Filing of Fund Freeze Report (FFR) under UAE AML Laws

The Executive Office for Control and Non-Proliferation (EOCN) requires every person (whether natural or legal) to implement Targeted Financial Sanctions, whereby ongoing screening has to be undertaken on the UN Consolidated List and the UAE Local Terrorist List. This infographic captures the actionable in case a confirmed match is found while screening the sanctions, including the period allowed to take action and report the same.

AML UAE is a leading AML consultancy service provider in the UAE, providing assistance around all the AML compliance requirements, including AML screening software and reporting the same on the goAML Portal.

Use of Digital ID for Customer Due Diligence -New Guidance issued by CBUAE for LFIs

Pathik Shah

Protect your business with reliable and effective AML strategies with AML UAE.

Use of Digital ID for Customer Due Diligence -New Guidance issued by CBUAE for LFIs

The Central Bank of the UAE (CBUAE) has issued new Guidance on anti-money laundering and combatting the financing of terrorism (AML/CFT) for Licensed Financial Institutions (LFIs), which shall be applicable with immediate effect. The Guidance for LFIs on the use of Digital ID for customer due diligence aims to help the Financial Institution to adopt, understand and implement the statutory obligations concerning AML/CFT and considers the standards issued by Financial Action Task Force (FATF).

The Guidance talks about using digital ID systems/mechanisms by LFIs to fulfil their obligations about customer due diligence (“CDD”) in relation to natural persons.

Digital ID for Customer Due Diligence Guidance Applicability

The Guidance applies to all the Natural and legal persons licensed and/or supervised by the Central Bank of UAE in the below-mentioned categories:

National banks
Branches of foreign banks
Exchange houses
Finance companies
Issuers and providers of stored value facilities
Licensed retail payment service providers and card schemes
Registered hawala providers,
Insurance companies, Agencies, and Brokers.
Other LFIs not covered above.

Key Takeaways: Guidance on Digital ID for Customer Due Diligence

1. The Guidance talks about Identity proofing, enrollment, and authentication mechanisms with regard to the usage of digital ID systems. The terminology of “Digital ID systems” is defined as under:

“use electronic means to assert and prove a person’s identity online and/or in in-person environments, including through the use of:

Electronic databases, including distributed databases and/or ledgers, to obtain, confirm, store, and/or manage identity evidence;
Digital credentials to authenticate identity for accessing mobile, online, and offline applications;
Biometrics to help identify and/or authenticate individuals; and
Digital application program interfaces (“APIs”), platforms, and protocols that facilitate online identification and the verification and authentication of identity.”

2. LFIs are directed to use national-level identificationsystems and processes prevalent/under-development in UAE, like UAE Pass, Emirates ID, Emirates Facial Recognition, etc.

3. LFIs may use the online validation gateway of the Federal Authority for Identity and Citizenship and keep a copy of the Emirates ID and its digital verification in their records.

4. LFIs should leverage data generated by authentication for ongoing Customer Due-Diligence and transaction monitoring to identify suspicious customer activity/behavior /transactions with sanctioned or High-Risk jurisdictions.

5. LFIs may rely on customer identification, and verification carried out by a third party but shall make sure to abide by the following.

The LFIs shall obtain all relevant information from the third party.
Take the required steps to ensure that a third party provides copies of customer documentation/information used for CDD.
Third-party complies with the record-retention requirements provided in Cabinet Resolution No. (134) of 2025 and Federal Decree by Law No. (10) of 2025 on Anti-Money Laundering

6. LFIs should take appropriate measures to safeguard and deal with the inherent technology risk and challenges posed by digital ID systems and shall ensure implementation of such processes and systems to reduce the Identity proofing and enrolment risks, e.g. cyberattacks, security/cyber breaches, use of stolen/falsified/synthetic ID details due to the reliance on the open networks like the Internet.

7. The Guidance sets out a strategy for mitigating threats to the identify proofing and enrollment process laid down by the U.S. National Institute of Standards and Technology (“NIST”) Digital Identity Guidelines.

8. The Guidance also talks about the risks at the authentication stage, like credential stuffing, Phishing, man-in-middle (credential interception), PIN code capture and replay, which are exploited without the owner’s knowledge.

