Frequently Asked Questions

Anti-money Laundering (AML)

Questions & Answers

1. What is money laundering?
   Money laundering is the process by which individuals or entities attempt to disguise the illegal origin of the proceeds derived from criminal activities. It typically involves multiple stages: placement (introducing illegal funds into the financial system), layering (complex transactions to obscure the origin), and integration (returning the cleaned money into the economy as legitimate funds). In the UAE, this activity is strictly prohibited under Federal Decree-Law No. (20) of 2018, and severe penalties apply for violators​.

2. Which law governs anti-money laundering in the UAE?
   The primary law governing anti-money laundering activities in the UAE is Federal Decree-Law No. (20) of 2018 concerning Anti-Money Laundering, Combating the Financing of Terrorism, and Financing of Illegal Organizations. This law outlines the legal framework for identifying, reporting, and penalizing money laundering activities. It was further amended by Federal Decree-Law No. (26) of 2021, which introduced additional measures and penalties​.

3. What is the role of the Financial Intelligence Unit (FIU)?
   The FIU is responsible for receiving, analyzing, and investigating reports of suspicious financial transactions. It is a crucial agency in the UAE’s AML framework, coordinating with financial institutions and designated non-financial businesses and professions (DNFBPs) to detect and prevent money laundering. The FIU also collaborates with law enforcement agencies to investigate and prosecute criminal activities.

4. Who is required to comply with AML regulations in the UAE?
   Both financial institutions and designated non-financial businesses and professions (DNFBPs) must comply with AML regulations in the UAE. DNFBPs include sectors such as real estate, precious metals dealers, accountants, lawyers, and corporate service providers. These businesses are considered vulnerable to money laundering risks and are required to implement strict AML measures​.

5. What are DNFBPs in AML regulations?
   DNFBPs (Designated Non-Financial Businesses and Professions) refer to businesses or professions that could be susceptible to money laundering risks. These include real estate brokers, law firms, auditors, precious metal and gem dealers, and trust and company service providers. These sectors must apply AML compliance measures, such as customer due diligence, transaction monitoring, and reporting of suspicious activities​.

6. What is the penalty for non-compliance with AML regulations in the UAE?
   Non-compliance with AML regulations in the UAE results in strict penalties, ranging from fines to imprisonment. Administrative fines start at AED 50,000 and can go up to AED 1,000,000, depending on the severity of the violation. Repeat offenses or intentional involvement in money laundering may lead to further sanctions, including criminal prosecution, business closure, or revocation of licenses.

7. What is a Suspicious Transaction Report (STR)?
   An STR is a mandatory report submitted by financial institutions or DNFBPs when they detect or suspect that a transaction may be connected to criminal activities, including money laundering or terrorism financing. The report is submitted to the FIU and triggers further investigation. Failing to file an STR when required can result in hefty fines and criminal liability.

8. What is Customer Due Diligence (CDD)?
   CDD refers to the process whereby financial institutions and DNFBPs verify the identity of their customers and assess the risks associated with their financial activities. This involves collecting and verifying documents that prove the customer’s identity, understanding the nature of their business relationships, and monitoring their transactions for suspicious patterns. The aim is to prevent financial systems from being used for illegal purposes​.

9. What is the minimum threshold for transactions that require CDD?
   In the UAE, CDD is required for transactions involving amounts of AED 55,000 or more, and for wire transfers exceeding AED 3,500. However, institutions are encouraged to apply CDD measures even for lower amounts if suspicious activity is suspected​.

10. Who is the beneficial owner in AML compliance?
    The beneficial owner is the natural person who ultimately owns or controls a customer or the legal entity involved in a transaction. Identifying the beneficial owner is crucial because they could be hiding behind layers of corporate entities to conceal illegal activities. AML laws in the UAE require financial institutions and DNFBPs to conduct enhanced due diligence to uncover the true beneficial owner​.

11. How often should financial institutions update CDD information?
    CDD information must be kept up-to-date and regularly reviewed, especially for high-risk customers. Periodic reviews should be conducted at intervals based on the institution’s risk assessment, but at a minimum, records must be reviewed every five years or when there is a significant change in the business relationship​.

