White Collar Crimes and Money Laundering: A Convergence of Suits and Secrets

A seemingly ordinary office worker, a trusted accountant, or a powerful executive may cloak their illicit intentions under the garb of respectability, exploiting loopholes and manipulating systems. These financial crimes not only drain economies but also fuel illicit activities like money laundering and terrorism financing.

Our latest eBook unravels the intricacies of white-collar crime by helping the readers with the following:

The crossroads of morality: Understanding white-collar crimes
The silent signature: The stark features of white-collar crimes that differentiate them from blue-collar crimes.
Beyond borders: The global impact of white-collar crimes
The spectrum of white-collar crime: Uncovering fraud, embezzlement and other types of white-collar crimes
Modus operandi: Identifying the common typologies used in white-collar crimes
Addressing the complexities: Overcoming the challenges in investigation and prosecution of white-collar crimes.
Leveraging digital detectives: Exploring the application of machine learning in detecting white-collar crimes.
The trinity of crimes: Unmasking the inter-relationship between money laundering and terrorist financing
Strategies of defence: Learning the measures to combat white-collar crimes, ML, and TF

Protect your organisation from white-collar crime. Get this comprehensive eBook now!

Related Infographics

Source of funds and source of wealth: Essential element of Customer Due Diligence

Money laundering is about concealing the origin of illegal funds and making them appear as if they were earned through legitimate sources. Once the criminal proceeds are integrated into the financial system, it becomes challenging to trace the original illegal source or the owner of the funds. To mitigate this risk, the UAE AML regulations mandate that regulated organizations – Financial Institutions, DNFBPs, and VASPs– obtain information about the source of funds and wealth and establish its legitimacy in case of high-risk customers or where ML/FT suspicion is observed.

Understanding the source of funds and the customer’s wealth brings transparency to the transactions. These details help the regulated organization determine the customer’s financial profile, which sets a base for monitoring the transaction and immediately identifies any unusual transaction inconsistent with the customer’s financial capacity.

It also helps determine the nature and source of the customer’s wealth, which is pertinent to understanding if the customer’s activities are directly or indirectly associated with any criminal activities or organization.

The Source Of Wealth due diligence is conducted at the time of customer onboarding or account opening and refreshed as per the customer’s risk categorization. Further, the SoW due diligence includes the collection of documents from the customer. Once the documents are collected, the compliance teams check if the SoW is reasonable and in line with the customer’s profile. If the documents are insufficient or there are queries, the customer is contacted, and the required information is obtained. Sometimes, the compliance team takes Source of Wealth information from the publicly available registry and reputable sources; in such cases, the reliability of the source is evaluated and taken into consideration while finalizing the genuineness of Source of Funds.

The extent and nature of the information collection for the Source of Funds depends on the risk-based approach adopted by the regulated entity. The compliance team collects SoF information regarding the activities that generated the funds used in a transaction, the method of transfer, the financial institution from which the transaction originated, the country from which the fund transfer is made, and the existence of any third parties in the fund transfer.

Establishing the legitimacy of the high-risk customer’s source of funds and wealth enhances the quality and effectiveness of the organization’s AML framework to mitigate the ML/FT risks.

With this visual depiction, let us understand the significance of the source of funds and wealth as part of AML’s efforts.

What is Source of Funds in Financial Crime Compliance?

Source of Funds (SoF) is the origin of funds used in carrying out a business transaction. The SoF is the origin and means of a business transaction made by the customer. It is focused on the funds transferred by the customer to a regulated entity. Further investigation on the Source of Funds places higher reliance on the customer’s personal and financial background and the risk-based approach taken by the regulated entity.

The concept of the source of funds may not be clear to the end customers, and they may wonder what the Source of Funds is in KYC, but it’s part of the Enhanced Due Diligence process carried out to control and mitigate ML/TF risks.

What is Source of Wealth in Financial Crime Compliance?

The Source of Wealth (SoW) is the origin of the accumulated monetary assets of an individual. It involves an analysis of the economic activities undertaken by a person to accumulate the entire body of wealth. In accounting terms, it’s the overall net worth (assets minus liabilities) of a person.

Examples of Source of Wealth

Following are the examples of Source of Wealth:

1. Family Wealth:

The wealth generated from inheritance, gifts, pension benefits, lawsuit settlement, divorce settlement, etc.

2. Personal Wealth:

The wealth generated from lottery wins, the sale of artworks, the sale of a fixed asset, and other personal backgrounds and circumstances.

3. Employment Activities:

The wealth generated from salaries, commissions, bonuses, or pension or other retirement benefit schemes.

4. Business Activities:

The wealth generated from the sale of products and services, business income, and other commercial activities like brokerage, commission, etc.

5. Investment Activities:
The wealth generated from the sale of investments such as properties, shares and securities, royalties, patents, etc.

Examples of Source of Funds

Following are the examples of Source of Funds:

1. Salaries, Bonuses, Pension or other retirement benefit payouts

2. Interest income on bonds, FDs, personal savings account

3. Dividend income or return on investments

4. Proceeds of real-estate sale transaction

5. Inheritance or gifts

6. Winnings from lottery or casino

What is the difference between Source of Funds and Source of Wealth?