9. LFI’s shall ensure that the Digital ID system adopted shall provide complete confidence/assurance and is working efficiently to produce desired results. The same should be protected against internal and external manipulation and shall detect unauthorized users, cyberattacks, and insider fraud.

10. LFIs shall at first conduct Assurance Level Assessmentto understand the assurance levels of the digital ID system based on its governance, technology, and architecture to determine its reliability and independence. The assessment can be performed by themselves, or they may consider obtaining an audit or assurance certificate from an expert body.

11. Post Assurance Level Assessment, the LFIs shall conduct an Appropriateness Assessment to determine whether the digital ID system is reliable to deal with potential Money Laundering, Terrorism Financing, fraud, and other financing risks. LFI’s Assurance and Appropriateness Assessmentof the digital ID system to perform CDD shall be documented and updated periodically.

12. The Guidance has various illustrations adapted from NIST Digital ID Guidelines for technical requirements for

the identity proofing and enrollment
authentication protocols and processes
authenticator lifecycle management

13. This Guidance focuses on the use of digital ID systems for performing Customer Due-Diligence at the time of Onboarding/opening of account and ongoing monitoring, which will help mitigate the potential risks of Money Laundering and Combatting the Financing of Terrorism and safeguarding the financial system of UAE.

How can AML UAE help?

AML UAE is one of the top AML Consulting firms providing end-to-end support services for Anti-Money Laundering and Combatting Terrorism Financing to Financial Institutions, DNFBPs and VASPs. We can assist you in conducting Business Risk assessment, selection and assurance assessment of Digital ID systems, complying with ongoing monitoring of Transactions, and identification and reporting of suspicious transactions.

All-encompassing AML training for
your business just a call away.

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About the Author

Dipali Vora

CAMS, ACS

Dipali is an Associate member of ICSI and a Certified Anti-Money Laundering Specialist (CAMS). She has an overall experience of 8 years in the compliance domain, including Anti-Money Laundering, due diligence, secretarial audit, and managing scrutiniser functions. She currently assists clients by advising and helping them navigate through all the legal and regulatory challenges of Anti-Money Laundering Law. She helps companies to develop, implement, and maintain effective AML/CFT and sanctions programs.

Reach Out to Dipali

When to file STR under UAE AML Law?

The Financial Intelligence Unit (FIU) provides for filing a Suspicious Transaction Report (STR) when any red flags are observed during the customer onboarding process or executing a transaction. This infographic presents various indicators a business organization should consider while interacting with the customer or establishing a business relationship, suggesting the need to report the same to FIU through STR.

AML UAE is a consultancy firm offering a comprehensive range of services on AML compliance in UAE, including but not limited to enlisting sector-specific red flags, advising around the identification of suspicious transactions, and reporting the same on the goAML Portal.

Understanding When to File STRs

Checklist for filing STR and SAR on goAML portal under UAE AML Laws

It is essential to ensure the accuracy and completeness of the Suspicious Transaction Report (STR) and Suspicious Activity Report (SAR) to be filed with FIU through the goAML portal. The quality of the STR/SAR reported indicates the level of AML/CFT compliance framework deployed by the Company.

A process is to be followed to ensure that STR/SAR is filed correctly on the goAML Portal. To help you ensure accurate reporting of suspicious transactions with FIU, we have prepared a brief checklist of the points to be taken care of in the present infographic.

AML UAE is firmly dedicated to supporting the designated entities in detecting and preventing financial crimes by offering end-to-end AML Consultancy services, including assistance in regulatory reporting.

Uncovering the Red Flags of NFT-Related Money Laundering

Pathik Shah

Protect your business with reliable and effective AML strategies with AML UAE.

Uncovering the Red Flags of NFT-Related Money Laundering

With the increased acceptance of artwork using Non-Fungible Tokens (NFTs), comes the increased risk of money laundering and terrorism financing, induced by anonymity around the origin, mode of transfer, and payment. With this, awareness about the risk indicators associated with NFTs is very pertinent amongst NFT users and society as a whole.

Recently, the Joint Chiefs of Global Tax Enforcement (J5) issued a list of red flags that financial institutions, business organizations, and individuals must be aware of. The document released by J5 is the ‘J5 NFT Marketplace Red Flag Indicators’, which highlights how criminals constantly develop new ways to exploit emerging technologies.

