A Guide to New AML-CFT Requirements for UAE’s Licensed Financial Institutions

Suppose you are a Licensed Financial Institution (LFI) operating in the UAE. In that case, you must take urgent actions to comply with the new guideline issued by the Central Bank of the UAE (CBUAE) with respect to Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT). Many of the obligations listed by the CBUAE are complex but LFIS can consult with AML consultants in Dubai to ensure compliance. The new CBUAE guidance details the ML-FT risks related to payments and preventive measures that LFIs need to apply to mitigate such risks.

The AML-CFT guideline for LFIs was necessitated by the emergence of new payment modes such as cryptocurrencies that might bring risks to the financial system. As per the CBUAE guideline, LFIs are urged to take a risk-based approach to mitigate and manage the risks related to money laundering and terrorism that emanate from the New Payment Products and Services (NPPs). In this article, we will discuss the LFIs that come within the scope of the new guidance and the compliance measures they need to implement. AML consultancy firms in Dubai can advise you on how to comply with the requirements. Keep reading the blog to get a glimpse of the new AML-CFT requirements for UAE’s LFIs.

What Are the Licensed Financial Institutions Under Obligation?

Unless otherwise notified, the new guideline applies to all natural and legal persons that are licensed/supervised by the CBUAE. AML consultants in Dubai can guide you on whether you come within the scope of the new guideline. LFIs in the following categories are required to comply with the AML-CFT requirements related to payments:

  • National banks
  • Branches of foreign banks
  • Exchange houses
  • Finance companies
  • Stored value facilities (SVF) such as values, reward points, crypto-assets or virtual assets)
  • Retail payment services (such as payment account issuance; payment instrument issuance; merchant acquiring; payment aggregation; domestic fund transfer; cross-border fund transfer; payment token; payment initiation; and payment account information)
  • Card schemes

Preventive Measures for LFIs Providing Products and Services directly to Customers

LFIs are required to carry out specific preventive measures to mitigate the risks of money laundering and financing terrorism. LFIs under obligation can consult with AML consultants in Dubai to implement the preventive measures stated in the guideline. The following preventive measures apply for LFIs providing products and services directly to customers:

1. Carry out Customer Due Diligence, Enhanced Due Diligence & Ongoing Monitoring

LFIs are required to carry out mandatory Customer Due Diligence (CDD) measures such as customer identification & verification, beneficial owner identification, understanding the nature of the customer’s business and the purpose of the relationship, and ongoing monitoring. In addition to such mandatory CDD elements, LFIs are required to perform measures that are specifically relevant to NPPs such as user identification and verification, use of IP addresses and geographical (spatial & temporal) locators and SVF & merchant due diligence.

2. Develop Controls

Developing controls is one of the key AML-CFT compliance requirements for LFIs in the UAE that provide products and services directly to customers. LFIs are required to develop controls that correspond with the nature and size of their business to manage the risks identified. To meet this requirement, LFIs need to consider geographical limits, funding constraints, and multi-factor authentication to reduce or eliminate those aspects of Payment Products and Services (PPS) and NPPS that make them attractive to money launderers.

3. Wire Transfers requirements

LFIs must meet the specific requirements mentioned in Articles 27-29 of the AML-CFT Decision regarding the information that LFIs must collect, and transmit with the wire transfer when conducting an international wire transfer as well as specific obligations related to domestic wire transfers. They should also meet the CDD measures concerning wire transfers as per section 6.3.2 of the Guidelines on AML-CFT and Illicit Organizations for Financial Institutions. You may consult with AML consultants in Dubai to comply with the Wire Transfer Requirements.

Preventive measures for LFIs Providing Services to other Payment Sector Participants

The following compliance measures apply to LFIs that provide services to other payment sector participants:

1. Customer Due Diligence, Enhanced Due Diligence & Ongoing Monitoring

The LFIs are required to carry out appropriate CDD measures on all customers irrespective of their type or sector. They should also check whether nesting will take place. Apart from the standard CDD activities, LFIs should also collect information necessary to risk-rate the Payment Sector Participant customer and evaluate whether the customer profile requires Enhanced Due Diligence (EDD). The LFIs should also subject all the customers to ongoing monitoring during the course of their relationship.

2. Correspondent Due Diligence

In the case of correspondent banking relationships with Payment Sector Participants, LFIs should carry out correspondent due diligence that reflects the unique risks and features of those relationships. In the context of the extended, intermediated transaction chains, each LFI involved is responsible for monitoring all transactions processed or carried out through them. Specifically, the LFIs must consider regulatory status, merchant due diligence, controls relating to nesting, and testing & auditing of the correspondent’s AML-CFT program.

3. Targeted Financial Sanctions

LFIs need to apply the directives issued by the competent authorities in the UAE and the requirements set out in the Cabinet Decision 74 of 2020 on Targeted Financial Sanctions (TFS). The LFIs should have operational systems in place for all the PPS they offer, which ensures they can appropriately screen transactions related to those products or services. The LFIs should not offer any product or services if they cannot conduct the screening.

4. Transaction Monitoring and Suspicious Transaction Reporting

LFIs are required to monitor activity by all customers to identify behaviour that is potentially suspicious and that may need to be the subject of a Suspicious Transaction Report (STR), a Suspicious Activity Report (SAR) or other report types. When monitoring and evaluating transactions, the LFI should take into account all information that it has collected as part of CDD. AML consultants in Dubai can advise LFIs on monitoring and suspicious transaction reporting.

5. Governance and Training

Payment Sector participants and LFIs that provide services to them need to incorporate the following aspects while designing their governance frameworks and training programs:

  • Clear allocation of AML/CFT responsibilities among LFIs
  • Agent Governance and Training
  • Employee Training

Ensure Compliance with the Best AML Consultants in Dubai, UAE

LFIs need to implement the preventive measures listed by the CBUAE in its latest guideline to mitigate and manage the risks posed by NPPS. Given the complexity of the compliance process, it is advisable to leverage the services of the best AML consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA is a leading provider of AML consultancy services in Dubai, providing robust services such as

  • AML Risk Assessment specific to the industry
  • Implementation and review of effective AML/CFT policies & procedures
  • Advice on staffing requirements for AML/CFT department
  • Assistance with staff awareness training
  • AML Penalty Appeal Services in the UAE