1. The source of Wealth is the origin of the entire body of wealth, whereas the Source of Funds is a narrow term. It is only concerned about the origin of funds used for a transaction.

2. The Source of Wealth has more relevance when onboarding a customer and performing his risk assessment and when you think the risks associated with a customer have changed. The Source Funds investigation is necessitated every time a transaction is made with a high-risk customer.

For compliance officers, the Source of Funds and the Source of Wealth go hand in hand. If the value of the transaction is more than the customer’s wealth, it requires a detailed investigation into the Source of Funds.

What if the result of Source of Wealth Due Diligence is unsatisfactory?

If the result of Source of Wealth Due Diligence falls short of the required standards as backed by the risk-based approach taken by the entity, the entity can:
1. Offboard the customer
2. Decide against onboarding a customer
3. Assign a higher risk rating to the customer
4. Enhance monitoring on customer’s activities and transactions
5. Put threshold-based controls on customer’s activities
6. Place restrictions on transactions, products, and payment methods

7. Raise an internal STR and assign it to the compliance officer for further investigation into the Source of Funds and Source of Wealth
8. If the compliance officer has a suspicion as to ML/TF then he considers filing the STR with the UAE FIU goAML portal

Legal Background: Enhanced Due Diligence and SoF and SoW

Article 4.2 of Cabinet Resolution No. (134) of 2025 concerning the implementing regulation of Federal Decree by Law No. (10) of 2025 Regarding Anti-Money Laundering, and Combating the Financing of Terrorism and Proliferation Financing requires Financial Institutions, DNFBPs, and VASPs to apply Enhanced CDD measures to manage high risks and take reasonable measures to identify the Source of Funds and Source of Wealth of customers and beneficial owners. The Enhanced Due Diligence (EDD) requires the regulated entity to obtain necessary documents and information and satisfy itself as to AML Source of Funds requirements and Source of Wealth Requirements.

SoF and SoW in Customer Risk Assessment

Source of Funds verification limits opportunities for criminals to exploit financial systems. The type of documents to rely on when performing a Source of Funds check depends on the associated risks with a transaction. Documents required to check the Source of Funds include bank statements, documents confirming the sale of real estate, the sale of shares and securities, and a win from a casino.

Source of Funds and Source of Wealth information play a vital role in Customer Risk Assessment. The following factors require due consideration:

1. Whether the Source of Wealth information is adequately obtained and documented in Customer’s Profile
2. Whether the Source of Funds information at the time of customer onboarding has been adequately obtained and documented in the customer’s profile
3. Whether the ongoing Source of Funds information is adequately obtained and documented
4. Whether there are any open queries as to SoF or SoW
5. Whether the customer is a Politically Exposed Person (PEP)
5. Whether there is negative news, criminal history, ML/TF charges associated with the customer
6. Whether the customer is genuine and reputable
7. Whether the Source of Funds or Source of Wealth originates from a high-risk country

What documents can verify Source of Funds and Source of Wealth

The Source of Wealth and the Source of Funds documents must be issued by a reputable company, commercial provider, or government agency. The following documents, data, or information could be considered reliable while collecting SoF and SoW information:

1. Government-issued data and documents – Tax returns, Property Register, etc.
2. Bank statement, passbook
3. Payslip
4. Stamped grant of probate
5. Audited Financial Statements
6. Will
7. Sale and purchase agreements
8. Import and export documents

When to conduct the source of funds and source of wealth enquiries

Enquiries into the source of Funds and Source of Wealth are conducted in accordance with the regulatory requirements, the entity’s risk-based approach, and the AML/CFT policies and procedures.

The AML/CFT policies and procedures must clearly identify triggers for necessitating the performance of Source of Wealth and Source of Funds enquiries.

Here are some events that would trigger Source of Wealth and Source of Funds verification:

1. SoF and SoW checks are required when onboarding or conducting a transaction with a high-risk customer.
2. As a part of ongoing monitoring of a business relationship with a high-risk customer
3. When there’s a change in the customer’s risk profile (Non-PEP customer becoming a PEP)
4. When the customer’s transactions are inconsistent with his profile
5. When a transaction is complex, or it is a high-value transaction
6. When a transaction is destined to or originates from a high-risk country

Best Practices for Source of Funds Due Diligence

The AML/CFT policies and procedures of the company must answer the question of how to check the Source of Funds. Here are best practices for AML Source of Funds Due Diligence:

1. Assess the overall risk associated with the customer and the transaction being carried out
2. Analyse documents and information collected and determine if the nature and size of the transaction align with the customer’s profile
3. Document the rationale and any other relevant information and final decision as to onboarding or otherwise for future reference.

