UAE Federal AML, CTF and CPF legislation
UAE Federal AML, CTF and CPF legislation places obligations on all Relevant Persons in the DIFC to prevent, detect and report money laundering, terrorism financing and proliferation activities and to comply with sanctions.
UAE Federal AML/CTF/CPF legislation includes:
Federal Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.
Cabinet Decision No. 10 of 2019 Concerning the Implementing Regulation of Federal Law No. 20 of 2018.
Cabinet Decision No. 74 of 2020 concerning the UAE List of Terrorists and the Implementation of UN Security Council Decisions Relating to Preventing and Countering Financing Terrorism and Leveraging Non-Proliferation of Weapons of Mass Destruction, and the Relevant Resolutions.
Federal Law No. 7 of 2014 on Combating Terrorism Offences.
Regulation No. 1/2019 regarding declaration of currencies, negotiable bearer financial instruments, previous metals & precious stones in possession of travellers entering or leaving the UAE (issued by the UAE Central Bank on 14/1/2019 pursuant to Article 8 of Federal Law No. 20/2018).
Federal Law No. 5 of 2012 on Combating Cyber Crimes.
Federal Penal Law No. 3 of 1987 (as amended), the Penal Code.
Federal Penal Procedures Law No. 35/1992 (as amended), the Penal Procedures law.
Central Bank Board of Directors’ Decision No. 59/4/219 regarding procedures for AML and CTF and Illicit organizations.
Guidelines for Financial Institutions on anti-money laundering and combating the financing of terrorism and illegal organisations issued by the UAE Central Bank on 23/6/2019.
Ministerial Decision No. 532/2019 on the establishment of the Department of Combating Money Laundering and the Financing of Terrorism.
Ministerial Decision No. 533/2019 on the procedures of combating money laundering and Financing of Terrorism for lawyers, notaries public and independent legal professionals.
Ministerial Decision No. 534/2019 on the establishment of the Committee for the management of frozen, seized and confiscated assets.
Ministerial Decision No. 535/2019 on the procedures for the authorisation application presented by those designated on terrorist lists to use a part of frozen assets.
Ministerial Decision No. 536/2019 on the mechanism of grievance against the decisions issued regarding listing on local terrorist lists.
Ministerial Decision No. 563/2019 on the procedures and conditions of the applications for the international judicial cooperation in the distribution of the proceeds of crime.
Cabinet Decision No. 16/2021 regarding the unified list of violations and administrative fines for the said violations of measures to combat money laundering and terrorism financing that are subject to the supervision of the Ministry of Justice and the Ministry of Economy.
The above legislation may not be all encompassing, and will be updated and amended by relevant Federal authorities from time to time.
UAE Federal legislation may be accessed via the UAE Ministry of Justice’s Legislation Portal (available in Arabic and English).
Guidelines on Federal AML, CTF and CPF legislation
The UAE Government has prepared guidelines for Financial Institutions on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations (the Guidelines). The Guidelines seek to provide guidance and assistance to supervised Financial Institutions, to assist their better understanding and effective performance of their statutory obligations under UAE Federal AML/CTF legislation. The Guidelines can be accessed here; AMLCFT Guidance for FI’s / AMLCFT Guidance for DNFBP’s.
Please note that the Guidelines are not intended to replace, limit or otherwise circumscribe additional or supplementary guidance which is published on occasion by the DFSA or any other Supervisory Authority in the UAE.
It is the sole responsibility of supervised institutions to keep apprised and updated at all times regarding the money laundering and financing of terrorism risks to which they are exposed, and to maintain appropriate risk identification, assessment, and mitigation programmes, and to ensure their responsible officers, managers and employees are adequately informed and trained on the relevant policies, processes, and procedures.