12. What is enhanced due diligence (EDD)?
    Enhanced Due Diligence (EDD) is a more detailed investigation required for high-risk customers or transactions, such as those involving politically exposed persons (PEPs), countries identified as high-risk, or customers dealing in virtual assets. EDD involves obtaining additional information about the source of funds, understanding the purpose of transactions, and continuously monitoring customer activity to identify potential risks​.

13. What are the penalties for failing to report a suspicious transaction?
    Financial institutions or DNFBPs that fail to report suspicious transactions can face fines ranging from AED 50,000 to AED 200,000. More serious cases, where there is clear intent to conceal or avoid reporting suspicious activities, can lead to criminal prosecution, resulting in imprisonment, further fines, or the closure of the business.

14. What are politically exposed persons (PEPs)?
    Politically Exposed Persons (PEPs) are individuals who hold or have held prominent public functions, such as heads of state, senior government officials, or military leaders. Due to their positions of influence, PEPs are considered higher risk for potential involvement in bribery, corruption, or money laundering. Financial institutions must apply enhanced due diligence measures when dealing with PEPs and their family members​.

15. What are shell banks, and are they allowed in the UAE?
    Shell banks are banks that have no physical presence in any jurisdiction and are not affiliated with any regulated financial institution. The UAE prohibits financial institutions from conducting any business with shell banks. Violations of this prohibition result in significant fines, up to AED 1,000,000, and could also lead to further legal action​.

16. Can a financial institution be held liable for not performing AML checks on high-risk customers?
    Yes, financial institutions can face penalties if they fail to perform proper AML checks, particularly on high-risk customers such as PEPs or entities from high-risk jurisdictions. Penalties include administrative fines, reputational damage, and potential criminal liability for senior management​.

17. How long must records be kept under AML laws?
    Under UAE AML laws, financial institutions and DNFBPs must retain all records related to transactions, customer identification, due diligence, and monitoring for at least five years from the date of the transaction or the termination of the business relationship. This ensures that authorities can access historical data if required for investigations​.

18. What is the threshold for reporting cash transactions under UAE AML law?
    Financial institutions and DNFBPs are required to report cash transactions of AED 55,000 or more. This includes deposits, withdrawals, or exchanges that meet or exceed the threshold. For wire transfers, the reporting threshold is AED 3,500​.

19. What is the process for freezing funds under AML laws?
    If funds are suspected of being linked to money laundering or terrorist financing, the competent authority in the UAE has the power to freeze the funds for up to seven working days. During this time, an investigation is conducted. If necessary, the freeze can be extended by a court order or under the direction of the public prosecutor​.

20. How do AML laws in the UAE address terrorism financing?
    AML regulations in the UAE specifically target terrorism financing, which includes any financial support provided for terrorist activities or organizations. The UAE has adopted strict measures under Federal Decree-Law No. (20) of 2018 to combat the financing of terrorism, which includes the immediate freezing of assets linked to terrorism, stringent penalties, and the mandatory reporting of suspicious transactions related to terrorism​.

21. What are the key differences between money laundering and terrorism financing under UAE law?
    While both money laundering and terrorism financing involve illegal financial activities, they differ in intent and scope. Money laundering seeks to disguise the illegal origins of funds derived from criminal activities, such as drug trafficking or fraud, by introducing the funds into the financial system and making them appear legitimate. Terrorism financing, on the other hand, involves the provision of funds to support terrorist activities or organizations, regardless of whether the funds come from legal or illegal sources. Under UAE law, both activities are severely penalized, with terrorism financing considered particularly serious due to its link to global security threats​.

22. What are the penalties for financing illegal organizations under UAE AML law?
    Financing illegal organizations, including terrorist groups, is a serious offense under UAE law. Penalties include imprisonment ranging from 5 to 25 years, and fines that can reach AED 100 million. In addition, assets linked to financing these organizations are subject to immediate freezing, and individuals involved may face additional penalties such as asset confiscation​.

