2. Understanding Risks

Effective from 16/6/2021

The FATF's Mutual Evaluation Report of the UAE issued in April 2020 stated that the two sectors of real estate and precious metals and stones are weighted as highly important in terms of risk and materiality in the UAE. While the nature and extent of the risk posed by the two sectors to the LFIs providing them with accounts and other financial services is different, they do share common characteristics that LFIs should recognize and take into account:

	•	Attractiveness to illicit finance. The real estate and precious metals and stones sectors are important parts of the UAE's economy, and each provides important, legitimate goods and services to the UAE population and global trading partners. Nevertheless, experience shows that these sectors offer services that are particularly attractive to illicit actors.
	•	Facilitation of the international movement of value. Despite their different natures, both sectors allow individuals to move large values across international borders, sometimes with only minimal involvement from the formal financial system. For example, a courier carrying a valuable diamond can move millions of AED of value simply by taking a short international flight. In addition, the real estate and precious metals and stones sectors allow individuals to hold value in a form that retains value over time (such as gold or real property) without having to maintain an account in the formal financial system. These facilities are useful to many legitimate businesses, but are also highly sought-after by illicit actors.
	•	Varying regulatory regimes. The extent and nature of regulation on these sectors varies widely between jurisdictions. In some jurisdictions, participants such as dealers in precious metals and stones (DPMS) and real estate agents and brokers are required to be licensed or registered, and to comply with AML/CFT requirements that are similar to those imposed on LFIs. These include, at a minimum, the requirement to perform CDD on customers and to report suspicious transactions. Despite the existence of these requirements, however, sector participants are in many cases not closely supervised or monitored for compliance. Their understanding of their risk and of their compliance obligations may not be well-developed or accurate. In other jurisdictions, there are limited or no obligations placed on these actors, and they may not have any understanding of how they can be abused by illicit actors, or the steps they should take to protect themselves.