United Arab Emirates
Last updated: 16/06/2009
CENTRAL AUTHORITY FOR REPORTING
Federal Law No 4 of 2002 (‘the AML Law’) Law criminalizes money-laundering with respect to specified predicate offences. The AML Law also establishes the Financial Intelligence Unit within the UAE Central Bank for the purposes of the Egmont Group. Suspicious transactions are to be reported to this unit which, for these purposes is named, the ‘Anti-Money Laundering and Suspicious Cases Unit' (‘AMLSCU’) which was already in existence.
Responsibility for establishing the mechanics for reporting suspicious transactions lies with the National Anti-money Laundering Committee also established under the AML Law and which is under the Chairmanship of the Central Bank Governor.
The AML Law applies within the Dubai International Financial Centre (‘DIFC’). Additionally, Federal Law No 1 of 2004 on Combating Terrorism Offences (the 'CT Law’), the UAE Penal Code and any other Federal provision relating to anti-money laundering also apply within the DIFC. Within the DIFC there are principally three categories of business, namely:
Authorized Firms (ie financial services businesses);
Ancillary Service Providers (‘ASPs’) (broadly, legal and accounting professionals providing legal/accounting services to Authorized Firms or Authorized Market Institutions);
Designated Non-Financial Businesses and Professions (‘DNFBPs’) (which can include lawyers/accountants who are not ASPs).
Authorized Firms and ASPs are required to report suspicious transactions to the AMLSCU and to simultaneously file a report with the Dubai Financial Services Authority (‘DFSA’). DNFBPs are required to report such transactions to the AMLSCU and simultaneously file a report with the Compliance Department of the DIFC Authority.
FURTHER ANTI-MONEY LAUNDERING REGULATOR(S) AND SUPERVISORY BODIES
To summarize the principal authorities (including those referred to above):
The National Anti-Money Laundering Committee: The National Anti-Terrorism Committee facilitates interagency co-operation and liaison.
The National Committee for Combating Terrorism, established pursuant to the CT which is tasked with providing coordination between the authorities in all matters relating to terrorism. The committee comprises of representatives from the Central Bank and Government Ministries as well as from Customs, and the Chamber of Commerce and Industry.
After September 11, 2001, the Committee took charge of combating the financing of terrorism through the financial sector. Additionally, it is responsible for, inter alia, proposing legislative initiatives and for ensuring enforcement of UN Security Council resolutions.
The DIFC DNFBP AML/CFT Commissioner.
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
Within the UAE
Circular No 1 of 2008 (‘the Lawyer Circular’) issued in June 2008 by the Chairman for Registration and Admittance of Lawyers (part of the Ministry of Justice) addresses Lawyers within the UAE, and establishes procedures to be followed with respect to verification of client identity, identity of parties to a transaction, the commercial objective of a transaction and the relevant ‘owners and beneficiaries’.
Additionally there are record-keeping requirements.
The transactions to which the Lawyer Circular applies are specified and include property transactions, management of client money and assets, client bank accounts and ‘commercial paper’. Also encompassed are the establishment, operation, management, sale or purchase of companies / commercial entities.
In broad terms, the Lawyer Circular tracks FATF Recommendation 12 as to the transactions it covers. In terms of reporting, it does not apply to predicate money laundering offences but with respect to terrorism only.
It is not clear whether the Lawyer Circular only applies to Lawyers on the Roster of Lawyers under Federal Law No 23 of 1991 (regarding the regulation of the legal profession), or whether the Lawyer Circular also applies to legal consultants and foreign law firms or, indeed, to law firms within the DIFC (but see below). Clarification is currently being sought on the ambit of the Lawyer Circular.
Within the DIFC
Those providing legal services within the DIFC as ASPs are not only covered by the Federal anti-money laundering and anti-terrorism laws, but are also governed by DFSA requirements relating to, inter alia, ‘know your client’, record keeping, systems and controls, and training. As indicated above, it is not yet clear if the Lawyer Circular applies to lawyers within the DIFC, but given the matters discussed in the next paragraph, this is perhaps academic.
Those lawyers who are not ASPs and are therefore DNFBPs are covered by the Federal law and, additionally, the Non-Financial Anti-Money Laundering / Anti-Terrorist Financing Regulations (AML/CFT) Regulations (the 'DIFC DNFBP Regulations’) issued by the DIFC. The DIFC DNFBP Regulations are analogous to the Lawyer Circular in tracking FATF Recommendation 12 (rather than the more thoroughgoing regime to which ASPs are subject).
However, in the case of the DIFC DNFBP Regulations the reporting obligations cover the predicate anti-money laundering offences and not just terrorism. DNFBPs are exonerated from criminal and civil liability with respect to good faith performance of their reporting obligations.