Best Practices for Source of Wealth Due Diligence

The AML/CFT policies and procedures of the company must answer the question of how to check the Source of Wealth. Here are best practices for AML Source of Wealth Due Diligence:

1. Consider the risk rating of the customer and ensure that the source of wealth information aligns with the customer’s profile
2. Collect documents and information, including audited financial statements, tax returns, payslips, inheritance certificates, and so on.
3. Document the decision-making process and record your observations and the final decision.

The importance of AML Source of Funds Verification

Investigating a customer’s Source of Funds is important to fighting financial crimes like money laundering and terrorist financing. In cases where the SoF and SoW do not match the customer’s risk profile or intended volume and nature of transactions, filing a suspicious transaction report or suspicious activity report may be necessary.

The AML source of Funds check confirms that the funds used in carrying out a business transaction are coming from legal sources or genuine business activities. It is an essential component of AML/CFT compliance for high-risk customers. Failure to perform Source of Funds checks can result in fraud, reputational damage, fines, and penalties.

The importance of AML Source of Wealth Verification<

The Source of Wealth identifies what the customer does for a living and the origin of the wealth accumulated. The entire purpose of Source of Wealth Due Diligence is to avoid working with clients who have acquired their wealth through illegal means and to comply with regulatory AML/CFT requirements.

Proof of Funds

Proof of Funds (PoF) is the document evidencing the origin and means of a financial transaction. It demonstrates that the customer has the funds to carry out a particular transaction. A Bank statement usually depicts the balance available in the customer’s account to complete a transaction.
There is a difference between Proof of Funds (POF) and Source of Funds (SoF). The Proof of Funds (PoF) only focuses on documentary evidence, whereas the Source of Funds questions the origin of funds.

AML UAE is one of the leading AML Consultancy Service Providers in the UAE, assisting clients with tailoring the AML/CFT policies and procedures, implementing the robust AML framework, drafting the comprehensive Customer Due Diligence procedures, including Enhanced Due Diligence measures, imparting AML Training to the Compliance Officer and team, etc.

The Regulatory and Technological Challenges of Perpetual KYC

The Perpetual KYC (pKYC) solutions offer a high degree of convenience, time-saving, and cost-saving for regulated entities. Still, the regulatory and technological challenges of pKYC need thorough consideration before regulated entities implement pKYC solutions.

This infographic discusses the challenges that Regulated Entities must be mindful of while attempting to implement pKYC measures for their business.

The regulatory and technological challenges that act as obstacles to pKYC implementation are discussed as follows:

Data Privacy Concerns:

Regulated Entities intending to implement pKYC must consider the prevailing data privacy regime in UAE. Federal Decree Law No. 45 of 2021 Regarding the Protection of Personal Data contains a framework to ensure that the privacy of individuals in UAE is not compromised. Regulated Entities must ensure that they select and implement a pKYC software that is compliant with data privacy laws in UAE as well as laws prevalent in countries from which customers of the regulated entity belong to.

The challenge here is navigating the variation in data privacy laws across various countries and the concern of the personal information of customers being sold or misused for marketing or other purposes by the vendors of such pKYC platforms. The process of pKYC entails the collection and analysis of a huge volume of data in real-time, which requires fail-safe data privacy protocols.

Regulated Entities must ensure that pKYC software that they select is compliant across all required parameters and conduct due diligence, software testing and validation before shifting to a pKYC software for fulfilling its KYC obligations.

Data Security Concerns:

Data Security concerns arise whenever using any software or tool as there exists the risk of malware, phishing, ransomware attacks, or social engineering attacks designed to obtain sensitive personal information from the customers or acquire login or authentication credentials. Regulated Entities must ensure that hackers and cybercriminals don’t end up stealing customer information and compromising the privileged and private information of customers. Regulated entities must ensure that the pKYC software they select and implement uses adequate encryption and security protocols to protect data from the risk of leakage and misuse.

Integration Challenges:

Another set of challenges that regulated entities face is the integration of pKYC software with existing AML compliance, customer relationship management, or client management software and re-tuning workflows and task allocation or task assignment across various personnel in the regulated entity. Regulated Entities must ensure that the pKYC tool they select can be integrated with existing systems for seamless pKYC implementation.

Regulatory Compliance:

Regulatory compliance is the purpose of opting for pKYC, however, it comes with its own set of compliance challenges for Regulated Entities such as ensuring that pKYC tool selected works as intended and within defined and acceptable parameters.

Conclusion

The prospect of implementing pKYC for ensuring a lesser KYC remediation burden and improve money laundering or terrorism financing risk mitigation is a smart choice however, Regulated Entities must be mindful of regulatory and technological challenges and must take adequate measures to reduce such challenges for easier pKYC implementation.

From Re-KYC to Perpetual KYC: The New Standard in Compliance

Re-KYC (Know Your Customer) or reviewing KYC details or KYC refresh is a mandatory Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) requirement in UAE. The guidelines for Designated Non-Financial Businesses and Professions (DNFBPs) provide for periodic updates of Customer Due Diligence (CDD) information. However, in an increasingly dynamic technological landscape, the concept of perpetual KYC or pKYC has emerged.