NFT Critical red flags suggesting high ML/FT risk

Collection or organization of the NFTs from the high-risk jurisdictions
Collection of similar kinds of NFTs in large numbers to launder money between related wallets
Distribution or giveaway of fake or forged NFTs
Manipulation of the NFT values (unreasonably high) by the frequent buy-sell transactions between connected wallets (also known as “Wash Trading”)
High turnover of low-valued NFTs
Sell of newly minted NFTs at a very high value, contradictory with the other NFTs and a general trend
A high volume of trading of overpriced/underpriced NFTs within a short time gap
Mismatch in the NFT minting address and the contract address appearing on the exchange portal
A high volume of trading for the NFT collection purchased from a mixer or tumbler
Transaction value exceeding US$ 100,000 for newly minted or secondary market tokens without any apparent community
Request to share the seed phrase (translation of the private key) from the virtual asset wallet to execute the transaction
The same tokens were reacquired from the same party or the third party at a lower price, to whom earlier the said tokens were sold at a higher value
Phishing – flooding the inbox by sharing fake NFT offers
The unreasonably high price gap between the legitimate marketplace and a particular site
Unverified social media presence, with no apparent followers
Unnecessary exchange of NFTs between the same group of people or network

Other Risk Indicators suggesting medium ML/FT Risk related to NFTs

NFT with re-used code
NFT without any thumbnail appearing on the marketplace
No information is available about when and where the NFT was minted
Minting an NFT or buying it at an inflated price and immediately selling it off at a significant loss
The absence of the contract address makes the tracing of NFT difficult in the marketplace
High-volume transactions of the tokens purchased from the same wallet or network of wallets
Unverified accounts on the market profile
Details of the NFT not clearly captured – properties and description of the token missing
High value structured into smaller valued multiple transactions, over a short period, with no observable community

It is essential to understand these red flags and stay alert towards the same to reduce the chances of exploitation of the NFTs for laundering money or financing terrorism.

This list will enable the market participants to improve their fraud detection policies and deploy the necessary mitigation measures. They must implement customized compliance programs to avoid becoming victims of money laundering or other financial crimes.

Let us all fight the risks of the execution of financial crimes using cryptocurrency and virtual assets.

How can AML UAE assist you in AML NFT Compliance?

Awareness of the NFT-induced red flags is critical to safeguard yourself from being vulnerable to financial criminals exploiting the technologies.

AML UAE is a firm offering end-to-end AML consultancy services to Financial Institutions, DNFBPs, and the VASPs. We offer assistance in implementing the AML framework, training the compliance officer and team, offering AML software, managing customer onboarding, etc.

Partner with AML UAE and understand your AML risk better

Safeguard your business now!

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About the Author

Jyoti Maheshwari

CAMS, ACA

Jyoti has over 11 years of hands-on experience in regulatory compliance, policymaking, risk management, technology consultancy, and implementation. She holds vast experience with Anti-Money Laundering rules and regulations and helps companies deploy adequate mitigation measures and comply with legal requirements. Jyoti has been instrumental in optimizing business processes, documenting business requirements, preparing FRD, BRD, and SRS, and implementing IT solutions.

Reach Out to Jyoti

How to conduct AML Business Risk Assessment?

It is challenging to develop and deploy the necessary mitigation measures without understanding the inherent risk connected to your nature of business, the products, and services you offer, the geographies you are targeting, etc.

Once you understand your business risk, you can adopt the Risk-Based approach to optimally utilize your resources to effectively implement the controls and safeguard your business against financial crime risk. The infographic here captures the detailed business risk assessment procedure under UAE AML regulations.

Factors triggering review of Enterprise-wide Risk Assessment (EWRA)

Change in National Risk Assessment (NRA)
Change in AML regulations
Introduction of new product or service
Implementation of new technology in delivery of services or complying with AML regulations
Onboarding a new class of customers that presents risks not addressed by Entity-wide Risk Assessment
Merger of business
Operating in a new jurisdiction
Changes in management or group structure of the company

AML UAE is your one-stop solution for all your AML requirements in UAE, starting from goAML registration to conducting the business risk assessment and defining your AML checks and controls to fight money laundering and terrorism financing.

When to file SAR under UAE AML Law?

The Financial Intelligence Unit (FIU) provides for filing a Suspicious Activity Report (SAR) when any red flags are observed in attempted or unexecuted transactions or while establishing a customer relationship. This infographic presents various indicators a business organization should consider while interacting with the proposed customer, suggesting the need to report the same to FIU through SAR.

