its responsibilities effectively, commensurate with the ML/FT risks to which the FIs are exposed, and with the nature and size of their businesses.
It should be noted that, while most FIs are expected to have the capacity to meet these requirements internally, depending on the nature and size of their businesses, some FIs (particularly smaller ones) may not necessarily have the resources to maintain a fully functioning and effective internal audit unit. In such cases, those FIs should ensure that they take adequate measures to obtain the necessary capabilities from qualified external sources. They should also ensure that they have in place adequate internal capabilities to provide sufficient coordination with and oversight of any external resources they may utilise, and that such external resources are adequately regulated and supervised by relevant Competent Authorities.
FIs should ensure that the periodic inspection and testing of all aspects of their AML/CFT compliance programmes, including ML/FT business risk assessment and AML/CFT mitigation measures, and CDD policies, procedures and controls, is incorporated into their regular audit plans. They should also ensure that all their branches and the subsidiaries in which they hold a majority interest, whether domestic or foreign, are part of an independent audit testing programme that covers the effectiveness and adequacy of their internal AML/CFT polices, controls and procedures.
Some of the factors FIs should consider in determining the appropriate frequency and extent of audit testing of their AML/CFT programmes by their independent audit functions include but are not limited to:
• The results of the NRA and any topical risk assessment;
• The nature, size, complexity, and geographic scope of the FIs’ businesses, and the results of their ML/TF business risk assessments;
• The risk profile associated with the products and services they offer and the markets and customer segments they serve;
• The frequency of supervision and inspection by, and the nature of the feedback (including the imposition of administrative sanctions) they receive from, Supervisory Authorities, relative to enhancing the effectiveness of their AML/CFT measures;
• Internal and external developments in relation to ML/FT risks, as well as developments pertaining to the management and operations of the FIs.
The scope of such audits should include but not be limited to:
• Examine the adequacy of AML/CFT and CDD policies, procedures and processes, and whether they comply with regulatory requirements.
• Assess training adequacy, including its comprehensiveness, accuracy of materials, training schedule, attendance tracking and escalation procedures for lack of attendance.
• Review all the aspects of any AML/CFT compliance function that have been outsourced to third parties, including the qualifications of the personnel, the contract and the performance and reputation of the company.
• Review case management and STR systems, including an evaluation of the research and referral of unusual transactions, and a review of policies, procedures and processes for referring unusual or suspicious activity from all business lines to the personnel responsible for investigating unusual activity
8.5 Responsibilities of Senior Management
(AML-CFT Decision Articles 4.2(a), 4.2(b)(5), 8.1(a), 15.1(b) and 15.2, 17.3, 21.3, 25.1(d))
A cornerstone of any sound governance structure, including those related to AML/CFT compliance, is senior management involvement and accountability. The members of an FI’s senior management (together with the members of the board of directors in those organisations that have one) are ultimately responsible for the quality, strength and effectiveness of the FI’s AML/CFT framework, as well as for the robustness of its compliance culture. In this regard, an FI’s senior management should set the ML/FT risk appetite and a proper “tone at the top,” by demonstrating their commitment to ensuring an effective AML/CFT compliance programme is in place, and by clearly articulating their expectations with regard to the responsibilities and accountability of all staff members in relation to it.
Under the AML/CFT legal and regulatory framework of the UAE, the senior management of all FIs are responsible for performing certain functions related to the assessment, management and mitigation of the ML/FT risks to which their organisations are exposed. These responsibilities can be grouped broadly into categories which include:
• Implementation of governance, control, and operating systems. These include such elements as:
- Appointing a qualified compliance officer in line with the requirements of the relevant Supervisory Authority; - Ensuring a robust and effective independent audit function is in place; - Putting in place and monitoring the implementation of adequate management and information systems, internal controls, and policies, procedures to mitigate risks.
• Approval of internal policies, procedures and controls. These include such elements as the FI’s overall ML/FT risk appetite as well as the framework of AML/CFT policies, procedures and controls related to areas such as:
- Identification, assessment, understanding, management and mitigation of ML/FT risks; - Performance, review and updating of CDD (including EDD and SDD) measures; - Identification and implementation of indictors to identify suspicious transactions; - Record retention and data protection; - Staff screening, training and development.
• Oversight of the AML/CFT compliance programme. This includes such elements as:
- Reviewing and providing comments in relation to the compliance officer’s semi-annual reports to the relevant Supervisory Authority; - Approving the establishment and continuance of High Risk Customer Business Relationships and their associated transactions, including those with PEPs; - Approving the establishment and continuance of Business Relationships involving high-risk countries; - Approving the establishment and continuance of relationships with correspondent institutions; - Ensuring the adequate application of the appropriate components of the AML/CFT compliance programme to all branches and majority-owned subsidiaries, including those operating in foreign jurisdictions.
• Application of the directives of Competent Authorities. This includes such elements as:
- Applying the directives of Competent Authorities for implementing UN Security Council decisions under Chapter VII of the Charter of the United Nations, and other related directives, including Cabinet Decision (74) of 2020 Regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions On the Suppression and Combating of Terrorism, Terrorists Financing & Proliferation of Weapons of Mass Destruction, and Related Resolutions; - Implementing CDD measures defined by the National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organisations, regarding High Risk Countries.
8.6 Governance Issues of Small Organisations
Some FIs may operate as small or mid-sized businesses, without large staff organisations or sophisticated IT infrastructures. In such cases, individual managers and employees may often be called upon to undertake multiple roles and responsibilities in the course of day-today business activities, and it may be difficult at times to maintain a clear separation of duties or functions. While an FI’s small size does not in any way exempt it from fulfilling its obligations under the AML-CFT Law and AML-CFT Decision, and without prejudice to guidance provided in the previous sections, the following additional considerations are of particular importance to small and mid-sized FIs.
• In situations in which the responsibilities of the AML/CFT compliance officer are delegated to a manager or staff member who also has other responsibilities, FIs should undertake their best efforts to ensure that the designated AML/CFT compliance officer does not have day-to-day responsibility for sales and/or customer business relationship management.
• When an adequate separation of responsibilities is not possible due to the small size of an FI’s organisation, FIs should take the necessary steps to ensure that operational and AML/CFT policies and procedures (particularly those pertaining to CDD, the identification and reporting of Suspicious Transactions, and the monitoring and updating of required High Risk Country CDD measures, and Local and Sanctions Lists—see Sections 6, Customer Due Diligence (CDD), 6.4.3 Requirements for High-Risk Countries, and 10, International Financial Sanctions) are clearly formulated, documented, and adhered to during the establishment and ongoing monitoring of business relationships and the carrying out of transactions.
• In such cases, FIs should ensure that they clearly document the rationale for any policy and/or procedural exceptions they make, along with any additional AML/CFT risk mitigation measures they implement, and that these records are properly retained in accordance with the statutory record-keeping requirements (see Section 9, Record Keeping). FIs should also consider referring to any significant policy or procedural exceptions, along with their rationale, associated additional AML/CFT risk mitigation measures, and senior management comments, in the AML/CFT compliance officer’s required semi-annual reports to the relevant Supervisory Authorities.
• FIs that are unable to ensure a clear and effective separation of AML/CFT responsibilities from those related to the day-to-day management of their businesses, including but not limited to sales and customer business relationship management functions, due to the small size of their organisation should also consider taking additional measures to enhance the appl