This infographic strives to bring out the characteristics of pKYC, which compensate for and overcome the shortcomings encountered during the re-KYC process and emphasizing how re-KYC is the new standard in AML compliance, making selection and switch to pKYC a smarter choice for DNFBPs for mitigating their money laundering and terrorism financing risks (ML/TF).

Here are a few pointers indicating how pKYC outperforms reKYC.

Better ML/TF Risk Management:

Better ML/TF risk management can be ensured with the help of perpetual KYC. For instance, perpetual KYC identifies and notifies about material changes in customer KYC information in real-time whereas the factors triggering the re-KYC process are event or frequency-based, leading to the perpetual KYC approach being proactive in risk mitigation in contrast to the reactive mode of re-KYC where the circumstances, timing, and frequency of re-KYC work in a pre-determined or pre-set manner, not considering real-time changes in customer information.

In re-KYC the review of customer profile or KYC information is done on the basis of the customer risk rating assigned to that particular customer, and a blind spot exists where there might be a material change in customer’s KYC details leading to a change in their customer risk rating from low to high, which would go unnoticed until the pre-determined re-KYC cycle is triggered, creating loophole for ML/TF actors to find their way into the economy through the DNFBP. Perpetual KYC in turn protects DNFBPs from ML/TF risks by real-time identification of changes in customer KYC information.

Streamlined KYC Remediation:

KYC remediation is a process which analyses the validity and relevance of the KYC procedure conducted by a DNFBP to find any inconsistencies or anomalies and remedy them in a timely manner.

The biggest contribution of the adoption of pKYC practice through a tool or software is with regards to streamlining the KYC remediation process by reducing the instances requiring KYC remediation by addressing most changes in customer profiles in real-time, reducing the need to remediate errors or issues found during KYC remediation process in future. This new standard set by pKYC outperforms reKYC whose accuracy and relevance can only be found during KYC remediation.

Enhanced Data Quality:

As changes in customer details are tracked in real time through pKYC, the data quality of CDD information is enhanced due to not becoming redundant due to document expiries. Redundancy is one aspect; pKYC also helps enhance data quality due to it being dependent on Artificial Intelligence and Machine Learning, or a combination of both components, which accepts or synthesises customer data and stores it in a prescribed format, resulting in better data quality for record-keeping as well.

Also, when the currentness of customer data is compared among re-KYC and pKYC, pKYC outperforms reKYC, making it new standard in AML compliance, as customer data in reKYC is only as current as the latest KYC review or refresh cycle, whereas customer data collected through pKYC is always the latest and updated.

Enhanced Operational Efficiency:

With better ML/TF risk management, streamlined KYC remediation, and enhanced data quality for CDD procedure, a DNFBP is bound to achieve enhanced operational efficiency through adoption of pKYC as it solves a lot of delays, overlaps, and internal coordination requirements among the members of AML compliance team and KYC analysts in conducting re-KYC, KYC remediation, and ongoing monitoring of business relationships through automation and intervention through notifications and alerts only when anomaly or red-flags are detected.

World-Class Customer Experience:

What helps with world-class customer experience is the customer-centric focus that anticipates customer issues and strives to drive solutions rather than shift the burden of KYC compliance on customers. Perpetual KYC is one such solution that embeds compliance in the customer lifecycle or customer journey, always keeping track of changes in customer KYC details, reducing the friction that may arise during the KYC remediation process. The use of technology for pKYC and training personnel to handle pKYC tools gives a competitive advantage to the DNFBP, thus enhancing customer experience and making pKYC a new AML compliance standard.

Compliance Cost Reduction:

To better understand how pKYC helps with compliance cost reduction, it’s important to understand compliance cost reduction is the result of multiple factors, such as enhanced operational efficiency being a major contributor along with a streamlined KYC remediation process. The proactive approach of pKYC helps in bringing down the cost of compliance in the long run. It facilitates in lessening the cost of KYC remediation as it helps update customer information and documents in real-time, helping ensure the relevance of customer details and documents, and tracking any shift in customers’ risk profiles, reducing situations warranting KYC remediation and bringing down compliance costs.

Conclusion

To conclude, when a DNFBP thinks in terms of having a KYC model that embodies principles of risk-based approach, perpetual KYC is the answer, helping the DNFBP to re-calibrate its ML/TF risk mitigation measures in real-time in alignment with changes in customer’s KYC information which makes pKYC a new standard in AML compliance.

eBook on AML Compliance for Online Jewellery Marketplace

The Precious Metals and Stones sector in UAE is at the pinnacle of redefining adornment with the Online Jewellery Marketplace. However, this latest disruption in the Precious Metals and Stones sector is also catching the eye of illicit actors.

This calls for greater Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) controls to be applied by Dealers in Precious Metals and Stones (DPMS).

