Anticorruption and anti-money laundering top the UAE’s enforcement agenda: Key takeaways
Governments around the world continue to place corporate crime at the top of their enforcement agendas, and the United Arab Emirates is no exception. In the wake of the country’s greylisting by the Financial Action Taskforce (FATF), the international terrorist financing and anti-money laundering (AML) watchdog, the UAE continues to increase its focus on combatting money laundering and bribery and corruption within its borders.
In this update, we explore recent trends in the UAE to tackle corruption and the developments we expect to see moving forward.
As one of the world’s leading financial and business centers and a gateway for investment in Africa and the Middle East, the UAE is committed to protecting the integrity of the financial system and providing a safe place to invest and do business. Following the addition of the UAE to FATF’s grey list in March 2023, meaning the UAE is now under “increased monitoring” for rectification of AML compliance deficiencies, the UAE is seeking to align its AML framework with international best practice and FATF’s 40 Recommendations1 as it works toward being removed from the grey list. We expect to see concerted, ongoing efforts by its government bodies and regulators to demonstrate a zero-tolerance policy for money laundering.
Investigations and enforcement
Domestic AML and anti-corruption enforcement actions are on the rise as the UAE doubles down on its efforts to tackle money laundering and financial crime. An example of recent enforcement is the issuance of a significant AED19.5 million (USD5 million) fine by the Central Bank of the United Arab Emirates (CBUAE) against a bank within the UAE for failings in its AML and sanctions compliance framework.2 In the first half of 2022, the government also opened almost 200 new cases against alleged financial criminals, in line with its clampdown on money laundering and terrorism financing.
The increase in fines and penalties levied in the UAE, along with greater numbers of publicly issued statements and press releases, represents a marked shift toward greater transparency in enforcement actions. This mirrors the approach taken by regulators and enforcement agencies in other jurisdictions, such as the US and UK, as the UAE seeks to raise awareness of the compliance standards expected and deter future misconduct.
In addition to domestic enforcement action, the UAE has continued to foster a close relationship with regulatory bodies and enforcement agencies around the world. By way of example, the UAE has entered into more than 40 international cooperation agreements to tackle money laundering and other crimes. The UAE also recently hosted Interpol and its Asian Regional Conference in February 2023 with more than 150 law enforcement officials from 42 countries.3
The UAE has made taken significant steps to enhance protections for whistleblowers. Of note are the efforts made by the two financial free zones in the UAE: the Dubai International Financial Centre (DIFC) and the Abu Dhabi General Market (ADGM).
In April 2022, the Dubai Financial Services Authority (DFSA) announced the introduction of a whistleblowing regime which applies to all entities it regulates in the DIFC.4 The regime requires entities to implement measures to protect the identities of whistleblowers and ensure that they are insulated from “detriment,” which includes, for example, dismissal from their current employment.
Similarly, in December 2022, the Financial Services Regulatory Authority (the FSRA) published guiding principles on whistleblowing for entities operating in the ADGM to abide by when designing and implementing whistleblowing frameworks.5 Relevant principles include non-retaliation, confidentiality and due process, and the implementation of a culture of trust and transparency within organisations.
In the Middle East, the UAE has been at the fore in developing and embracing modern technology and encouraging regulated institutions to use emerging technologies.
Of note, the CBUAE recently issued guidance on the use of digital customer due diligence (CDD).6 It encourages licensed financial institutions (LFIs) to leverage data generated by authentication (such as IP addresses) when conducting ongoing CDD and transaction monitoring. LFIs are also expected to assess the adequacy and appropriateness of any digital customer identification systems that they adopt, which includes remaining alive to the inherent risks associated with such systems, such as the potential for cyberattacks and other forms of security breaches.
The UAE was one of the first countries in the region to develop a digital AML platform (goAML), described by the United Nations Office on Drugs and Crime as a "fully integrated software solution developed specifically for Financial Intelligence Units (FIUs)."7 It is mandatory for all regulated institutions in the UAE to file suspicious transaction reports via the goAML platform.
The UAE continues to promote and develop Fawri Tick, its national information-sharing system for proliferation financing cases and financial sanctions implementation, furthering the UAE's efforts to integrate AML and counter-terrorist financing cases across federal and local authorities and facilitate information sharing among the relevant national authorities.
The UAE has also expanded its AML laws to keep pace with technological developments, recently expanding the legislative framework to cover virtual asset service providers.
The UAE continues to drive forward local and global anti-corruption and AML strategies at an unprecedented pace.
Businesses in the region should continue to monitor and assess their individual risks and their compliance with the country's evolving regulatory framework. Companies operating in the UAE should keep in mind the increased risk of enforcement action and sharing of information between regulators and enforcement agencies when making decisions concerning voluntary disclosures of potential compliance issues in one or more jurisdiction.
Other prudent steps include focusing on the effectiveness of internal compliance measures, embracing technology as a tool for compliance and anti-corruption efforts, and taking into account not only the specific risks the company faces but the UAE’s national risk assessment. In the event that multijurisdictional violations or issues are identified, companies should swiftly move to adopt a coordinated, responsive strategy across the relevant jurisdictions.
If you have any questions about the implications of these issues for your business, please reach out to the authors or to any of our global co-chairs – Karl Buch and Jon King in the US and Adam Vause in Dubai – or to either of our editors, Aurelie Ercoli and Sarah Walsh.
1 FATF Recommendations (fatf-gafi.org)
2 UAE Central Bank imposes Dh19.5m penalty on bank under strict anti-money laundering rules,” Gulf News, found at https://gulfnews.com/business/banking/uae-central-bank-imposes-dh195m-penalty-on-bank-under-strict-anti-money-laundering-rules-1.1639470822503
3 INTERPOL Asian Conference calls for greater cross-sector cooperation
4 DFSA introduces Whistleblowing regime | DFSA | THE INDEPENDENT REGULATOR OF FINANCIAL SERVICES
6 cbuae-issues-new-guidance-on-amlcft-forlfis-on-the-use-of-digital-id-for-customer-due-diligence_en.pdf (centralbank.ae)
7 goAML (Anti-Money-Laundering System) (unodc.org)