23. How are correspondent banking relationships regulated under AML laws?
    Correspondent banking relationships, which involve a bank providing services to another financial institution, are subject to stringent AML regulations. UAE banks are required to conduct comprehensive due diligence on their correspondent banks, ensuring that they are not involved in any money laundering or terrorism financing activities. This includes assessing the correspondent bank’s AML policies and compliance with international standards. UAE banks are prohibited from entering into correspondent relationships with shell banks or banks located in jurisdictions with insufficient AML controls​.

24. What steps should financial institutions take if they cannot complete CDD?
    If a financial institution is unable to complete Customer Due Diligence (CDD), such as when a customer refuses to provide necessary information or documents, the institution must not establish a business relationship or carry out any transactions with that customer. In cases where a business relationship has already been established, it must be terminated, and a Suspicious Transaction Report (STR) should be filed with the Financial Intelligence Unit (FIU). Non-compliance with this requirement can lead to administrative fines or more severe penalties.

25. How do AML regulations address the use of virtual assets in the UAE?
    Virtual assets, such as cryptocurrencies, are increasingly used for various financial transactions but can also pose a significant risk for money laundering due to their relative anonymity. Under UAE AML laws, virtual asset service providers (VASPs) must implement strict Enhanced Due Diligence (EDD) measures when dealing with virtual assets. They are required to verify the identity of their customers, monitor transactions for suspicious patterns, and report any suspicious activity to the FIU. Additionally, virtual assets are subject to monitoring and reporting requirements similar to traditional financial instruments.

26. What are the penalties for non-compliance by DNFBPs under UAE AML law?
    DNFBPs (Designated Non-Financial Businesses and Professions), such as real estate agents, jewelers, and lawyers, are held to the same high standards of AML compliance as financial institutions. Penalties for non-compliance include administrative fines ranging from AED 50,000 to AED 200,000, depending on the severity and recurrence of the offense. In more serious cases, the business may face license suspension or cancellation, criminal prosecution, and potential imprisonment for individuals involved in the violation​.

27. How does UAE law ensure the confidentiality of STRs?
    Confidentiality is a critical aspect of Suspicious Transaction Reports (STRs) under UAE law. The filing of an STR must be kept strictly confidential, and the institution that files the report is prohibited from disclosing the fact to the customer or any third party involved. Unauthorized disclosure of an STR can result in significant penalties, including fines of up to AED 100,000 and potential criminal charges against the institution or individuals responsible for the breach.

28. Can AML fines be doubled for repeat offenders?
    Yes, under UAE AML regulations, fines can be doubled for repeat offenders. For example, a financial institution or DNFBP that repeatedly violates AML laws, such as failing to implement adequate CDD or not filing STRs, can face fines up to AED 2,000,000 in cases of continued non-compliance. Additionally, repeated violations may lead to harsher penalties, including license revocation and criminal prosecution​.

29. How does AML law treat high-risk countries?
    Under UAE AML law, transactions involving individuals or entities from high-risk countries—countries identified as having weak AML controls or a high level of criminal activity—require enhanced due diligence (EDD). This means that financial institutions must gather additional information on the customer's background, the source of funds, and the nature of the business relationship. Institutions must also closely monitor transactions involving high-risk countries and report any suspicious activity to the FIU​.

30. What are the obligations for reporting cash or precious metal imports and exports?
    Any person or entity bringing large amounts of cash, precious metals, or precious stones into or out of the UAE must declare them to the relevant authorities, such as customs officials, in accordance with UAE AML laws. The threshold for mandatory declaration is typically AED 60,000 or more. Failure to report such movements of cash or valuables can result in fines, asset confiscation, and possible criminal prosecution for attempting to circumvent AML controls​.