NAME THE LAWS REGARDING ANTI-MONEY LAUNDERING PROCEDURES
The principal laws are:
- Regulation No. 24/2000, issued by the Central Bank which contains detailed provisions applying an anti-money laundering infrastructure to banks and all financial institutions;
- Federal Law No. 4 of 2002 (the AML Law), which criminalizes money laundering with respect to specified predicate offences;
- Federal Law No. 1 of 2004 (the CT Law) on combating terrorism offences. In particular, Article 23 provides that any person who knows of a ‘design’ to commit any of the primary terrorist offences, which includes a terrorist finance offence, and does not report that fact to the relevant authority, commits an offence. This provision applies to all persons;
- Federal Law No. 2 of 2006 on the Prevention of Information Technology Crimes.
There are other laws and regulations from Central Bank and Federal institutions that address particular AML/CFT issues either generally or in relation to particular sectors, e.g. the insurance industry, lawyers (the Lawyer Circular), accountants (issued by the Ministry of Economy) and Hawala Brokers.
In addition, free-zones are to incorporate the Federal requirements into their regulatory framework.
Other significant institutions have issued AML/CFT regulations to members, including the UAE Securities & Commodities Authority.
In addition to the Federal laws (in particular the AML Law and CT Law), different layers of regulation apply to the various categories of businesses operating within the DIFC:
IN ADDITION TO THESE LAWS, IS THERE ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS CURRENTLY IN PLACE?
No, although there are guidance notes within the relevant DFSA Rulebook Modules.
UNDER WHAT CIRCUMSTANCES IS A LAWYER UNDER THE OBLIGATION TO REPORT.
In the UAE
To the extent that a lawyer is governed by the Lawyer Circular, the reporting obligation is triggered when there are objective reasons to suspect that money involved in a transaction is related to or will be used for terrorism or for financing terrorism operations or related to terrorist organizations or persons financing terrorism.
In the DIFC
The reporting obligation is triggered by;
For ASPs: the actual knowledge or suspicion or possession of reasonable grounds for knowing or suspecting that a person is engaged in money laundering (as defined in the federal AML Law);
For DNFBPs: actual suspicion or reasonable grounds to suspect that funds concerning an actual or proposed transaction are the proceeds of any criminal activity, or are related to money laundering (as defined under the AML Law) or Terrorist Financing (as understood from the CT Law).
In the UAE
There are no particular penalties or sanctions are stipulated under the Lawyer Circular.
In the DIFC
For ASPs: the ASP and individuals within it are subject to the full enforcement powers of the DFSA.
For DNFBPs: the DIFC Authority may impose sanctions including unlimited fines upon those in breach of the DIFC DNFBP Regulations.
CLIENTS IDENTIFICATION AND VERIFICATION
In the UAE
The Lawyer Circular outlines client identification and verification requirements with respect to the transactions covered by the Circular.
In the DIFC
ASPs are required to meet the comprehensive requirements as provided in the ASP Module of the DFSA Rulebook.
DNFBPs are required to meet the Client Due Diligence requirements (which include identification provisions) set out in the DIFC DNFBP Regulations.
LAWYERS PROSECUTED FOR MONEY LAUNDERING OFFENCES
We are not aware of any.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) OR RELEVANT SUB REGIONAL ORGANISATION CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Between 28th February and 15th March 2007 an assessment on the AML and CFT framework was conducted in the UAE under the supervision of the IMF, in the context of the 40+9 FATF Recommendations. The report ('Mutual Evaluation Report’) was adopted by the Middle East and North African FATF (‘MENA FATF’) in April 2008 and by the Financial Action Task Force itself in June 2008.
The Mutual Evaluation Report made a number of recommendations regarding steps that should be taken to strengthen AML and CFT within the UAE. In particular, it was concluded that lawyers were not covered by AML laws/regulation except in the case of ASPs, although acknowledgement was given to the impending issuance of the DIFC DNFBP Regulations and their application to non-ASP lawyers within the DIFC.
In November 2008 MENA FATF issued a report (the ‘MENA FATF DNFBP Report’) containing FATF-consistent recommendations directed specifically at the issue of AML and CFT regulations for DNFBPs (including lawyers). This report was not specific to the UAE but for all members of MENA FATF.
It should be appreciated that the Mutual Evaluation Report was issued prior to the Lawyer Circular. Therefore, it is no longer the case that lawyers are not covered by AML and CFT regulation. The exact ambit of the coverage requires clarification and this is being sought with the objective that the website entry for the UAE be updated in due course.
Information supplied by:
Mr Philip Jolowicz
Mr Alexander McGeoch
Hadef & Partners
Building 3, Level 5
Downtown Burj Dubai
PO Box 37172
Official Website: www.hadefpartners.com
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