AML UAE is a consultancy firm offering end-to-end solutions on AML compliance, including enlisting the red flags, advising around the identification of suspicion, and reporting the same on the goAML Portal.”

What is NFT money laundering, and how to combat it?

What is NFT money laundering and how to combat it?

Protect your business with reliable and effective AML strategies with AML UAE.

What is NFT money laundering and how to combat it?

Technology has entered every field of work. The art field is the latest to have been impacted by technology in the form of Non-fungible Tokens (NFTs). NFTs are blockchain-based tokens depicting various art forms – painting, music, and games.

Since technological evolution brought the digitalization of art, money launderers came up with new typologies to exploit the same.

Since technological evolution brought the digitalization of art, money launderers came up with new typologies to exploit the same and transfer the illegally obtained funds through misuse of NFTs.

This article discusses NFT money laundering, why and how it is conducted, and what measures businesses should consider combating.

What are NFTs?

NFTs are tokens, which are data in the form of videos, pictures, artwork, memes, tweets, or any digital asset. These are stored on different forms of distributed ledgers, such as blockchains. These cannot be interchanged with other NFTs. Thus, they are non-interchangeable digital assets but can only be bought and sold using cryptocurrencies.

They have unique identifying codes and are finite in numbers. People can see NFTs for free, but to own them, they must pay the price to the actual owner. The value of an NFT is based on its perceived value, driven by its market demand.

After the purchase, there is a built-in authentication, which the new user can show as proof of ownership. Here, the new owner gets ownership of the NFT and not the physical object, while the original creator owns the intellectual rights of the work. So, NFTs are famous because people value digital bragging rights over an item instead of the actual physical item.

How are NFTs different from cryptocurrencies?

The only similarity between cryptocurrencies and NFTs is that they are built on the same programming. Both are secured in digital wallets. And you need cryptocurrencies to buy NFTs.

Any physical currency and cryptocurrency are fungible. It means that these assets can be interchanged and traded with one another. That is not the case with NFTs because they are non-fungible.

Cryptocurrencies and physical currencies are equal in value. It means one dollar is equal to one dollar. One Ethereum is equal to one Ethereum. In the case of NFTs, each has a digital signature that makes it unique; thus, one NFT cannot be exchanged with another NFT. At any given moment, only one person can own an NFT, and the digital signature gives that ownership value.

Why are NFTs attractive to money launderers?

As it is said, the perceived value of art and its market demand decide an NFT. The perceived value factor makes dealing with NFTs a bit subjective and hence, away from the scrutiny of regulators.

The transfer of ownership of NFT happens in an instant. Buying and selling NFTs is easy and smooth and requires no additional financial cost except the token’s value. Also, there are no geographical restrictions on these transactions; NFTs created in one country can be done in another country without any limitation.

Moreover, NFT is an entirely new concept and a new market. Many different NFT platforms exist with different structures, operations, standards, ownership models, and due diligence rules. Therefore, it becomes challenging for regulators to create standard regulations for the NFT space applicable to various countries across the globe.

Smart contracts in the NFT market are one of the critical reasons money launderers are attracted to it. In smart contracts, the user generates revenue each time a transaction occurs on the blockchain. So, launderers rapidly conduct a transaction to generate revenues. Now, this becomes a significant motivation to execute smart contracts; in the process, forget about the identity verification of buyers. Launderers exploit this loophole to their benefit.

How does NFT money laundering occur?

Wash trading

Generally, criminals use their illicit money (converted into cryptocurrency) to buy an NFT. They use illegal money, but the purchase is a legal one. Later, they can sell the NFT and earn legal cryptocurrencies. This process is called wash trading.

The central concept in wash trading is to increase the value of the transaction. Thus, in this transaction, criminals benefit in two ways: they avoid taxes and convert unlawful funds to legitimate digital assets or currencies. Only a record of this purchase and sale transaction is present on the blockchain, and nothing about the funds obtained to buy this NFT.

Standard money laundering

Another way is to do multiple buying and selling transactions between their accounts or someone known to them to create layers of fake transactions. With each transaction, illegitimate money gets transformed into legitimate money.