31. How does the UAE’s AML law address complex corporate structures used for money laundering?
    Complex corporate structures, such as holding companies, trusts, and shell companies, can be used to conceal the true ownership of assets and facilitate money laundering. UAE AML law requires financial institutions and DNFBPs to thoroughly investigate the ownership structure of their clients, particularly when dealing with entities that have opaque or multi-layered ownership. This involves identifying the ultimate beneficial owner (UBO) and ensuring that there is no misuse of corporate structures for illicit purposes. Failure to conduct such investigations can result in penalties​.

32. What steps must DNFBPs take to comply with AML requirements when conducting large transactions?
    DNFBPs involved in large transactions, particularly in sectors like real estate, jewelry, or legal services, must implement robust Customer Due Diligence (CDD) procedures. This includes verifying the identity of the customer, assessing the purpose of the transaction, and reporting any transactions that exceed the reporting threshold of AED 55,000. DNFBPs must also file Suspicious Transaction Reports (STRs) when there is reason to believe that the transaction could be linked to illegal activities. Non-compliance can lead to significant fines or even criminal prosecution​.

33. What is the process for submitting an STR to the Financial Intelligence Unit (FIU)?
    When a financial institution or DNFBP identifies a suspicious transaction, it must submit an STR to the FIU using the designated online portal. The STR must include detailed information about the customer, the nature of the transaction, and the reasons for suspicion. Once submitted, the FIU will analyze the report and may request additional information or escalate the case to law enforcement if criminal activity is suspected. The institution must not inform the customer of the STR submission, as doing so could compromise the investigation​.

34. How does UAE AML law handle foreign politically exposed persons (PEPs)?
    Foreign PEPs, due to their positions of influence and the associated risks of corruption, are subject to Enhanced Due Diligence (EDD). Financial institutions must conduct thorough background checks, including verifying the source of the PEP’s funds and monitoring their transactions for any unusual or suspicious activity. The UAE’s FIU may also work with international regulatory bodies to exchange information on PEPs when needed. Institutions that fail to apply EDD measures on PEPs face significant penalties​.

35. What are the reporting requirements for high-value real estate transactions?
    Real estate agents are required to apply CDD measures when facilitating property transactions that exceed AED 55,000. This includes verifying the identities of both the buyer and the seller, assessing the source of funds, and reporting any suspicious activity to the FIU. Given the potential for real estate to be used in money laundering schemes, real estate professionals must also be vigilant about any attempts to purchase property using cash payments or complex financing arrangements​.

36. How does the UAE coordinate internationally in combating money laundering?
    The UAE actively collaborates with international organizations such as the Financial Action Task Force (FATF) and other jurisdictions to combat money laundering and terrorism financing. This involves sharing information about suspicious transactions, assisting in international investigations, and participating in mutual evaluation reports to assess the effectiveness of its AML regime. Additionally, the UAE has signed various bilateral and multilateral agreements to facilitate the exchange of financial intelligence and ensure compliance with global AML standards​.

37. What are the penalties for financial institutions that fail to monitor high-risk customers?
    Financial institutions that do not adequately monitor high-risk customers, such as politically exposed persons (PEPs) or customers from high-risk jurisdictions, may face severe penalties. These penalties can include fines starting at AED 100,000, and in extreme cases, the institution's license may be revoked. Additionally, the management of the institution may face personal liability, including imprisonment if the failure is deemed intentional or reckless.

38. How are informal value transfer systems (IVTS) regulated under UAE AML laws?
    Informal Value Transfer Systems (IVTS), such as hawala, are legal in the UAE but must be licensed and registered with the Central Bank of the UAE. Hawala brokers are required to comply with AML regulations, including conducting Customer Due Diligence (CDD), maintaining transaction records, and reporting suspicious transactions to the FIU. Unlicensed hawala operations are strictly prohibited, and engaging in such activities can result in severe penalties, including fines and imprisonment​.

39. What are the obligations of financial institutions regarding the identification of suspicious patterns in transaction monitoring?
    Financial institutions are required to implement automated systems for transaction monitoring to detect suspicious patterns that could indicate money laundering or terrorism financing. This includes setting up alerts for unusually large transactions, frequent transfers to high-risk countries, or complex layering activities. When such patterns are identified, the institution must conduct further investigations and, if necessary, file a Suspicious Transaction Report (STR) with the FIU. Failure to properly monitor transactions or report suspicious activity can lead to significant penalties​.

