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Money Laundering in the UAE

Posted on 1st April 2010 by Camille Paldi,

Anti – Money Laundering Laws in the UAE and Dubai International Financial Center Free Zone

 

I.

UAE Federal Law No. 4 of 2002, Regarding Criminalization of Money Laundering

http://www.centralbank.ae/pdf/AMLSU/Federal-Law-No.4-2002-English.pdf

UAE Federal Law No. 1 of 2004 Regarding Anti- Terrorism

AML Federal_Law_No_1_2004[1]

http://uaelaws.files.wordpress.com/2010/04/aml-federal_law_no_1_20041.pdf

UAE Penal Code, Federal Law No. 3 of 1987

http://www.centralbank.ae/pdf/AMLSU/Federal-Law-No.3-1987.pdf

UAE Central Bank Regulations concerning Money Laundering

http://www.centralbank.ae/AMLSU.php

DFSA Anti-Money Laundering Rules: These set out the requirements for the policies, procedures, systems and controls which the DFSA require Authorized firms in the DIFC to have in place.

 AML_DFSA_Rulebook[1]

AML Non_Financial_AML__Regulations[1]

AML ASP_Module_DFSA_Rulebook[1]

II.

Money Laundering is the process by which individuals attempt to conceal the true origin, ownership and/or use of the proceeds of illegal activities and includes, without limitation, monies associated with terrorist financing.

Money Laundering can be divided into three stages:

  1. Placement, which involves the placement of illicit funds into the financial system.
  2. Layering, which involves the transfer of funds from one source to another in order to conceal the source of funds.
  3. Integration, which involves the placement of the proceeds of crime into use as legitimate funds by purchasing a legitimate business or real estate.

The Dubai Financial Services Authority (“DFSA”) has recently stepped up its’ campaign against anti-money laundering.  The DFSA is the organization which monitors the Dubai International Financial Center  (“DIFC”).  Depending on the type of  DIFC company vehicle, there are various forms of anti-money laundering controls which must be put in place in order to obtain a license to operate.  Violation of the Anti-Money Laundering Rules of the DFSA can lead to censure and/or penalty. 

Recently, the DFSA censured Saxo Bank Dubai for failure to comply with the DFSA Rules regarding the on-boarding of clients and Anti-Money Laundering, however, no evidence of any money-laundering was found to have taken place.  Saxo Bank was censured due to the fact that it referred clients to its parent company in Denmark without carrying out sufficient client classification as per the Laws and Rules of the DIFC and DFSA. 

In another recent case, the DFSA fined Dubai’s E-Trade Securities, the Dubai unit of a global online trading company, AED1.1 million for deficiencies in its anti-money laundering controls.  The DFSA said E-Trade Securities had failed to obtain sufficient documentary evidence of the origin of funds or sources of wealth of clients and nor  did it have adequate policies to ‘address the need to assess the money-laundering risk of its clients.’  E-Trade Securities has entered into an enforceable undertaking with the DFSA that requires the company to pay AED734,580.00 in thirty days.  Furthermore, E-Trade Securities was forced to close more than 1,000 customer accounts.

Ian Johnston, Deputy Chief Executive Managing Director of the DFSA said, “ The DFSA expects all firms, as part of their compliance regimes, to establish and maintain strong and effective know your client, anti-money laundering, and counter terrorist financing systems and controls.’  Firms should therefore confirm clients’ identities, residential addresses, and sources of funds as well as comply with the anti-money laundering controls in place in their company and the Anti-Money Laundering Rules of the DFSA.


Posted on 1st April 2010 by Camille Paldi


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