1.3. Legal Basis
(AML-CFT Law Articles 9.1, 15, 24, 25, 27; AML-CFT Decision Articles 16-18, 20.2, 21.2, 40-43)
The requirement to submit Suspicious Transaction Reports (“STRs”) to the Financial Intelligence Unit ("FIU”) is outlined in the (i) Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering (“AML”) and Combatting the Financing of Terrorism (“CFT”) and Financing Illegal Organisations and Federal Decree law No. (26) of 2021 To amend certain provisions of 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”); (ii) Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation for Decree-Law No. (20) of 2018 on AML and CFT and Financing of Illegal Organisations (the “AML-CFT Decision”); and (iii) Cabinet Decision No. (74) of 2020 Regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions on the Suppression and Combating of Terrorism, Terrorist Financing, Countering the Proliferation of Weapons of Mass Destruction and its Financing and Relevant Resolution.
Under the UAE AML-CFT legal and regulatory framework, all LFIs are obliged to promptly report to the FIU suspicious transactions and any additional information 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. “Crime” is defined in Article 1 of the AML-CFT Law as “money laundering crime and related predicate offences, or financing of terrorism or illegal organisations.” There is no minimum reporting threshold; all suspicious transactions, including attempted transactions, should be reported regardless of the amount of the transaction. LFIs are also required to put in place and update indicators that can be used to identify possible suspicious transactions.
Although the AML-CFT Law uses the term “STRs” to mean both suspicious transactions and activity, for the purposes of this Guidance document, suspicious activity involving transactions should be reported (in the first instance) to the FIU as STRs; suspicious activity that does not involve transactions, on the other hand, should be reported (in the first instance) to the FIU as Suspicious Activity Reports (“SARs”). Examples of scenarios that warrant a SAR filing include, but are not limited to: the customer is the subject of material adverse media; the customer alerts as a positive sanctions match; the prospective customer acts in a manner that is suspicious upon account opening (e.g., refusing to answer account opening questions; providing falsified or counterfeit documentation; exhibiting reluctance to provide detailed information about a business account, etc.); or the customer exhibits other suspicious behavior (e.g., inquiring about ways to circumvent certain reporting thresholds). STRs, SARs, and other report types (referenced in greater detail in Section 3.2 (“Basic Structure of an STR or SAR”)) align with the FIU’s current reporting regime and utilization of the goAML system.
Under federal law and regulations, whether the LFIs operate in the mainland UAE or in a Financial or Commercial Free Zone, the designated competent authority for receiving report of suspicious transactions or activity is the FIU. The UAE’s minimum statutory obligations that apply to LFIs are covered in the following requirements:
• To put in place indicators to identify suspicious transactions (AML-CFT Law Article 15, AML-CFT Decision Article 16). • To report suspicious activity to the FIU and cooperate with relevant authorities, including to not disclose the information or data in an STR (AML-CFT Law Articles 9.1, 15, 24, 25, 27, AML-CFT Decision Articles 13.2, 17.1, 18.1, 20.2, 42.1/2).
1.3.1. Consequences for Failure to Disclose Suspicious Activity
Failure to report a suspicious transaction (STR, SAR, or other report types) without delay, whether intentionally or by gross negligence, is a federal crime in the UAE. The AML-CFT Law provides for the following sanctions against any person, including an LFI, or their managers and employees, who fail to perform, whether purposely or through gross negligence, their statutory obligation to report a suspicion of money laundering and related predicate offences 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 (i.e., imprisonment or fine of no less than AED100,000 and no more than AED1,000,000), according to Article 24 of the AML-CFT Law.
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.
1.3.2. Protection for Individuals Disclosing Suspicious Activity
LFIs as well as their board members, employees, and authorized representatives, are protected by Article 15 of the AML-CFT Law and Article 17.3 of the 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. This covers cases when an employee files an STR, SAR, or other report types that its employer did not want to file.
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.
1.3.3. Meaning of Suspicious Transaction
Within the AML-CFT Law and its AML-CFT Decision, a suspicious transaction refers to any transaction, attempted transaction, or funds for which an LFI 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 (Money laundering and related predicate offenses, or financing of terrorism or illegal organisations); • Being related to the crimes of money laundering and related predicate offences, the financing of terrorism or illegal organisations; and • Being intended to be used in an activity related to such crimes.
The AML-CFT Law and its AML-CFT Decision define a predicate offence as “any act constituting an offense 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.”
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; financial/transactional and behavioral patterns; Customer Due Diligence (“CDD”) information; or adverse media information, and it is not dependent on obtaining evidence that a predicate offense has actually occurred or on proving the illicit source of the proceeds involved. LFIs 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 to suspect any such criminal activity are sufficient.
LFIs should also note that suspicious transactions need not be completed, in progress, or pending completion. 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.