Our latest eBook:

Offers a closer look into the Online Jewellery Marketplace and what constitutes an Online Jewellery Marketplace and defines the qualifications of a customer as well as best practices to be adopted by Suppliers for listing themselves on an Online Jewellery Marketplace in accordance with UAE’s AML framework.
Throws light on the AML Compliance Measures to be undertaken by Online Jewellery Marketplace to mitigate the Money Laundering, Terrorism Financing, and Proliferation Financing (ML, TF, and PF) risks to the Online Jewellery Marketplace
Navigates the Regulatory milestones concerning legal framework for an Online Jewellery Marketplace including e-commerce as well as AML regulations
Sets forth suggestive benchmark Requirements in a checklist format for Buyers and Sellers that DPMS must meet to qualify for listing and enrolling or registering on an Online Jewellery Marketplace to mitigate ML, TF and PF risks effectively
Discusses AML Governance framework that can be adopted within the Online Jewellery Marketplace with a Risk Based Approach (RBA)
Shares the List of Red Flags applicable to Online Jewellery Marketplace that are helpful for identifying Suspicious Activity or Transaction in a timely manner for following Regulatory Reporting requirements and implementing further Due Diligence measures
Answers the Commonly Raised Queries regarding the Subject.

DPMS can download a copy of the eBook today to elevate the sparkling business with effective AML compliance!

Related Infographics

Why Real Estate Appeals to Money Launderers: A Closer Look

The Real Estate Sector is considered at significant risk for Money Laundering (ML), Financing of Terrorism (FT), and Proliferation Financing (PF). Such a ML/FT and PF risk to the real estate sector originates from various features of the real estate business itself. This infographic digs deep into finding out why real estate appeals to money launderers and has become a preferred conduit to disguise their illicit money.

The factors contributing criminals and money launderers to prefer real estate as a mode for money laundering are discussed as follows:

High-Value Transactions:

The subject matter of real estate business is property, be it housing or commercial which is a highly valuable asset whose value tends to appreciate. Due to the high-value nature of the real estate, it ends up supporting high-value transactions. This feature attracts money launderers as they can disguise large amounts of illegally derived funds through the purchase, rent, or sale of real estate, which provides an opportunity to place, layer, and integrate illicit funds into the financial system.

Real estate can also be bought or sold through cash, making it even more vulnerable to criminals who pump their cash and park or invest it in the form of property.

Cross-Border Transactions:

Many Real Estate projects are undertaken on an international scale with the goal of attracting foreign investors and funding.

However, this feature of the real estate sector comes with its own set of risks. The risk here lies in facilitating payments and disbursements of funds across borders.

The cross-border transaction facility provided to investors often gets misused by money launderers outside the country to funnel their illicit funds from one country to another in the guise of a real estate transaction, thus helping with the layering and integration of illicit proceeds.

Even the most experienced bankers and transaction monitoring analysts face ambiguity while deciding whether the real estate transaction across borders is a genuine one or an illusion created by money launderers to launder illegal funds as both the genuine or ill-motivated cross border transaction exhibit similar features such as routine disbursements, routing of funds to and from different jurisdictions to pay for real estate, inward remittances from offshore accounts, etc.

Involvement of Intermediaries:

Real estate transactions and dealings do not require the parties to the transaction to appear in person to execute a real estate agreement or sale/purchase/mortgage/lease deed as this task can be delegated or assigned to intermediaries such as real estate agents or agencies specialising in facilitating real estate transactions for individuals or entities across the world. With the involvement of such intermediaries, it becomes difficult to identify the authenticity, legitimacy, and intent of the parties to real estate transactions, making it an easy target for money launderers.

To add to the vulnerability, the involvement of gatekeepers such as lawyers, accountants, and conveyancers as intermediaries adds to the difficulty in identifying the involvement of money launderers or criminals behind the transaction as gatekeepers create an image of authenticity.

Concealment of UBOs:

As real estate transactions involve legal entities entering transactions, it appears on paper and on surface that a legal entity or a legal arrangement is entering a real estate agreement and transaction through their authorised signatories.

However, the ML/FT and PF risk lies behind the identity of the actual puppeteer, i.e., the natural person possessing significant control or beneficial ownership (also known as ultimate beneficial owner -UBO) of such a legal entity or legal arrangement. It is possible that the beneficial owner or person with a controlling interest is a criminal who is getting business done through the mask of a legal entity or legal arrangement.

The purchase/sale/lease of real estate can be conducted by money launderers by hiding their true identities through misuse of complex business structures such as shell companies, trusts, fronts, nominees or nonprofit organisation etc.

Anonymity and Privacy:

Many real estate transactions these days are executed by persons holding Power of Attorney (POA), which provides anonymity to the UBOs behind the transaction, also the use of virtual assets to execute real estate transactions makes it attractive for money launderers to further their money laundering motives as virtual asset transactions provide anonymity to the originator as well as the beneficiary of the virtual asset transaction.

Subjectivity around Valuation:

Launderers can buy/sell/lease real estate at any value (usually higher than market value), usually as a tool to commingle illegally gotten money with legitimate earnings or profits by exploiting the subjectivity around the valuation of a real estate property as its value inflation can be justified through renovations and refurbishments to manipulate property price that confuses or convinces the authorities that subject matter of transaction is indeed quoted justly, facilitating money laundering by exploiting subjectivity around valuation.