Now, since the determination of the fair market value of an NFT depends only on how the appraiser values it, you never get to know the actual price of the NFT. Launderers create multiple accounts and transfer assets from one account to another for any price. These transactions layer the illegal money with legitimacy and cleanse huge funds.

How to combat NFT money laundering?

Whenever there is a new technological innovation, money launderers exploit them. And NFT is the latest technology to become its victim.

Individuals and businesses dealing in NFTs or facilitating NFTs exchanges must find ways to regulate NFT activities – to verify the buyer and seller’s identity and the transaction’s authenticity. They can improve their AML and KYC checks or implement some monitoring software to track all movements. They must trace NFT transactions between wallets and conduct the KYC of wallet holders.

They must know how launderers engage in NFT money laundering and related red flags to identify suspicious transactions. Countries can implement relevant regulatory laws and actions to control this NFT market. It requires efforts globally because NFT transactions can occur globally without border restrictions.

Money launderers exploited the NFT world as countries, and international regulators introduced AML rules in the traditional buying and selling activities of art. So, criminals come up with newer ways and means; businesses must take the help of AML consultants to identify the risks to NFTs.

Key AML Measures and Responsibilities for curbing NFT money laundering

The crypto companies, NFT service providers and facilitators, and other Virtual Asset Service Providers (VASPs) in UAE must implement the following measures to comply with law and protect the NFT ecosystem:

How can AML UAE help?

AML UAE is a leading provider of AML compliance services in the UAE across different sectors, such as corporate service providers, virtual assets service providers, dealers in precious metals and stones, financial institutions, etc. Our AML consultants understand AML laws and money laundering red flags specific to business and transactions and thus can guide you in protecting your business against money laundering threats.

We help assess your business risk and set up an AML Compliance framework aligned with AML/CFT obligations. We implement specific comprehensive screening procedures and help you identify the potential red flags of NFT money laundering for early detection and preventive actions.

FAQs on NFT Money Laundering and ways to combat it

The mainland companies or onshore crypto and other virtual assets companies in UAE are regulated by the Securities and Commodities Authority (SCA). Further,
Virtual Assets Regulatory Authority (VARA) controls Dubai-based virtual assets service providers (except DIFC). While it is Financial Services Regulatory Authority
(FSRA) & Dubai Financial Services Authority (DFSA) for ADGM and DIFC based VASPs respectively.

According to FATF, “virtual asset” refers to any digital representation of value that can be digitally traded, transferred or used for payment.

A cryptocurrency is a type of virtual asset. But not all virtual assets are cryptocurrencies.

A virtual asset is an asset held digitally or virtually. It is a digital value you can virtually trade, transfer, and use for investment and payment.

Virtual assets include digital art, text, videos, in-game items, images, music, cryptocurrencies, and virtual real estate.

Primarily, the crypto, NFT, and other virtual assets companies in UAE have to adhere to the requirements of the following anti-money laundering (AML) laws and regulations:

Federal Decree by Law No. (10) of 2025
Cabinet Resolution No. (134) of 2025
Cabinet Decision No. (74) of 2020
AML/CFT-specific guidelines issued by the Supervisory Authority

The various methods used to launder money include:

Using smurfs, mules, or shell companies
Investing in real estate with cash and then selling it or generating rental income
Investing in jewellery and moving it to other jurisdictions
Online auctions and sales
Virtual assets, including NFTs and cryptocurrencies

Yes, all Virtual Asset Service Providers (VASPs) must register with the goAML Portal in UAE.

Get ready for the fight against money laundering
with AML UAE

Get in touch with our team to discuss how we can help

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About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is an ACAMS-certified AML consultant specialising in governance, risk, and compliance for regulated entities in the UAE. He brings over 28 years of experience, with 1,000+ hours of AML training and 200+ advisory engagements across DNFBPs, VASPs, and FIs. He supports businesses in aligning with AML/CFT requirements from the CBUAE, DFSA, MoET, MoJ, VARA, CMA, FSRA, and FATF. Known for translating complex regulations into audit-ready procedures, Pathik enables operational clarity and compliance readiness.

Reach Out to Pathik

What are the basic elements of AML Policy in UAE?

What are the basic elements of AML Policy in UAE?

Documentation of AML policy, procedures, and controls are crucial for the effective and consistent implementation of the AML programs across the organization.

