| Purpose of this Guidance | Purpose | The purpose of this guidance is to assist Licensed Financial Institutions (LFIs) understand and mitigate the risks when providing services to customers who are cash-intensive businesses (CIBs), and to guide them in fulfilling their AML/CFT obligations. The FATF's Mutual Evaluation Report of the UAE issued in April 2020 stated that, as the UAE is a cash-intensive economy and plays an important part in global trade, there are significant risks associated with the cross-border movement of cash and bearer negotiable instruments. |
| Applicability | This guidance applies to natural and legal persons, which are licensed and/or supervised by CBUAE, in the following categories:- all national banks, branches of foreign banks, exchange houses, finance companies, payment service providers, registered hawala providers and other LFIs; and
- insurance companies, agencies, and brokers.
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| Understanding Risks | Vulnerabilities of Cash | The specific characteristics of cash—its anonymity, interchangeability, and transportability—make it an attractive option for illicit actors seeking to conceal the proceeds of crime. Cash holds no record of its source or owner and can be easily concealed in large quantities Cash transactions are also instantaneous and widely accepted across jurisdictions. |
| Vulnerabilities of Alternatives to Cash | Illicit actors also use various monetary instruments in conjunction with, or as a replacementto, cash. Both bearer negotiable instruments and prepaid cards, for instance, offer similar benefits to cash, including anonymity and accessibility. They can store large amounts of value in a compact physical size that is easily transportable and obscures the origin of the funds.- Bearer negotiable instruments are financial instruments of whatever form, whether in the form of a bearer document, such as traveler's cheques, promissory notes and cheques, payment orders, or others.
- Prepaid cards can be used as an alternative to cash in that they provide access to funds that have been paid in advance Funds can be claimed or transferred through an electronic device, such as through a card, code, electronic serial number, mobile identification number, or personal identification number within either an open or closed loop system.
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| Vulnerabilities of Cash- intensive Businesses | Types of CIBs: CIBs are businesses that experience a high volume of cash flows. CIBs span across various industry sectors and most are operating a legitimate business. However, some aspects of these businesses may be vulnerable to money laundering or the financing of terrorism and illegal organisations. Examples of cash-intensive businesses that can pose a higher risk include but are not limited to: convenience and retail stores; restaurants; wholesale and general trading businesses; travel agencies and tour operators and car dealers. LFIs may expand on the above by considering additional factors when identifying cash-intensive businesses in their customer base and should consider the specific risks posed by the below features to determine whether the customer is considered as high-risk and should be subject to enhanced due diligence ("EDD") measures. |
| Cross-Border Movement of Cash and Cash Couriers: CIBs may move cash across borders as part of their business model including by utilizing cash couriers. Cross-border movement of licit cash can be legal, subject to compliance with reporting and other relevant legal and regulatory requirements. However, criminals may also seek to move cash across borders to launder proceeds of crime by placing them in another jurisdiction. Natural of legal persons must declare upon entering or leaving the UAE any currencies, bearer negotiable instruments, precious metals and stones above the threshold of AED 60000. Understanding whether customers have made any such declarations, in accordance with the Regulation should form part of any due diligence by the LFIs where required. |
| Cash Deposits: CIBscan be expected to make cash deposits, which is legal and a natural fit with their business model. Illicit actors, however, will also seek ways to place their illicit cash into the financial system Terrorists also seek to finance, often through small amounts of cash, activities without traceability. LFIs should, as the case may be, undertake CDD measures on the third party cash depositors transacting in any accounts above the threshold specified in Article 5 of the AML-CFT Decision. LFIs should also obtain appropriate information regarding the source of cash deposited in a customer's account as well as mandate the use of Emirates ID for cash deposits in ATMs. |
| Currency Exchanges: CIBs may include currency exchanges as legitimate providers of services Currency exchanges, however, can also be an attractive vehicle for illicit actors seeking to enter the financial system and transfer their funds. Once the money has been exchanged, it is difficult to trace its origin. |
| Mitigating Risks | Risk-Based Approach | LFIs must take a risk-based approach in their AML programs. This means that they should assess all customers, including CIB customers, to determine their degree of risk. The LFlis expected to assess the risk of each customer to identify those that require EDD and to support its entity risk assessment. In assessing the risks of a cash-intensive business, LFIs should consider:- Geographic Risk related to the jurisdiction(s) in which the customer is based and where it operates;
- Customer Risks related to the customer's customer base, incl, its type and the characteristics of the business relationship; and
- Product, Service, and Delivery Channel Risk related to the products and services the customer intends to use and the delivery channels through which the LFI will provide these services.
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| Customer Due Diligence and Enhanced Due Diligence | For all customers, including CIB customers, LFIs must perform Customer Due Diligence ("CDD") with the following components: |
| Customer Identification: LFIsare required to identify and verify the identity of all customers. Please seethe Guidelines on Anti-Money Laundering and Combating the Financing of Terrorism and illegal Organisations for Financial Institutions for further information on customer identification. |
| Beneficial Owners identification: The majority of cash-intensive businesses will be legal persons. For all legal person customers, LFIs must identify all individuals who, individually or jointly, have a controlling ownership interest in the legal person of 25% or more. If no such individual can be identified, the LFI must identify the individual(s) holding the senior management position(s) within the legal person customer. |
| Nature of the Customer's Business and Purpose of the Business relationship: The purpose of the account and the nature of the customer's business are critical drivers of risk for CIB customers. LFIs should fully understand the uses to which the CIB intends to put the account and the expected activity on the account, to the extent that it can generally predict activity on the account and identify activity that does not fit the profile. As they seek to understand the customer's business, LFIs should collect all information necessary to assess customer risk. |
| Perform Ongoing Monitoring: For all customers, LFIs should ensure that the customer information is accurate, complete and up-to-date, and that the customer's profile and business are consistent with the expectations set at onboarding. If not, the customer risk rating may need to be changed. When customers are higher risk, such as for cash-intensive businesses rated as high-risk following the completion of the CDD process, monitoring should be more frequent, intensive, and intrusive. |
| Transaction Monitoring and Suspicious Transaction Reporting | The transaction monitoring system used by LFIs should be equipped to identify patterns of activity that appear unusual and potentially suspicious for CIB customers as well as unusual behaviour that may indicate that a customer's business has changed in such a way as to require a high-risk rating. Please consult the CBUAE's Guidance for Licensed Financial Institutions on Transaction Monitoring and Sanctions Screening for further information. LFIs must file a suspicious transaction report ("STR") or suspicious activity report ("SAR") or other report types with the UAE Financial Intelligence Unit ("UAE FIU")when they have reasonable grounds to suspect that a transaction, attempted transaction, or funds constitute, in whole or in part, regardless of the amount, the proceeds of crime, are related to a crime, or are intended to be used in a crime. Please consult the CBUAE's Guidance for LFIs on Suspicious Transaction Reporting for further information. |
| Governance and Training | The preventive measures discussed above should take place within, and be supported by, a comprehensive institutional AML/CFT program that is appropriate to the risks the LFI faces. As with all risks to which the LFI is exposed, the AML/CFT training program should ensure that employees are aware of the risks of cash-intensive business customers, familiar with the obligations of the LFI, and equipped to apply appropriate risk-based controls. |