Conclusion

Real Estate businesses and aspirants such as buyers/sellers/lessors and lessees need to beware of the underlying ML/FT and PF risk to the real estate sector and must enter into business relationships by ensuring adequate due diligence.

Countering Trade-Based Money Laundering

Trade-Based Money Laundering (TBML) is a widespread money laundering typology. This infographic elaborates on how Regulated Entities can effectively counter TBML by adopting risk-based countermeasures. Let us delve into each of these countermeasures in depth as follows:

Robust AML/CFT Policies and Procedures

Regulated Entities must ensure that they formulate and implement Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) policies and procedures after considering TBML risk specific to the Regulated Entity by having at their core, a risk-based and risk-sensitive approach. A risk-sensitive AML/CFT policy and procedure should be devised after carefully weighing the TBML risk specific to the Regulated Entity.

Regulatory Oversight

Regulated Entities can successfully counter TBML risks by ensuring Compliance with applicable AML Laws and Regulations. The AML/CFT laws applicable to Regulated Entities in UAE are as follows:

Federal Decree by Law No. (10) of 2025 Regarding Anti-Money Laundering, and Combating the Financing of Terrorism and Proliferation Financing.
The Cabinet Resolution No. (134) of 2025 Concerning the Executive Regulations of Federal Decree-Law No. (10) of 2025 Concerning Combating Money Laundering, Terrorist Financing, and the Financing of the Proliferation of Weapons.
Cabinet Resolution No. (74) of 2020 Regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions on the Suppression and Combating of Terrorism, Terrorist Financing, Countering the Proliferation of Weapons of Mass Destruction and its Financing and Relevant Resolutions.
Cabinet Decision No. (109) of 2023 On Regulating the Beneficial Owner Procedures.

Transaction Monitoring

As TBML is a transaction-heavy money laundering technique, it makes rational business sense for Regulated Entities to invest in a Transaction Monitoring tool or software. A transaction monitoring tool helps Regulated Entities to identify suspicious transactions and transaction monitoring related red-flags. Regulated Entities must be mindful of ensuring that they impart adequate and training to staff for using transaction monitoring tools for identifying TBML red flags to make the most of it.

Information Sharing

Regulated Entities must define within their AML/CFT policies and procedures methods for uniform sharing of information across branch offices, holdings, and subsidiaries spread across the globe. Such information sharing protocols must take into consideration, the applicable Data Protection and Data Privacy laws applicable across the globe. This information sharing protocol plays an instrumental role in identifying and mitigating TBML as secure sharing of information is important in identifying common areas posing TBML risks.

International Cooperation

Ensuring Compliance with internationally accepted AML Standards, such as Financial Action Task Force (FATF) Recommendations, interpretation notes, and publications to combat TBML, helps Regulated Entities ensure that they keep pace with internationally accepted standards and norms which facilitates with ease of doing business across the world.

Training and Awareness

Regulated Entities must ensure that they define Role Specific AML Training and Awareness program for their personnel which shall be helpful in combating TBML risks. This training must focus on making the personnel aware of the TBML typologies such as TBML through invoice manipulation and TBML red-flags. Policies must also define the frequency and means of training delivery into the AML Policies and Procedures.

Leveraging Technology

Regulated Entities must delegate manual AML Compliance processes to unified AML software solutions such as follows:

Record-Keeping

Regulated Entities must ensure that they maintain records of their TBML countermeasures to ensure adequate regulatory compliance. Regulated Entities must be careful about duration for which AML records have to be maintained according to Supervisory Body they are governed by.

These tools and software help regulated entities counter TBML risks by saving time and resources consumed by manual AML compliance processes.

Conclusion

Adequate TBML countermeasures, such as risk-based AML policies and procedures and leveraging technology, help Regulated Entities combat TBML risks easily.

Unmasking Invoice Manipulation in Trade-Based Money Laundering Schemes

Trade-Based Money Laundering (TBML) is a commonly used typology or method by money launderers. It involves manipulating international transactions of goods that can be traded. This infographic discusses how money launderers carry out TBML by manipulating invoices of goods traded across international borders and methods of invoice manipulation such as over-invoicing, under-invoicing, and multiple invoicing, including suggestive TBML risk mitigation measures to combat TBML through invoice manipulation.

Check out Unmasking Invoice Manipulation in Trade-Based Money Laundering Schemes now and safeguard your business from ML, TF, and PF risks.

TBML process is quite similar to usual money laundering, which involves placement, layering, and integration. Here, placement is done by providing scope for introducing or commingling illicit proceeds with legitimate proceeds by manipulating the value of goods imported or exported by manipulating invoices of such goods.

This manipulation of invoices is done by over or under-invoicing or placing multiple invoices for a single cluster or batch of goods. The manipulation of invoices facilitates the layering of illicit proceeds, separating them from the original illegal source by providing a facade of legitimacy through manipulated, tailored, or doctored invoices. Lastly, integration happens when such goods are sold in the open market.

