Ministry of Economy affirms UAE’s continuing efforts to combat money laundering and financing of terrorism

18
Obaid AlMuhairi, Anti-money Laundering and Terrorist Financing Consultant

The Ministry of Economy (MoE) has expressed its continuing efforts to enhance the level of compliance of the UAE’s business community to the Federal Decree-Law No. 20 of 2018 which was established to fight money laundering, financing of terrorism, and the financing of illegal organizations, its executive regulations, and related decisions following international standards. This is in line with the country’s commitment to achieve full compliance to the International Financial Action Task Force (FATF).

The ministry highlighted that the private sector is a strategic partner in its efforts to implement the country’s international obligations in this task, particularly its compliance with legal requirements and procedures being implemented by the authorities, including the MoE.

The MoE explained that its efforts are directed towards meeting compliance in two main areas, which include the regulation and supervision of the Designated Non-Financial Businesses and Professions (DNFBPs) to ensure they meet the legal requirements. The Ministry oversees four main business activities including real estate agents and brokers, precious metals and gemstone dealers, auditors, and corporate service providers. A total of 15,000 establishments are operating within in these activities and are under the supervision of the Ministry.

The second aspect is obtaining the Ultimate Beneficial Owner (UBO) data from all private sector establishments within the country, including the non-financial free zones. This is being implemented in cooperation with Registrars of Companies across the country to ensure the completion and registration of UBO data from more than 565,000 private establishments operating in various sectors.

These were announced during a media briefing held by the Ministry where it discussed ongoing efforts, developments and requirements in relation to anti-money laundering and the fight against financing of terrorism and other illegal organizations. Mohamed Al-Janahi, Head of AML Supervision Section at the Ministry of Economy and Obaid AlMuhairi, Anti-money Laundering and Terrorist Financing Consultant were the official speakers at the event. Ahmadeyya Ali Ahmed Complince Manager in Ras Al Khaimah Economic Zone (RAKEZ) also participated in the media briefing.

Oversight of Designated Non-Financial Businesses and Professions (DNFBPs)

In the area of overseeing the DNFBPs, Mohamed Al-Janahi emphasized that the UAE, under the directives of its wise leadership, remains resolute in its position to combat money laundering and terrorist financing, which aims to continuously uphold the country’s commitment to the international community and maintain the highest standards of integrity and transparency in all financial and commercial practices and confront illegal business activities.

He cited that the UAE follows an integrated system which is being implemented in coordination with relevant entities to achieve this national goal. This includes the legislation, laws, regulations and relevant decisions; federal and local government institutions and committees concerned with supervision, control, awareness, inspection and law enforcement, including the Ministry of Economy; electronic systems and databases and digital platforms. This ensures the implementation is in accordance with leading best practices and through the effective communication and partnership between the government and the private sector.

‘The Ministry of Economy has been working since the beginning of this year to register all identified DNFBPs in the goAML system, a system that has been formed to combat money laundering and Automatic Reporting System for Sanctions Lists that will help deter terrorism financing as well as the funding of illegal organizations,” Al-Janahi explained.

He mentioned that to date, more than 80 per cent of the targeted establishments have been registered, but still 20 per cent have to be completed in both the systems, amidst the awareness campaigns and the continuous communication efforts emphasizing the mandatory registration within the given grace period and even after the deadline has been extended, which ended in early May.

Financial penalties were imposed in accordance with the relevant resolutions on violating companies, recording a total of 3,083 fines, the value of each is AED 50,000.

Al-Janahi clarified that the ministry’s goal is to ensure compliance and not impose a fine. “We count on the partnership and cooperation of the DNFBPs to achieve the highest levels of oversight and compliance and contribute towards protecting these sectors’ investments from money laundering risks and avoid breaking the law,” he added.

He pointed out that establishments may file for grievances if they believe that the fines imposed on them are unjustified and they can apply for their grievance to be reviewed by the Ministry, in which the status of the establishment and the veracity of the reasons will be considered. He enumerated the four-step process when submitting grievance request.

The process include submitting a grievance request to the Ministry within 15 days from the date of notification of the violation using a customized form that can be downloaded from the Ministry’s website, along with supporting papers and documents. It is followed by the request issued with a reference number and will be assessed within 30 working days from the date of submission by a special grievance committee which will submit the recommendations to H.E. the Minister of Economy who will then make the decision whether to exempt the company from the fine or uphold the fine. In the event of an exemption, the company shall be notified within the specified period. And lastly, if the company did not receive any response from MOE within a specified period, the fine shall be established and must be deemed payable.