The AML Policy should also be comprehensive, covering the understanding of the law, the customer onboarding process, the reporting requirements, etc. The infographic presented here captures the critical elements of an ideal AML policy for adherence to the AML laws in UAE and safeguarding the business from being vulnerable to money laundering and other financial crimes.

AML UAE is here to assist you with all your AML requirements, including drafting your AML policies, procedures, and controls specific to your business and sector.

Elements of effective AML Policies and Procedures

What is trade-based money laundering?

Pathik Shah

Protect your business with reliable and effective AML strategies with AML UAE.

Trade-based money laundering is one of the most common forms of money laundering. It is an easy way exploited by criminals to launder money between different countries, wherein they misrepresent the quality, value, or amount of goods traded through various channels.

Trade financing processes are misused to facilitate the flow of illicit funds. Trade is conducted across different jurisdictions subject to different regulations, making detecting suspicious transactions difficult. Also, the complexity of trade transactions and the volume of goods traded are the loopholes these launderers exploit to their advantage.

Let’s understand trade-based money laundering, related red flags, and how businesses can mitigate the risk arising from trade-based money laundering.

What is trade-based money laundering?

Trade-based money laundering (TBML) cleans dirty money through trade transactions and activities. The trade transactions are exploited to transfer and convert illicit money into legitimate cash or commodity, avoiding the suspicion from regulatory authorities disguising the process as legitimate trade.

For example, importing and exporting goods is just a cover for the movement of illegal funds, making the trade transaction appear legal between two countries.

It is also a way to evade taxes. Companies show different amounts in invoices, thereby reporting reduced profits and taxes decrease. Alternatively, they show multiple payments for only one set of goods received from the exporter, increasing their procurement expenses.

Why do criminals engage in trade-based money laundering?

Lack of regulations

There are no standard regulations for trading transactions. Import and export of goods are regulated by the agreement between a buyer and seller and the respective countries’ regulations. No global regulator controls these transactions; the two parties entering the contract govern the trade terms.

A rise in the amount and volume of trade

Globalization has resulted in increased trade activities across the world. Countries engage in multiple import and export transactions with several countries. These transactions have increased in number and value over the years. It allows criminals to bypass commercial rules during these humongous trade transactions, avoiding the attention of the authorities.

Increase in free trade zones

Businesses are attracted to free trade zones for their ease of conducting business, as there are fewer regulatory constraints in these zones. The absence of rules is better than circumventing rules. The number of TBML transactions has also increased with a rise in free trade zones.

Use of open account payment method

Open account transactions are the ones where payment is due after a specified time of the occurrence of the trading activity, i.e., the goods are delivered to the party, and the payment is made after 30/90 days. This time gap minimizes the connection between the actual trade and the related payment. These transactions are subject to less oversight from financial institutions; hence, criminals increasingly use these methods.

How is trade-based money laundering conducted?

Understanding the standard techniques of conducting trade-based money laundering is essential to combat the same. The following are the most used TBML techniques:

Over-invoicing of goods

The exporter inflates the price of the goods in the invoice compared to their market value. In this case, exporters receive higher payments from the importer, allowing the importer to launder money and convert/transfer through import/export transactions.

Under-invoicing of goods

The exporter prepares the invoice for the goods at a price lower than the fair market value. Importers get goods at a lower value, resulting in the evasion of import duties.

Multi-invoicing

Exporters create multiple invoices for the same set of goods to be shipped. They can receive multiple payments for the same shipment, using different payment methods adding layers of complexity. Thus, launderers legitimize their illicit money through multiple invoicing.

Changing the quantity of goods

Launderers can also change the quantity or weight of goods being traded. They may report the quantity as more than the actual or less than the actual. In the case of over-quantity, they receive illicit money as payment and convert it to legitimate money. While in the case of under-quantity, they launder money by avoiding the payment of actual import duties.

Alternatively, they might report a specific quantity of goods while there is no shipment done. It is called phantom shipping or ghost shipping. Importers and exporters collaborate to create false invoices and other documentation without the actual shipping of goods. The illicit money is moved from the importer to the exporter without actual trade transactions.

Misrepresentation of goods

The exporters may represent the goods as expensive, though in reality, the goods are cheap. Thus, the invoice and customs documents show a high price while the actual value is less.

It is common in the gems and jewellery sector, where the invoice says raw diamonds and the shipment is of polished diamonds or artificial ones.