Invoice manipulation is a TBML technique used by money launderers. It facilitates TBML by misrepresenting the quality, quantity, and price of goods in the invoice.

Common TBML Typologies Using Invoice Manipulation

Over-Invoicing or Under-Invoicing

Over Invoicing: Involves receiving invoices from sellers and suppliers at an inflated value compared to their market value.

Under Invoicing: Involves receiving invoices from sellers and suppliers at a price lower than market value.

Multiple Invoicing

Involves receiving more than one invoice for a single transaction.

Mitigation Strategies to combat TBML through Invoice Manipulation

Common ML/FT and PF Risk Mitigation Strategies to Mitigate Invoice Manipulation:

Some of the standard methods to counter TBML through invoice manipulation are:

Sanctions Screening, Politically Exposed Person (PEP), and Adverse Media Checks:

Businesses involved in international trade transactions need to carry out sanctions screening of their customers/suppliers, importers and exporters to ensure that the individual or ultimate beneficial owner behind such transactions is not a sanctioned individual, PEP or has any relevant or material adverse media against their names. This possibility must be ruled out to eliminate the probability of money laundering through the trade transaction.

Deploying Adequate Transaction Risk Assessment:

Businesses in UAE must take adequate measures to ascertain or identify the level of TBML invoice manipulation risk posed to their business and deploy risk-based measures to mitigate such risk by putting in place transaction risk assessment measures. A transaction risk assessment process would facilitate identifying potentially suspicious trade transactions. Further transaction monitoring software can be configured to suit business-specific risks by using machine learning models combined with the power of artificial intelligence (AI) to automate such transaction risk assessment processes that generate alerts when any anomaly is found.

Devising Robust Supply Chain Controls:

Having in place a well-strategized Supply Chain Policy enables businesses to define and document the processes, timelines, workflows, parameters, and controls through which it shall closely monitor its trade activity involving inflow and outflow of goods. Especially in the case of dealers in precious metals and stones, supply chain policy or ethical sourcing policy is a requirement in many jurisdictions. Such a supply chain policy would enable businesses to devise and implement supply chain controls to curtail TBML in the following ways:

Defining adequate TBML identification measures and monitoring of TBML risks
Defining the timing, frequency, extent, and depth of personnel training, enabling them to identify TBML red flags and typologies.
Defining areas or jurisdictions and trade routes that are usually associated with TBML red flags.

Assessing Business Rationale:

Identifying the business rationale or purpose of business behind every invoice helps ensure that proposed trade transactions are well within a business’s risk appetite. If the business rationale is absent, it is a major red flag that the invoice or transaction is unusual, requiring further investigation.

Closely conducting Transaction and Inventory Monitoring:

When inventory and transactions are closely monitored, there is no room for manipulation of invoices from internal factors that might facilitate money laundering or TBML motives. When inventory and transaction value are coherent, the TBML risk is significantly reduced.

Deploying Invoice Verification Tools:

Technology is always a smart move when running any business with a high volume of transactions. Usually, the businesses involved in trade activities are invoice-heavy. Invoice verification tools are automated software that checks product descriptions, invoice particulars, invoice numbers, dates, etc. This helps prevent TBML through multiple invoicing and over or under-invoicing.

Specific TBML Risk Mitigation Strategies

Over-Invoicing or Under-Invoicing:

Assessing Product Category: Checking the product category, whether the product is prone to duplication, and whether its quality is worth the price quoted and entered into the invoice helps mitigate over or under-invoicing of such a product.

Ascertaining Unit Price Accurately: To prevent misrepresentation of invoice price through quantity, the price per piece helps verify the invoice value claimed.

Comparing Quantity Unit Price and Market Value Against Invoice Price: Ultimately, cross-checking the quantities of goods mentioned in the invoice, their per unit and order price, and the market value of similarly traded goods helps identify if any invoice presented to a business is over or underpriced.

Multiple Invoicing

Checking the Date of Transaction: Checking the date of transaction for an invoice is a general best practice and a TBML risk mitigation method. It helps identify the period for which the invoice is claimed, further cross-verify its authenticity, and avoid multiple invoicing.

Checking Invoice Number: Checking and verifying invoices through the invoice number is the best way to avoid the same invoice being used twice to claim or process the payment. It helps cross-verify the invoice and its particulars across different sets of databases pertaining to the same invoice or order number, thus helping identify if TBML through multiple invoices is attempted.

Checking Invoice Particulars: Checking invoice particulars for preventing TBML involves verifying the quality, product description, quantity, invoice number and other invoice attributes to make sure that the invoice in question is not manipulated, duplicated, or tampered with, forged, counterfeit or neither the particulars within the invoice are erased or added to make it look like a different invoice for multiple invoicing, thus establishing its legitimacy, which helps mitigate multiple invoicing risk.

Checking Product Description: Product description checking helps prevent TBML by confirming that a product for which a particular amount is billed is worth the amount it is billed for. This leaves no room for invoice duplication, which facilitates TBML through multiple invoicing.

