Targeted Financial Sanctions (TFS) compliance is one of the most scrutinised areas of AML/CFT supervision in the UAE. Financial Institutions (FIs), Designated Non-Financial Businesses and Professions (DNFBPs), and Virtual Asset Service Providers (VASPs) are legally required to freeze the funds and assets of Designated Persons without delay, and this obligation extends well beyond the individual or entity named on a sanctions list.
Regulators assess TFS exposure using three implementation criteria: ownership, control, and acting on behalf of a Designated Person. Misjudging any one of these can result in a reporting entity unknowingly providing funds, assets, or services to a sanctioned party, exposing the business to severe financial and criminal penalties.
This guide explains each of the three TFS implementation criteria under the UAE’s updated AML/CFT legislative framework, with practical examples to help compliance officers, business owners, and reporting entities apply the rules correctly.
What Are Targeted Financial Sanctions in the UAE?
Targeted Financial Sanctions are restrictions imposed on individuals and entities listed as Designated Persons, whether on the UAE Local Terrorist List or the United Nations Security Council (UNSC) Consolidated List. Once a person or organisation is designated, reporting entities must:
- Freeze, without delay and without prior notice, all funds and assets owned or controlled by the Designated Person
- Refrain from making any funds, assets, or economic resources available to the Designated Person, whether directly or indirectly
- Report any positive match, attempted transaction, or frozen asset to the UAE Financial Intelligence Unit (FIU) through the goAML portal
The obligation applies to funds held directly in a Designated Person’s name and to assets held indirectly through companies, trusts, or intermediaries that the Designated Person owns, controls, or acts through.
Legal Framework Governing TFS Compliance in the UAE
Reporting entities must implement TFS in line with the following legislation and guidance:
- Federal Decree-Law No. 10 of 2025 on Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation Financing, which replaced Federal Decree-Law No. 20 of 2018 and now forms the primary federal AML/CFT law
- Cabinet Resolution No. 134 of 2025, the Executive Regulations that operationalise the 2025 Decree-Law, replacing the 2019 Executive Regulations
- Cabinet Decision No. 74 of 2020 concerning the UAE Local Terrorist List and the implementation of UNSC resolutions on terrorism, terrorism financing, and proliferation financing, which remains in force as the dedicated TFS framework
- The Guidance on Targeted Financial Sanctions for FIs, DNFBPs, and VASPs, issued by the Executive Office for Control and Non-Proliferation (EOCN) and updated in July 2025
Reporting entities should treat the EOCN guidance as the primary operational reference for day-to-day TFS screening and freezing decisions, while the Decree-Law and Cabinet Resolution set out the statutory obligations and penalties.
The Three TFS Implementation Criteria
The EOCN guidance confirms that freezing obligations extend beyond a Designated Person’s own accounts to any legal entity or arrangement that meets one of three tests: ownership, control, or acting on behalf of a Designated Person.
- Ownership
An entity is treated as owned by a Designated Person if that person holds more than 50% of the entity’s proprietary rights, shares, or voting rights. This is known as majority ownership, and it triggers an automatic freezing obligation.
Example: Company A has three shareholders. The Designated Person holds 51%, Shareholder 2 holds 25%, and Shareholder 3 holds 24%. Because the Designated Person holds a majority stake, all of Company A’s funds and assets must be frozen. Shareholders 2 and 3 are not themselves designated, and their personal assets outside the company should not be frozen unless separate grounds exist.
Ownership below 50% does not automatically trigger freezing measures. In these minority ownership scenarios, reporting entities must instead assess whether the control criterion applies.
- Control
Even where a Designated Person holds a minority stake, freezing measures apply if there is documented evidence that the Designated Person exercises control over the entity. Control can arise through:
- The right to appoint or remove a majority of the board of directors
- Voting arrangements, shareholder agreements, or side letters granting decision-making power disproportionate to shareholding
- De facto influence over the entity’s financial or operational decisions
- Acting on Behalf of a Designated Person
The third criterion captures individuals and entities that transact, sign, or instruct on behalf of a Designated Person, even where no ownership or shareholding link exists. This includes:
- Persons holding a Power of Attorney (POA) issued by a Designated Person
- Authorised signatories acting under the Designated Person’s instructions
- Agents, representatives, or intermediaries carrying out transactions for the Designated Person’s benefit
Example: A Designated Person grants Power of Attorney over Company C to a non-designated individual. Because the Designated Person retains control through the POA, Company C’s funds and assets must be frozen without delay, even though the POA holder is not personally listed.
Nominee Shareholders and Nominee Directors under the 2025 Framework
Cabinet Resolution No. 134 of 2025 introduces defined terms for nominee shareholders and nominee directors: individuals who act strictly on the instructions of a nominator. A key clarification is that nominees are not automatically treated as beneficial owners in their own right. Reporting entities must look through the nominee arrangement to identify the real decision-maker, since it is the nominator’s status as a Designated Person, not the nominee’s, that triggers TFS obligations. This closes a gap that previously allowed nominee structures to obscure the true controller of an entity.
Penalties for Non-Compliance with TFS Obligations
Failure to implement TFS procedures correctly carries significant consequences under Cabinet Decision No. 74 of 2020:
- Imprisonment ranging from one to seven years
- Fines between AED 50,000 and AED 5,000,000
- Additional administrative sanctions from the relevant Supervisory Authority, including formal warnings, suspension of activities, or cancellation of the trade licence
These penalties apply not only where a business knowingly deals with a Designated Person, but also where it fails to apply adequate screening, ownership, and control checks that would have identified the exposure.
Practical Steps for TFS Compliance
Reporting entities should embed the ownership, control, and acting-on-behalf-of tests into everyday compliance workflows:
- Screen customers, beneficial owners, and related parties against the UAE Local Terrorist List and the UNSC Consolidated List at onboarding and on an ongoing basis
- Subscribe to the EOCN notification alert system to receive real-time list updates
- Map shareholding structures beyond the first layer to identify majority and minority ownership by Designated Persons
- Review POA documents, authorised signatory lists, and nominee arrangements as part of customer due diligence
- Maintain a documented rationale for every freezing decision, and report matches to the FIU through the goAML portal without delay
FAQs on TFS Implementation Criteria in the UAE
What happens if a Designated Person owns less than 50% of a company?
Minority ownership alone does not trigger automatic freezing. Reporting entities must assess whether the Designated Person exercises control over the entity through voting rights, board appointments, or other documented influence.
Are nominee directors treated as Designated Persons?
No. Under Cabinet Resolution No. 134 of 2025, nominee directors and shareholders acting on a nominator’s instructions are not treated as beneficial owners. Compliance teams must identify the nominator to assess TFS exposure correctly.
What should a business do if it discovers it holds assets linked to a Designated Person?
The funds or assets must be frozen immediately, without prior notice to the client, and the match must be reported to the FIU via the goAML portal.
Get Expert TFS and AML Compliance Support
Correctly applying the ownership, control, and acting-on-behalf-of criteria requires careful review of shareholding structures, governance documents, and beneficial ownership records. Getting it wrong exposes your business to fines of up to AED 5,000,000 and licence cancellation.
Jitendra Chartered Accountants supports FIs, DNFBPs, and VASPs across the UAE with TFS framework design, sanctions screening, beneficial ownership assessments, and the full implementation of AML/CFT programmes, aligned with Federal Decree-Law No. 10 of 2025 and the latest EOCN guidance.
Contact Jitendra Chartered Accountants today for a TFS compliance review and safeguard your business against regulatory penalties.