Non-documentary trade

For some trading transactions, there are no documents available for investigation. It is not that no documents are prepared for the transaction, but these are not accessible. The regulators have access to only the name, account number, and address of the buyer and seller.

In non-documentary trade transactions, regulators are unaware of the underlying flow of goods and trade activities. It is difficult for them to validate transactions. The absence of due diligence on the volume, type, quantity, and value of goods makes it easier for launderers to launder money.

What are the red flag indicators of trade-based money laundering?

The best option for individuals, companies, and countries is to observe the red flags of trading transactions. With the identification of suspicious transactions, you can investigate them further. Following is an illustrative list of TBML indicators:

Differences in the descriptions of items to be traded in the invoice and the shipping bill.
Differences in the market value of the items and the value mentioned on the invoice.
Involvement of trading entities with registered addresses in residential buildings.
The shipment size does not match the customer’s profile and regular business activities.
Trading of an item from one jurisdiction to another or from one subsidiary to another, whose business activities are in no way related to each other or without logical economic reason.
Involvement of trading entities with no physical presence or an online presence that does not align with its business activities.
The type of goods traded does not align with the regular shipment of customers or the client’s profile and business activities.
Trading transactions involving a third party with no relation to the transaction (either receiving cash payments or managing documents); offshore front companies or shell companies may be involved in such transactions.
Trade deals involve complex trade routes that do not make geographical sense.
Goods are exported from or imported into high-risk jurisdictions or countries with poor AML regulations.
Missing trade documents or false documents.
A sudden increase in trade transactions from or to a company that was dormant for a long time.
Sudden high volumes or value of trade from an entirely new company.

What is the way out for businesses from trade-based money laundering?

Know Your Customer (KYC) and customer due diligence (CDD) are the best solutions for reducing trade-based money laundering. Businesses must implement policies to collect details on all their customers and transactions. Further, ongoing monitoring of the customer’s profile and the transaction is necessary to identify any unusual patterns. If they see any red flag, deeper scrutiny is essential to identify money laundering risks.

Using advanced technology systems or artificial intelligence is also an excellent solution to reduce money laundering risks. These systems can help businesses identify money laundering threats and send alerts. It allows the entities to report the TBML activities to the authorities promptly.

How AML UAE can help

Associating with AML consultants, like AML UAE, can help you understand the red flags better to identify suspicious transactions and take necessary actions to combat the same.

AML UAE also helps clients form an AML compliance department and conduct employee training. Our AML consultants aid in developing relevant AML policies, selecting appropriate AML software, and managing the reporting requirements. We ensure you comply with applicable AML regulations and stay safe from money laundering threats.

AML UAE helps you safeguard your business from money
laundering threats.

Get in touch to know the best preventive and corrective actions.

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About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is an ACAMS-certified AML consultant specialising in governance, risk, and compliance for regulated entities in the UAE. He brings over 28 years of experience, with 1,000+ hours of AML training and 200+ advisory engagements across DNFBPs, VASPs, and FIs. He supports businesses in aligning with AML/CFT requirements from the CBUAE, DFSA, MoET, MoJ, VARA, CMA, FSRA, and FATF. Known for translating complex regulations into audit-ready procedures, Pathik enables operational clarity and compliance readiness.

Reach Out to Pathik

Filing of Fund Freeze Report (FFR) under UAE AML Laws

Filing of Fund Freeze Report (FFR) under UAE AML Laws

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Use of Digital ID for Customer Due Diligence -New Guidance issued by CBUAE for LFIs

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What is NFT money laundering and how to combat it?

What is NFT money laundering and how to combat it?

What are NFTs?

How are NFTs different from cryptocurrencies?

Why are NFTs attractive to money launderers?

How does NFT money laundering occur?

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Standard money laundering

How to combat NFT money laundering?

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Why do criminals engage in trade-based money laundering?

Lack of regulations

A rise in the amount and volume of trade

Increase in free trade zones

Use of open account payment method

How is trade-based money laundering conducted?

Over-invoicing of goods

Under-invoicing of goods

Multi-invoicing

Changing the quantity of goods

Misrepresentation of goods

Non-documentary trade

What are the red flag indicators of trade-based money laundering?

What is the way out for businesses from trade-based money laundering?

How AML UAE can help

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