Conclusion

TBML is a widely used methodology by criminals to launder money by manipulating invoices of tradeable goods across international borders. Having an adequate TBML invoice manipulation mitigation strategy helps prevent TBML invoice manipulation risk effectively.

eBook on the PEP Puzzle Solving the AML Conundrum

Establishing a business relationship with Politically Exposed Persons (PEPs) can be a tricky trajectory. Designated Non-Financial Businesses and Professions (DNFBPs) and Virtual Asset Service Providers (VASPs) are constantly balancing profit requirements with the need for protection against Money Laundering, Terrorism Financing, and Proliferation Financing (ML/TF/PF) risks. So, here’s an eBook for navigating the PEP puzzle.

This eBook aims to resolve this conundrum with:

Demystifying the PEP enigma: Understanding the classifications of PEP in UAE
Deciphering UAE’s regulatory framework for PEPs: A deep dive into the legal framework concerning Politically Exposed Persons in UAE
Putting the puzzle pieces in place: Insights into the significance of PEP screening
Cracking the Risk Assessment code: Learn how to devise an accurate Risk Assessment methodology tailored to business needs.
Resolving the ultimate riddle: A step-by-step approach for identifying Politically Exposed Persons
Assembling the compliance jigsaw: A detailed guide on implementing the compliance measures in dealing with PEPs
Conquering the final stage: Addressing the challenges to Risk Assessment and management
The ultimate game plan: A series of best practices to elevate PEP Risk Management to the next level

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Related Infographics

Senegal Removed; Lebanon, Algeria, Angola, and Côte d’Ivoire Added: FATF Grey List October 2024 Update

The Financial Action Task Force (FATF) is a global watchdog on Money Laundering, Terrorism Financing, and Proliferation Financing. It releases a list of Jurisdictions under Increased Monitoring, commonly referred to as the Grey List. The FATF also sets international standards related to the Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT), and Counter-Proliferation Financing (CPF) regimes.

The Grey List includes countries that are proactively working with the FATF to counter strategic deficiencies in their regulatory framework to combat the threats of ML/TF and PF.

On 25 October 2024, the FATF concluded its October Plenary. In this latest plenary, the FATF removed Senegal from the ‘Grey List’. Senegal’s removal is in recognition of the countries significant progress in improving its AML/CFT/CPF regime.

This plenary also resulted in additions to the ‘Grey List’. The FATF added Algeria, Angola, Côte d’Ivoire, and Lebanon to the ‘Grey List’. These countries are now expected to work with the FATF and address the deficiencies in their AML/CFT/CPF regimes.

This requires modifications to the regulated entity’s internal AML policies and procedures to ensure that adequate Customer Due Diligence measures are applied while engaging with customers from or closely associated with the “FATF-defined Jurisdictions Subject to Increased Monitoring” list, adopting a risk-based approach.

Other updates from this Plenary include:

Adoption of joint FATF GAFILAT mutual evaluation report of Argentina, recognising the improvement Argentina made in its AML/CFT/CPF framework.
Adoption of FATF-MENAFATF assessment of Oman, recognising the positive steps of Oman to improve its AML/CFT/CPF regime with robust technical compliance.
Revision in FATF guidance for National Money Laundering Risk Assessment.
Agreement to release for public consultation proposed revisions to FATF standards, mainly Recommendation 1.
Agreement to strengthen support to regional bodies, for high-quality, consistent evaluations across the global network.
Launching initiative by inviting Senegal and the Cayman Islands to participate actively in the FATF to further engage with the region and acknowledge diverse perspectives.

Changes in Financial Action Task Force (FATF) Grey List

Countries Removed from FATF's Grey List (Jurisdiction Under Increased Monitoring):

Senegal

Countries Added to FATF's Grey List (Jurisdictions under Increased Monitoring):

Algeria
Angola
Côte d’Ivoire
Lebanon

FATF Grey List as of 25th October 2024

1. Algeria
2. Angola
3. Bulgaria
4. Burkina Faso
5. Cameroon
6. Côte d’Ivoire
7. Croatia
8. Democratic Republic of the Congo
9. Haiti
10. Kenya
11. Lebanon
12. Mali

13. Monaco
14. Mozambique
15. Namibia
16. Nigeria
17. Philippines
18. South Africa
19. South Sudan
20. Syria
21. Tanzania
22. Venezuela
23. Vietnam
24. Yemen

Source: Jurisdictions under Increased Monitoring – 25 October 2024

To dive deeper into the FATF Grey List Update History: Refer to FATF Grey List and Blacklist Update History

To learn more about the difference between FATF-blacklisted countries and greylisted countries: Checkout What are FATF Blacklist and Grey list countries?

Wondering How the FATF Blacklist and Grey List
Impact Your AML Compliance?

AML UAE is your trusted partner in ensuring your business keeps pace
with FATF updates in the UAE context

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White Collar Crimes and Money Laundering: A Convergence of Suits and Secrets