The National Risk Assessment

Al Janahi further highlighted that to develop a comprehensive national framework on the risks of money laundering, the country conducted a national risk assessment which was implemented in cooperation with key government entities, providing a deeper understanding of the risks and threats of money laundering in the country’s business community.

“This assessment has become the basis today for the creation of policies, action plans and regulatory procedures that ensure implementation of actions against money laundering and terrorist financing, based on a risk-based approach. In accordance with international standards, the assessment was conducted following five main criteria, namely:  the nature of the activity, the nature of the product or service, the nature of the customer, the geographical scope, and the nature of delivery channels,” he said.

“The results of this assessment are comprehensive and extensive and had been circulated to all relevant private sector organizations to serve as their reference when developing their internal anti-money laundering policies and procedures. However, in reference to the DNFBPs which are under the supervision of the Ministry of Economy, the assessment identified trading precious metals, especially gold, and the buying and selling of real estate as being high-risk activities.”

Ministry of Economy and partners’ inspection program

Al-Janahi said that the Ministry of Economy is working with 17 Registrars of Companies across the country and has formed a national team comprising 97 inspectors to ensure the highest levels of oversight and compliance in the business sector and the DNFBPs. The inspection campaigns started on June 1, 2021 and is an ongoing process following the risk-based approach, putting the most at risk activities and companies to higher and stricter levels of inspection.

He explained that the Ministry of Economy has created a dedicated assessment process for this purpose for all DNFBPs, focused on the precious metals and real estate sectors. Following the criteria and regulations set by the National Risk Assessment, the mentioned sectors’ activities were classified into three categories: high risk, medium risk, and low risk.

Al Janahi said the number of DNFBPs identified as high-risk has reached 255 and they will be subject to a thorough and comprehensive onsite inspection. Medium and low risk entities will be subject to a remote inspection or ‘desk inspection’. They will also be required to attend awareness seminars on the procedures to enhance their compliance levels.

He urged the respective establishments to cooperate fully with inspectors and provide them with the proper regulatory requirements to ensure protection and avoid violations. If companies have been found violating the law, a review will be conducted to reach to a decision regarding the case.

Al Janahi further noted That the concerned entity will be either given a deadline to settle its status and fulfill all the requirements, or a fine will be imposed according to the type of violation, and as stipulated in Cabinet Resolution 16 of 2021 regarding the consolidated list of violations and administrative fines for violators of anti-laundering procedures and combating the financing of terrorism.

The value of the fines stipulated in the list ranges between AED 50,000 and AED 1 million, and it can be doubled to AED 5 million in accordance with the provisions of the law and the estimates of the Supreme Committee for Combating Money Laundering.

The risks of targeted financial sanctions and the fight against terrorism financing

Al Janahi said that field and office-based inspections are ongoing in addition to the implementation of various measures to combat money laundering. The campaign will focus next on the risks of specified financial sanctions related to combating the funding of terrorism, financing illegal organizations and arms proliferation. Accordingly, there will be field visits and information request to ensure the extent of awareness and compliance of commercial establishments and DNFBPs with the relevant legal requirements, specified by Cabinet Resolution No. 74 of 2020.

He cited the following: registration in the automated reporting system for sanctions lists; follow-up of terrorist lists through the automated reporting system, whether local as issued by the UAE Cabinet, or international issued by the Security Council; and taking the required legal measures in case one of the individuals or entities listed on the sanction lists are in communication with establishments based in the country. Measures include the immediate cessation of dealing with the listed persons, the seizure of any funds belonging to them, and the notification of the authorities through the designated system.

Al Janahi called on the full cooperation of companies in this campaign including the raising of awareness, as well as during inspection and regulation campaigns. He directed them to find all information related to the targeted financial penalties through MoE’s website via  https://www.economy.gov.ae/arabic/AML/Pages/tfs.aspx

He emphasized that appointing a compliance officer to be a point of contact between the facility and between the Ministry and the regulatory authorities is the most important legal requirement that businesses and designated non-financial professions must abide by to implement the corresponding actions in accordance with the executive regulations of the Federal Decree-Law to Combat Money Laundering and Combating the Financing of Terrorism.

He discussed the key tasks of the compliance officer, which include developing the internal policy on anti-money laundering and combating the financing of terrorism, determining procedures and work processes, and ensuring that they are compatible with the relevant legislations; training employees to implement the tasks in compliance with legal requirements; ensuring the implementation of ‘due diligence’ procedures for clients and develop an internal system for implementing these procedures, which gathering full information about the client, including source of funds, payment method and all related risks; submitting suspicious transaction reports, and suspicious activity reports, via the goAML system; and taking measures related to combating terrorist financing and targeted financial sanctions through the automated reporting system for sanctions lists.