Overview - DIFC AML, CTF and CPF legal regime
The DIFC is governed by two separate and complementary regimes in relation to AML/CTF/Sanctions legislation, both administered by the DFSA in relation to Relevant Persons:
• The Federal regime: Pursuant to Article 3 of Federal Law No. 8 of 2004, and the Federal laws and regulations referred to above under “The UAE Federal AML/CTF legislation“ which apply in the DIFC the DFSA, as Supervisory Authority for AML/CTF/CPF oversight of Relevant Persons in the DIFC, is obliged to supervise and monitor Relevant Persons for compliance with provisions of the UAE Federal AML/CTF/CPF legislation. For example, please refer to Article 14 of Federal Law No. 20 of 2018, Article 44 of Cabinet Decision No. 10 of 2019 and Article 22 of Federal Cabinet Decision No. 74 of 2020; and
• The DIFC regime: Under Article 70(3) of the DIFC Regulatory Law 2004 as amended (the Regulatory Law), the DFSA has jurisdiction for the regulation of anti-money laundering and combatting of terrorist financing in the DIFC relating to Relevant Persons (see the definition above) and their officers, employees and agents. The DIFC regime specific to Relevant Persons is contained in the Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module (AML), Chapter 2 of Part 4 of the Regulatory Law and any DFSA Rules made in connection with anti-money laundering measures, policies and procedures.
Importantly, Article 71(1) of the Regulatory Law requires Relevant Persons to comply with Federal Anti-Money Laundering Legislation as it applies to such a person in the DIFC. Accordingly, a failure to comply with a provision of any of the “The UAE Federal AML/CTF/CPF legislation” referred to above may provide evidence of a failure to comply with Article 71(1) of the Regulatory Law. This may result in a Relevant Person being subject to sanctions under the Regulatory Law and DFSA Rules, but also administrative sanctions imposed by the DFSA, in its capacity as a Supervisory Authority, under applicable UAE Federal AML Legislation.
The AML Module of the DFSA Rulebook
The AML Module of the DFSA Rulebook (the AML Module) contains all of the regulatory requirements that apply to a Relevant Person in the DIFC concerning Anti-Money Laundering, Counter-Terrorist Financing and relevant sanctions, in one module. It provides a single reference point for all Relevant Persons supervised by the DFSA for AML, CTF and sanctions compliance in the DIFC.
It is important for Relevant Persons to familiarise themselves with the AML Module and assess the extent to which the AML Rules apply to them, and on a continuing basis.
The Risk-Based Approach
Rule 4.1.1 of the AML Module requires all Relevant Persons to adopt an approach to AML/CTF/CPF which is proportionate to the risks. This is known as the Risk Based Approach (RBA) and is a key aspect of a Relevant Person’s money laundering compliance culture, and should be cascaded down from the senior management to the rest of the organisation. The RBA seeks to ensure that the measures to prevent or mitigate ML / TF are commensurate to the risks identified. Adopting a RBA should enable Relevant Persons to:
• recognise the existence of risk(s) within their business;
• undertake an assessment of those risk(s); and
• develop controls and apply resources to manage and mitigate those risks identified.
An effective risk-based approach should allow Relevant Persons discretion to exercise reasonable business judgement with respect to their business and customers. Firms should understand their business better than anyone else and are best placed to identify and determine the level of risk their business faces from ML/TF, and to develop appropriate strategies, policies, procedures, systems and controls to manage and mitigate these risks.
The DFSA intends to provide certain practical information and assistance to all categories of Relevant Persons subject to the DFSA AML/CTF/CPF supervisory regime, on how to consider a risk based approach. The DFSA recognises there is a broad divergence of business activities carried on by the Relevant Persons we supervise, and therefore, the associated ML/TF risks for each Relevant Person will vary. The DFSA views this engagement as important in developing a common understanding amongst Relevant Persons within the DIFC of what a RBA entails and how to apply it.
DFSA Annual AML Return
All Relevant Persons are required to complete the DFSA Annual AML Return (AML Return) and submit it to the DFSA by the end of September each year. The AML Return covers the period from 1 August of the previous year to 31 July of the reporting year.
Information from the AML Return provides the Team with important information on the Relevant Persons we supervise. The information also helps us to:
• understand the risk of money laundering and financing of terrorism activities specific to each Relevant Person;
• ensure that information we have for our reporting entities is complete, accurate and current; and
• determine the best use of our resources in meeting our AML/CTF regulatory objectives.
The AML Return is available on the DFSA e-Portal following the end of the reporting period (i.e. from 1 August to 30 September). Guidance on how to complete the AML Return is available via the DFSA ePortal User Guide.
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