40. What is the role of the Central Bank in enforcing AML compliance?
    The Central Bank of the UAE plays a critical role in enforcing AML compliance by regulating financial institutions, issuing guidelines, and conducting inspections to ensure adherence to AML regulations. The Central Bank has the authority to impose administrative penalties, including fines, suspension of operations, and license revocations, on institutions that fail to comply. It also works closely with the FIU to ensure that financial institutions report suspicious transactions and follow proper due diligence protocols​.

41. How does the UAE's AML framework address anonymous accounts?
    The opening or maintenance of anonymous accounts or accounts under fictitious names is strictly prohibited under UAE AML laws. Financial institutions must conduct full Customer Due Diligence (CDD) to ensure that every account is linked to a verified individual or entity. Anonymous accounts pose significant risks for money laundering and are subject to immediate closure if detected. Institutions that allow such accounts to operate may face severe fines, and their senior management could be held personally liable.

42. How are cross-border wire transfers regulated under UAE AML laws?
    Cross-border wire transfers involving amounts of AED 3,500 or more must be reported under UAE AML regulations. Financial institutions are required to collect detailed information about the originator and the beneficiary, including their full name, address, and account number. Additionally, the purpose of the transfer must be verified, and any transfers linked to high-risk countries or suspicious activities should be reported to the FIU. Non-compliance with these requirements can lead to heavy penalties​.

43. What is the penalty for falsifying documents or providing false information in AML compliance processes?
    Providing false information or falsifying documents during the AML compliance process is a serious offense under UAE law. Penalties include fines starting at AED 50,000, escalating up to AED 1,000,000, depending on the severity of the offense. In cases where the falsification is linked to criminal activities, individuals involved may face imprisonment, in addition to asset confiscation and business closure.

44. What is the role of auditors in ensuring AML compliance for DNFBPs?
    Auditors play a crucial role in assessing the AML compliance of DNFBPs by reviewing their internal policies, procedures, and financial records. They must ensure that the business is following proper due diligence, record-keeping, and reporting protocols. Auditors are also required to notify the authorities if they identify any suspicious activities or instances of non-compliance. Failure to report such findings may result in penalties for the auditing firm, including fines and loss of accreditation​.

45. What are the requirements for financial institutions when dealing with correspondent banking relationships?
    Financial institutions must conduct comprehensive due diligence when establishing correspondent banking relationships, especially with foreign banks. This includes evaluating the AML compliance programs of the correspondent bank, ensuring that it is not linked to any shell banks, and verifying that it adheres to international AML standards. Banks in the UAE must monitor the transactions passing through correspondent accounts for suspicious activity and ensure that the relationship is continuously assessed for risks. Failure to meet these requirements can result in penalties, including fines and suspension of the correspondent banking relationship​.

46. How are politically exposed persons (PEPs) monitored under UAE AML regulations?
    Financial institutions are required to apply Enhanced Due Diligence (EDD) when dealing with Politically Exposed Persons (PEPs) due to their potential involvement in corruption or illicit activities. This includes verifying the source of wealth, conducting in-depth background checks, and continuously monitoring transactions for any signs of suspicious activity. Financial institutions must also implement ongoing monitoring systems to detect unusual patterns in the financial behavior of PEPs, and any suspicious activity must be reported to the FIU​.

47. What procedures are in place to handle sanctions violations under AML law?
    UAE AML law mandates strict compliance with international sanctions regimes, including those issued by the United Nations Security Council. Financial institutions must implement screening mechanisms to ensure that they are not dealing with individuals or entities listed under sanctions. If a financial institution inadvertently processes transactions for a sanctioned entity, it must immediately freeze the assets and notify the relevant authorities. Failing to comply with sanctions can result in severe penalties, including fines, asset confiscation, and criminal prosecution​.

