Updates on AML/KYC Laws and Regulations in UAE
The United Arab Emirates has a strong legal system in place to stop the funding of terrorism and money laundering. The UAE, being the financial center of the Middle East, has enforced stringent AML and KYC laws and regulations to guarantee the safety and openness of its financial system.
Although there is a tendency for people to confuse AML with KYC procedures, the two are closely related. The majority of people are unaware of their differences in the regulatory framework. To determine where to draw the line between the two, it is best to speak with AML consultants in Dubai.
What is meant by Anti-Money Laundering?
The rules and procedures that DNFBPs and financial institutions must abide by in order to avoid money laundering are collectively referred to as Anti-Money Laundering (AML). Companies can detect potentially illicit transactions and fight money laundering with the help of the AML-CFT rules. In order to uphold its commitment to the Financial Action Task Force (FATF) and stop money laundering from reaching the authorized financial system, the UAE government has put these regulations into effect.
What is KYC (Know Your Customer)?
Financial institutions and designated non-financial businesses and professions (DNFBPs) in the United Arab Emirates are required by law to adhere to anti-money laundering and countering the financing of terrorism (AML-CFT) regulations, which includes the KYC procedure. This group consists of auditors, real estate agents, dealers in precious stones and metals, and providers of trust and corporate services. Businesses can verify the identification of new clients, obtain vital information about them, and determine the risk of any potential financial activity by using the KYC procedure. Given the high risk of money laundering, banks and lenders frequently utilize it.
AML/CFT legislation require regulated firms to comply with AML, including KYC. Jurisdictions differ in the extent to which they can regulate entities. This usually includes the following:
- Institutions of finance
- Financial establishments
- Insurance providers
- Organizations that accept e-money
- Payment institutions
- Virtual Assets Service Providers(VASPs)
- Brokers and Agents of Real Estate
- Precious Metals & Stones Dealers
- Self-employed accountants and legal professionals
- Companies that Offer Services
According to national AML legislation, KYC/CDD is necessary in a number of situations. They typically consist of, but are not restricted to, situations in which the client:
- For the first time, forms a connection with a company (by opening an account at a bank or cryptocurrency trading platform, for instance)
- Transacts more than the maximum amount allowed by AML laws
- Raises questions about potential money laundering and financing of terrorism.
KYC(Know Your Customer)
- During the KYC procedure, an organization obtains essential client data and evaluates it according to a number of standards.
- Entities utilize KYC to assist in confirming the identification of their consumers.
- Identity verification, risk profiling, and customer screening are the three main components of the KYC process.
- By using a risk-based methodology, the KYC procedure enables pertinent companies to identify phony and fraudulent customers.
AML(Anti-Money Laundering)
- AML creates policies and measures to reduce the possibility of financial crimes such as money laundering
- The goal of AML processes is to stop criminal groups or individuals from committing financial crimes like money laundering. Financial sanctions are used through AML to express disapproval, limit a target, apply pressure to a regime, and safeguard assets.
- AML is a catch-all word that includes rules, guidelines, controls, SARs (suspicious activity reports), and more.
- In order to prevent financial crimes, AML helps relevant entities create a strong AML-CFT compliance structure and comply with new rules
The United Arab Emirates has a number of legislation pertaining to AML/CFT operations. The key ones are:
i) The Federal Decree-Law No. (20) of 2018 regulates the financing of unlawful groups in the United Arab Emirates, as well as anti-money laundering and counterterrorism financing regulations. The AML-CFT Law, as it is popularly known, establishes the legal foundation for the nation’s efforts to prevent and identify financial crimes.
ii) The Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations explains the implementing rules in Cabinet Decision No. (10) of 2019. The aforementioned ruling, known as the AML-CFT Decision, offers the essential directives for the efficient execution and adherence to the AML-CFT Law.
- Moving or transferring criminal proceeds with the intention of hiding or disguising their illegal source
- Hiding or masking the actual nature, source, location, mode of disposal, mobility, or ownership rights of any income
- Getting, holding, or utilizing stated earnings
- Preventing the predicate offense’s perpetrator from facing consequences.
Though the phrases KYC and AML are often used interchangeably, they are two different frameworks. The AML-CFT and KYC processes have different objectives and protocols. One may think of AML as a more complete term that covers a range of tasks. By identifying suspicious transactions, FIs and DNFBPs can safeguard themselves against financial crime, ensure compliance, and stop criminals and criminal organizations from legalizing illicit funds. All of these tasks are made easier with the help of an AML framework. Outsourcing the AML compliance process to AML experts in Dubai, United Arab Emirates, is a common practice. What’s more, AML also includes the following:
- Documentation of AML/CFT Policy Controls and Procedures
- AML/CFT compliance evaluation
- Training in AML
- The annual report on AML/CFT risk assessment
- Choosing AML software
- Designating an officer for AML compliance
Disclaimer: Above all information is for general reference only and sourced from internet, before making any kind of decision please visit the authorized websites of authorities and service providers.