The UAE Cabinet has approved the establishment of the Executive Office of the Anti-Money Laundering and Countering the Financing of Terrorism to oversee the implementation of the UAE’s National AML/CFT Strategy and National Action Plan (NAP).
FATF and MENAFATF mutual evaluation report
The measures follow the April 2020 mutual evaluation report from the Financial Action Task Force (FATF) and the Middle East and North Africa Financial Action Task Force (MENAFATF) which considered the effectiveness of the UAE’s AML and CFT systems, including its compliance with FATF recommendations.
Whilst the report recognised that the UAE had “taken some significant steps in strengthening its AML/CFT framework since its last evaluation, most notably by undertaking a National Risk Assessment (NRA) and with the enactment of the AML Law in 2018 and AML By-Law in 2019” and rated its terrorist financing investigatory and prosecution measures “substantial” (the second highest rating available), it noted that the UAE was a cash-intensive economy and therefore exposed to inherent money laundering and terrorist financing risks (including professional third-party money laundering, cash-based money laundering, abuse of legal persons, trade-based money laundering and the laundering of proceeds, particularly from foreign predicate offences including fraud, tax offences and organised crime).
In relation to the UAE’s overall level of compliance and effectiveness, the report concluded that “generally, fundamental and major improvements are needed across the UAE in order to demonstrate that the system cannot be used for money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction”.
The Executive Office
The Executive Office will be the primary national coordinating body, working alongside internal, intergovernmental and international organisations on the UAE’s AML/CFT NAP, and will have a wide-ranging mandate to assist those entities in the UAE with an AML/CFT function to implement the Plan.
The office will report directly to the Higher Committee overseeing the UAE’s National AML/CFT Strategy, chaired by His Highness Sheikh Abdullah bin Zayed Al Nahyan, Minister of Foreign Affairs and International Cooperation. Its responsibilities include:
- improving national and international coordination and cooperation on AML/CFT issues at the policy and operational levels;
- tackling money laundering and terrorist financing threats by working with regional and international groups, such as the Gulf Cooperation Council Working Group on AMLCFT, G20 and the FATF;
- increasing information sharing between law enforcement agencies, supervisors, and the private sector;
- exploring and enhancing legislation, in coordination with the Ministry of Foreign Affairs and International Cooperation (MoFAIC) and relevant UAE entities, to further strengthen the UAE’s current AML/CFT framework; and
- coordinating with MoFAIC in ensuring that progress is accurately articulated and reflected to the Higher Committee on AML/CFT under the mandate of H.H. Sheikh Abdullah bin Zayed.
The Wider Picture
During a virtual conference in February, Hamid Al Zaabi, the Director-General of the Executive Office of the UAE, stated that “in light of the vision of the UAE’s leadership, and the guidance of the Chair of the Higher Committee overseeing the UAE’s National AML/CFT Strategy, the UAE takes its role in protecting the integrity of the global financial system extremely seriously. The scale and complexity of financial crime has increased. So too has the UAE’s awareness and understanding of it. That is why the UAE is committed to taking action.”
The establishment of the Executive Office follows a series of measures taken by the UAE authorities in combating money laundering activities – in the last year alone, the Ministry of Economy set up an anti-money laundering department, the UAE Cabinet approved a council to co-ordinate federal and local financial policies, and, in Abu Dhabi, a dedicated court to tackle money laundering and tax evasion was established
More recently, the UAE Higher Committee announced two training programmes to train and certify professionals on global compliance standards and procedures to fight illicit finance. It is expected that more than 140 professionals working alongside 36 federal and local competent authorities in the UAE will train to obtain their Certified Anti-Money Laundering Special (CAMS) certification – the global gold standard in AML certifications or their Certified Global Sanctions Specialist (CGSS) certification – a global programme aimed to equip professionals with the tools required to understand and interpret changing sanctions regimes.
In relation to enforcement, the UAE’s central bank recently fined 11 banks a combined total of Dh45.75 million for violating AML regulations – a nod to the FATF and MENAFATF’s suggestion that the UAE needs to make use of more dissuasive enforcement action by authorities.
The establishment of the Executive Office is a further step in the right direction for the UAE in positioning itself in the global market as a sophisticated and attractive jurisdiction for overseas investors and companies. As the watchdog for money laundering and terrorist financing operations in the MENA Region, the conclusions and recommendations of MENAFATF are of great importance to the UAE, and the most recent measures demonstrate just how seriously its leaders take the responsibility it has, as a major financial centre, to uphold its AML and CFT obligations.
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© Herbert Smith Freehills 2021