DFSA | THE INDEPENDENT REGULATOR OF FINANCIAL SERVICES

Regulatory Framework

The UAE Federal AML Legislation

UAE Federal Laws place obligations on all Relevant Persons in the DIFC to detect and deter money laundering and terrorism financing and to comply with sanctions.

Federal laws that relate to anti money laundering (AML), counter terrorism financing (CTF) and sanctions compliance in the UAE include:

  • 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. 20 of 2019 regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions on the Suppression and Combating of Terrorism, Terrorist Financing and Proliferation of Weapons of Mass Destruction, and Related Resolutions.
  • Federal Law No. 7 of 2014 on Combating Terrorism Offences.
  • Regulation No. 1/2019 regarding declaration of currencies, negotiable bearer financial instruments, precious metals & precious stones in possession of Travelers 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. 5/2012 on Combating Cyber Crimes.
  • Federal Penal Law No. 3/1987(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 CFT and Illicit organizations.
  • 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.

The above list may not be all encompassing and may also be subject to change by relevant Federal authorities.

All Federal laws issued by the UAE are available on the Ministry of Justice’s Legislation Portal (available in Arabic and English).


Guidelines on Federal AML Legislation

The UAE Mutual Evaluation Project Management Office has prepared Guidelines for Financial Institutions on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations. The purpose of these Guidelines is to provide guidance to Financial Institutions in order to enhance their understanding and effective performance of their statutory obligations under the Federal AML Legislation. The Guidelines can be accessed here.

Please note that the Guidelines do not intend to replace, limit or otherwise circumscribe additional or supplementary guidance which may be published on occasion by the DFSA or any other Supervisory Authority in the UAE.


DIFC AML/CTF Legal Regime

The DIFC is governed by two separate and complementary regimes in relation to AML/CTF laws and regulations, 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 stated above under “The UAE Federal AML Legislation“ apply in the DIFC. The DFSA, as the DIFC Supervisory Authority for AML/CTF oversight of Relevant Persons, is obliged to supervise and monitor Relevant Persons for compliance with provisions of the UAE Federal AML Legislation. For example, refer to Article 14 of Federal Law No. 20 of 2018 and Article 44 of Cabinet Decision No. 10 of 2019; and
  • The DIFC regime: Under Article 70(3) of the DIFC Regulatory Law 2004 (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 below) 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 the 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 Legislation” listed 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 vested in the DFSA, as a Supervisory Authority, under UAE Federal AML Legislation.


The AML Module of the DFSA Rulebook

The AML Module of the DFSA Rulebook 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 for 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.

Guidance on the AML Module of the DFSA Rulebook

The Risk-Based Approach

Rule 4.1.1 of the DFSA AML module requires all Relevant Persons to adopt a Risk Based Approach (RBA) as a key part of that Relevant Person’s money laundering compliance culture and to cascade down from the senior management to the rest of the organisation. The importance of adhering to the RBA is to ensure that 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 the risk(s); and
  • develop controls to manage and mitigate the 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/sanctions 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 FCP 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.

Guidance on how to complete the AML Return is available in the DFSA ePortal User Guide.

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