Al Janahi reviewed the MOE’s efforts in raising the level of awareness among concerned establishments and companies about all the legal requirements and how to implement them. This has been implemented through several activities and efforts. He added that the Ministry held more than 11 workshops which were attended by more than 6,700 people. A total of four guides have been published and a dedicated webpage on combating money laundering and combating terrorist financing have been launched on the Ministry of Economy’s website.

Al Janahi referred the participants to the find all legal requirements and information on the official website of the Ministry of Economy as well as on the executive regulations of the law through: https://www.economy.gov.ae/arabic/AML/Pages/legislation-rules-regulations.aspx

Obaid AlMuhairi, on the other hand, gave an overview of the requirements for complying to the UBO data for private sector establishments. AlMuhairi stressed the importance of understanding the role of procedures for the UBO in supporting our system aimed at countering money laundering and the fight against the financing of terrorism in the UAE.

“This contributes to the development of governance and disclosure systems in the country’s business environment which would provide greater protection from financial crimes, money laundering and commercial fraud. Its success would enhance the confidence in the national economy while upholding the principles of transparency and flexibility and in accordance with international standards,” he said.

AlMuhairi pointed to that the MoE continues to cooperate and work with its partners, totaling 40 relevant licensing authorities, including the various Department of Economic Development, the Fujairah and Dibba Municipality and the authorities of non-financial free zones. This is to ensure the full commitment of the private sector in the country to the UBO procedures, encouraging them to complete and register the data of the UBO. This is applicable to all the private sector entities within the country and the non-financial free zones, which has reached to 565,000 establishments.

He explained that the MoE along with licensing authorities have achieved 93 per cent compliance rate of the total establishments. The Ministry will continue the implementation of the procedures in cooperation with its partners until the UBO data from the private sector has reached 100 per cent for both establishments within the country and the non-financial free zones.

According to AlMuhairi, since July 1, 2021, the MoE and the Registrars of Companies have started implementing administrative penalties in three levels, catching entities which are violating the rules. This is in accordance with the Cabinet Resolution 53 of 2021 regarding violators of the UBO procedures.

He stated: “We have issued a total of 78,787 written warnings for first time violators which were determined through the review of the establishments’ records with Registrars of Companies or through live inspection of the establishments’ headquarters. Meanwhile, the Ministry of Economy and the Registrars of Companies have begun implementing the second level of administrative penalties since July 8, 2021. This includes the imposition of financial fines of AED 15,000 per violation of the entities. A total of 42,011 violations have been recorded, with the total value of the fines reaching AED 630 million.”

He pointed that for the third level, administrative penalties on establishments which still fail to comply will be fined double the amount, which is AED 30,000, within 15 days of non-compliance starting from the date of issuance of the second penalty imposed for not meeting the mentioned legal requirements.

AlMuhairi explained that companies found violating the regulatory requirements for combating money laundering through the UBO have the right to counter the case lodged against them and must provide valid reasons for the penalty imposed on them to be lifted. This will be reviewed by a grievance committee formed for this purpose by the Registrars of Companies, which make up a total of 40 relevant entities across the country. The system ensures there is greater flexibility and understanding to the needs of businesses, while also aiming to hasten the decision on grievance requests in accordance with best practices.

He discussed the steps for submitting a complaint for administrative penalties regarding UBO violations. First is to send the grievance request to the concerned licensing authority within 30 days from the date of notification of the administrative penalty. The second step is to ensure that the application shall include an explanation of the reasons and justifications supporting its grievance, along with the supporting papers and documents. The third is for the relevant grievance committee to consider the request and issue its decision of acceptance or rejection within (30) days from the date of submitting the grievance request.

He pointed out that the MoE in coordination with the Registrars of Companies have updated the licensing systems across the country to ensure continuous submission and updating of the UBO from private establishments. This means that no new establishment can be issued with license, renewed or be able to modify their existing establishments without obtaining their UBO or update their data and verify the completeness and accuracy of such data.

Obaid AlMuhairi urged all the establishments to cooperate with Registrars of Companies and provide the UBO and constantly update their data.

“We would like to reiterate that the procedures for providing the UBO data required of the establishments are simple, but the most important of which is the creation of a record of the UBO, partners or shareholders and keep it with the establishment. These records and data must be submitted to the Registrars of Companies in their official websites. In the event of any change or modification to the UBO’s data, such updated data must be notified and submitted to the Registrar of Companies within 15 days of such change or modification,”’ he added.

Establishments must also appoint a person residing in the country with whom the Registrar of Companies can communicate with regarding the UBO data and other basic information about the establishment. It is essential that these establishments take the necessary steps to make it available to the Registrar and constantly keep it in its records, he concluded.