48. How does the UAE's AML framework regulate non-profit organizations (NPOs)?
    Non-profit organizations (NPOs) can be vulnerable to misuse for terrorism financing, so they are subject to specific AML regulations in the UAE. NPOs must implement stringent record-keeping practices, ensure full transparency of their funding sources, and report any large donations or unusual transactions to the relevant authorities. They are also required to submit annual financial statements and undergo regular audits to prevent any potential misuse of funds​.

49. What are the procedures for financial institutions to freeze suspected terrorist-linked accounts?
    Financial institutions must immediately freeze any accounts or assets that they suspect are linked to terrorism or are flagged by the UAE's national or international watchlists. This action must be reported to the FIU and relevant law enforcement authorities, who will determine the next steps in the investigation. Failure to freeze such accounts in a timely manner can result in fines, penalties, and reputational damage to the institution.

50. What are the requirements for training staff in AML compliance?
    Financial institutions and DNFBPs are required to regularly train their staff on AML compliance to ensure that employees understand how to identify and report suspicious transactions. This includes training on customer due diligence, recognizing red flags, and understanding the legal obligations of filing STRs. Institutions that fail to provide adequate training may face fines ranging from AED 50,000 to AED 500,000, depending on the severity of the oversight​.

51. How does the UAE address anonymous virtual asset transactions under AML laws?
    Anonymous or pseudonymous virtual asset transactions, such as those using privacy-focused cryptocurrencies (also known as anonymity-enhanced cryptocurrencies), are subject to strict scrutiny under UAE AML laws. Virtual Asset Service Providers (VASPs) are required to conduct Enhanced Due Diligence (EDD) on customers using such assets, including identifying the origin of the funds and reporting any suspicious activities. Additionally, any transaction involving virtual assets that appears to evade identification or obscures the source of funds must be reported to the FIU. Failure to do so can result in significant fines and possible suspension of VASP licenses.

52. What are the obligations for lawyers and notaries under AML regulations in the UAE?
    Lawyers and notaries, as part of the DNFBPs, are required to implement AML measures when involved in transactions on behalf of their clients, particularly in areas like real estate purchases, company formation, and financial management. Their obligations include conducting Customer Due Diligence (CDD), monitoring large or suspicious transactions, and filing Suspicious Transaction Reports (STRs) with the FIU if they suspect that a client may be involved in money laundering. Failure to comply with these obligations can result in disciplinary actions, including fines and suspension of licenses.

53. How are high-risk sectors identified under UAE AML regulations?
    High-risk sectors, such as real estate, precious metals trading, gambling, and cross-border banking, are identified by UAE regulators based on their vulnerability to money laundering and terrorism financing. Entities operating in these sectors are required to implement Enhanced Due Diligence (EDD) and adopt stricter monitoring practices to mitigate risks. Financial institutions and DNFBPs in these sectors must also regularly assess their risk exposure and report any suspicious activity to the FIU. Regular audits and inspections are conducted by regulatory authorities to ensure compliance.

54. What are the requirements for offshore companies in terms of AML compliance in the UAE?
    Offshore companies, particularly those operating in free zones, are required to comply with UAE AML regulations if they conduct business within the country. This includes implementing proper Customer Due Diligence (CDD) measures, maintaining accurate records of ownership and control structures, and reporting any suspicious transactions to the FIU. Offshore companies must also ensure they are not being used as vehicles for money laundering by conducting risk assessments and monitoring all transactions for irregularities. Non-compliance can result in fines, sanctions, and potential revocation of their business licenses.

55. How does the UAE’s AML framework address the use of trade-based money laundering (TBML)?
    Trade-Based Money Laundering (TBML) is the process of disguising the proceeds of crime and moving value through the use of trade transactions. UAE authorities have introduced strict regulations to detect and prevent TBML, including enhanced monitoring of trade finance transactions, customs declarations, and cross-border shipments. Financial institutions and DNFBPs must verify the legitimacy of trade documents, such as invoices and bills of lading, and report any discrepancies or unusual trade patterns to the FIU. Businesses involved in international trade must also be aware of sanctions and embargoes to avoid violations of international trade laws.