Ever since its grey-listing by global money laundering watchdog Financial Action Task Force (FATF) in March 2022, the UAE has been very active in strengthening its anti-financial crime framework.
Recently, the UAE Executive Office for Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) reaffirmed its ongoing commitment and efforts to strengthen its regulatory framework. The measures include:
- Producing a national risk assessment
- Forming the Executive Office of AML/CFT
- Offering a stable and effective system of regulation
- Enforcement and implementation of effective sanctions with robust screening systems and processes
The AML/CFT framework in any country dictates what its private and public sector institutions should be doing to prevent and detect financial crime. Among these institutions, those dealing with banking and financial services (both traditional and modern) are often subject to increased scrutiny by regulators as they form the main channels of illicit activities.
In this post, we list out a few measures undertaken by the UAE to address financial crimes and explore how financial institutions in the country can deal with their increased compliance responsibilities while ensuring comprehensive and sustainable financial crime risk management.
Anti-financial Crime Measures
Here are the measures undertaken by the UAE to counter financial crimes such as money laundering:
1. New Anti-Money Laundering Department Within the Ministry of Economy
The UAE’s Ministry of Economy established a specialised department called the ‘Anti-Money Laundering Department’ within its structure. The department will follow up and implement the ministry’s strategic plan, create awareness, and regulate all activities listed under the business sector and specific non-financial professions.
The ministry supervises designated non-financial businesses and professions sector at the national level and commercial free zones with regard to countering money laundering. The sector includes 4 categories: independent accountants and account auditors, real estate brokers and agents, dealers of precious metals and gemstones, and companies’ service providers.
2. Special Courts to Handle Money Laundering Cases
The Ministry of Justice, headed by Sultan Bin Saeed Al Badi, had decided to establish special courts to look into money laundering crimes in northern Emirates such as Sharjah, Ajman, Umm Al Quwain and Fujairah. The ministry will also establish a specialist committee to manage frozen and confiscated assets. With these measures, the ministry looks to enhance the effectiveness of investigations and trials in money laundering cases.
3. The Dubai Financial Services Authority (DFSA) Whistleblowing Regime
The Dubai Financial Services Authority (DFSA) announced a new whistleblowing regime in March 2022, and the same has come into force in April 2022. The regime applies to all persons regulated by the DFSA as an authorised firm, authorised market institution, designated non-financial business or profession, or registered auditor.
As per the regime, any person who makes a “qualifying disclosure of information” to a specified person will be a whistleblower, even if they make that disclosure anonymously. A qualifying disclosure of information relates to a reasonable suspicion that a regulated entity, or any of its employees or officers, has or may have violated a provision of legislation administered by the DFSA, or engaged in money laundering, fraud, or any other financial crime.
4. A New Regulator for Virtual Assets
In March, the Dubai government announced a first-of-its-kind law to regulate virtual assets: the Dubai Virtual Asset Regulation Law. The law establishes a sophisticated legal framework to safeguard investors and promote responsible corporate growth in the virtual asset industry while adhering to the highest international standards.
The new regulation also established an independent authority – Virtual Asset Regulatory Authority (VARA) – to oversee the regulation, licensing and governance of non-fungible tokens (NFTs), cryptocurrencies and other virtual assets.
5. Monitoring of Cryptocurrencies
Given the increasing use of cryptocurrencies for money laundering and other crimes, Dubai Police’s cybercrime unit has started monitoring the digital currencies in cooperation with the Ministry of Interior.
According to Dubai Police, there are special units to deal with e-crime and money laundering and these two departments would work together against any illegal use of cryptocurrency. The department will also implement the best technologies such as artificial intelligence and blockchain to aid its efforts.
6. International Cooperation
The UAE has taken efforts to work with the international community and across sectors to tackle money laundering. The country has been involved in a deep review of its procedures as part of working with global AML watchdog FATF for several years and has been keen to implement the agency’s recommendations.
In March 2022, the UAE and UK authorities met for a series of technical workshops in Abu Dhabi and London to share information on issues of mutual concern and enable participants to better understand illicit finance risks, threats, and typologies.
Financial Institutions’ Role
While new regulations can create a larger framework in the fight against financial crime, the onus is on financial institutions to put the regulations into action. New regulatory reforms in the UAE would mean increased obligations for banks, money service businesses, asset management and exchange houses.
They normally do this via regulatory compliance programmes, which include both human and technology resources.
Financial institutions in the Middle East are facing increasing pressure from local and global regulators to revamp their AML compliance programmes. Given the region’s rapidly evolving financial system and sophisticated criminal networks, it would be a complex task for them.
When it comes to AML compliance, financial institutions are often troubled by outdated compliance systems, scarcity of skilled compliance staff and inefficient allocation of staff. A shortfall in any of these areas might lead to enforcement actions including hefty fines.
How Can Tookitaki Help?
With modern technologies such as artificial intelligence and machine learning at the forefront, compliance departments can address many of these issues effectively. With proper implementation, these technologies can bring in a paradigm shift in the way financial institutions approach financial crimes and compliance risk at large.
This is an area where machine learning-powered platforms like Tookitaki can add value. Our end-to-end AML/CFT analytics solution, the Anti-Money Laundering Suite (AMLS), can create next-generation compliance programmes, encompassing key processes such as transaction monitoring, AML screening and customer due diligence on a single platform.
The suite comprises our Transaction Monitoring, Dynamic Risk Review, Smart Screening and Case Management solutions under one roof for all your AML needs. AMLS achieves new levels of accuracy and speed by providing the industry’s only shared typology platform, allowing our clients to break through silos and benefit from the industry’s collective intelligence. Our coordinated, collaborative and innovative approach enables everyone to join forces in the fight against financial crime.
Both modern and traditional financial institutions across the globe are building agile and scalable compliance programmes using AMLS, making us a partner of choice.
To learn more about our AML compliance solutions, speak to one of our experts today.
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