Role of the CBUAE in Combatting Money Laundering and Terrorist Financing

CB Roles

The Central Bank of the UAE, known as the CBUAE, is the state institution that manages the currency, banking regulation, and monetary policy in the UAE. CBUAE plays a massive role in ensuring Anti-money laundering compliance and preventing terrorist financing.

Role of the CBUAE in Combatting Money Laundering

The CBUAE has established the AMLD- Anti-Money Laundering and Combatting the Financing of Terrorism Supervision Department for dealing with all the AML/ CFT laws. The department has been set up to fulfil three objectives. 

  • Examining the LFI’s- Licensed Financial Institutions.
  • Identifying the threats and emerging risks to the financial sector in the UAE. 
  • Ensuring that the LFI’s adhere to the UAE’s AML/ CFT legal framework.

The CBUAE coordinates and works with the UAE’s National AML/ CFT Committee to implement the National Action Plan effectively. 

The AMLD comprises three teams with specific mandates:

  1. Compliance and Examination: Developing the annual AML/CFT risk Assessment supervisory plan and conducting supervisory examinations. Guide the LFIs to take appropriate action, recommend sanctions, and implement measures to put LFI adherence back on track.
  2. Policy and Co-operation: Creating policies for supervised LFIs and providing Guidance. It also includes handling the demand for information from local and international regulators. The next step involves collaborating with national committees, other authorities, and national and international stakeholders. The mandate also includes carrying out outreach activities.
  3. Research and Risk Analysis: The process includes collecting the AML/CFT-related data from LFIs and other stakeholders. It helps in risk assessment with dashboards to identify the LFIs weaknesses and ensure that the CBUAE guidelines are followed. 

Internal Coordination of the CBUAE

Internally, the AMLD coordinates with the Examination Division of the Banking Supervision Department. They exchange AML/CFT information on LFIs. The department also coordinates with the Enforcement Division to take disciplinary measures such as imposing fines defined by the CBUAE. 

External Coordination of the CBUAE

Externally, AMLD is the link between the central bank of the UAE and the domestic stakeholders to ensure AML/ CFT compliance for the LFIs. Its role in facilitating the co-operation of the FIU and international stakeholders to provide information for the AML/ CFT best practices. The foreign supervisors are responsible for looking into the AML/ CFT information requests and collaborating on investigating the AML/ CFT compliance

Latest UAE AML Guidelines 2022

The Central Bank has issued new guidelines – new Guidance to the financial institutions in the UAE that provide services to cash-intensive businesses. The medium of cash is attractive for money launderers as the inherent characteristics such as anonymity, transportability, and interchangeability make it easy for criminals to hide the profits from crime and the origin of the money.

Cash transactions can be and are rampantly misused for laundering money. It isn’t easy to trace the owner and monitor the trail of cash transactions. The Guidance is a crucial step towards combatting money laundering and terror financing. With the guidelines, financial institutions in the UAE can understand and mitigate the risks associated with cash-intensive businesses.

These businesses deal in large amounts of cash flows or cash alternatives such as prepaid cards and negotiable instruments. Several businesses across different industry verticals are cash-intensive businesses such as hospitality, travel, gaming, construction, wholesale, and many more. 

As per the Guidance, financial institutions must follow the AML/ CFT obligations by verifying the cash-intensive customers with a thorough risk assessment process. Institutions need to evaluate all aspects of the prospective customers before the onboarding process. They should be involved in risk assessment of the products and services, business operations, delivery channels, and evaluating the usage of the account and the services provided by the institution.

They need to anticipate the transactional counterparties and their size. With such a process in place, the financial institutions can get a clear picture of the risk assessment. They can decide on the feasibility of associating with a particular customer. 

The Central Bank of the UAE has issued new guidelines on anti-money laundering and combatting the financing of terrorism AML/ CFT for licensed exchange houses- LEH. The LEH is required to demonstrate AML compliance within one month.

Rules for Exchange houses

Exchange houses are vulnerable to money laundering because of their massive exposure to cash and international transactions. As per the new Guidance, the exchange houses need to maintain an effective AML/ CFT program to prevent money laundering and terrorist financing.

They need to adopt a risk-based AML/CFT approach and carry out a regular risk assessment process that covers the exchange houses, customer risk, products and services, delivery channels, locations, etc.

The AML program should be in sync with the government policies and regulations and be compliant with the government procedures defined for Targeted Financial Sanctions and Suspicious Transaction Reporting. A robust KYC process, CDD- Customer Due Diligence process, and continuous monitoring of the transaction are necessary for the Licensed Financial Institutions. 

Conclusion

AML UAE has a team of expert AML consultants who continuously update themselves about the latest UAE laws and the requirements they need to fulfil to stay AML compliant. It is one of the top UAE consultants that offers end-to-end AML compliance services eliminating any risk of non-compliance. 

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The Central Bank of UAE handles the supervision, management, and monitoring of AML/CFT matters in the UAE. It examines whether organizations comply with AML regulations, ensures appropriate measures are being implemented, and identifies risks and threats to the UAE’s economy from such financial crimes.  

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About the Author

Pathik Shah

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

Pathik is a multi-disciplinary professional with more than 22 years of experience in compliance, risk management, accounting, system audits, IT consultancy, and digital marketing. He has extensive knowledge of Anti-Money Laundering rules and regulations, and he helps companies comply with legal requirements. Pathik also helps companies generate value from their IT investments.