AML in UAE: Types of High-risk Customers Businesses may Encounter

Taking a risk-based approach to money laundering is critical to regulated businesses such as financial institutions, Virtual Assets Service Providers (VASPs), and Designated Non-Finance Businesses and Professions (DNFBPs). Such businesses need to adopt a risk-based approach to customer due diligence (CDD) and ongoing monitoring to ensure compliance with Anti-Money Laundering and Combating the Financing of Terrorism (AML-CFT).

To ensure AML compliance in the UAE, companies are required to identify high-risk customers and undertake enhanced due diligence (EDD) processes. AML consultants in Dubai can help you strengthen your compliance framework against high-risk customers. In this blog, we will explain everything business owners need to know about categories of high-risk customers. Read ahead to know more:

Who are high-risk customers?

High-risk customers are customers who pose a higher degree of money laundering/financing of terrorism (ML/FT) risk to an organisation. High-risk customers may include:

  • Customers having links to high-risk countries or industries
  • Customers with unnecessarily complex or opaque beneficial ownership structures
  • Customers who make unusual transactions or transactions that lack an obvious economic or lawful purpose, or are complex

Types of High-risk Customers under AML in the UAE

Before venturing out to identify high-risk customers, businesses need to know where risk lies within their sector. AML advisers in Dubai can train you to acquire such an understanding. To help you with this, we have listed the key categories of high-risk customers that your business may encounter:

Politically Exposed Persons

Politically exposed persons (PEPs) can be individuals entrusted with prominent public function, domestically or in foreign countries and the Heads of International Organizations. They are more likely involved in bribery and corruption. Apart from the individual in question, the definition of the PEP also covers his or her family members and known associates. PEPs can be identified from the PEP lists issued by the governments of different countries or international organisations.

People in sanctioned countries

Customers from or linked to sanctioned countries present a higher risk of money laundering and financing terrorism. High-risk countries are highly vulnerable to money laundering owing to a wide range of reasons such as a high rate of corruption, less transparency around business activities and beneficial ownership, and weaker AML/CFT measures. Such customers can be identified from the sanctions list published by the Financial Action Task Force (FATF) and the governments of various countries.

Customers with links to high-risk business sectors

The scope of high-risk customers also includes customers involved in highly regulated and supervised activities and those involved in activities that are unregulated. Some sectors are considered at a higher AML risk than others. For example, money laundering can be done by purchasing art, property, or cars using cash.

Customers with complex ownership structures

This category of high-risk customers may have complex legal, ownership, or direct or indirect group or network structures, or less transparency with regard to Beneficial Ownership, effective control, tax residency etc. They may pose different ML/FT risks than customers with simpler legal/ownership structures or with greater transparency. Businesses can strengthen their compliance framework against such customers with the help of AML consulting services in Dubai.

Customers with unusual account activity

Customers with unusual transactions are considered high-risk customers under the AML-CFT framework. Businesses need to monitor the account activities of such customers once on-boarded. This monitoring will help you ensure that these are consistent with the risk profile you initially established. Examples include customers suddenly starting to deposit large amounts of cash, transfer funds to another country regularly, or start sending money to another high-risk individual.

Customers with dubious reputations

Customers with a negative or dubious reputation also come under the scope of high-risk customers. A customer can be deemed high-risk if there are adverse news reports on that person’s alleged involvement in money laundering, terrorist financing, trafficking, sanctions, and other forms of illegal activity. Sources to monitor adverse reports include traditional news sources and media, international databases, blogs, web articles, and newswires.

Non-residential customers

Non-resident entities, especially those with connections to offshore and high-risk jurisdictions are also considered high-risk customers under the regulations of AML in the UAE. A non-resident person trying to open an account in a bank poses immense ML/FT risk especially when there isn’t a business case for the customer opening an account with your company.

AML Consultants in Dubai can help you Mitigate AML Risks

Businesses are required to detect high-risk customers early on to comply with the UAE AML / CFT laws. To navigate such customer risks and ensure AML compliance in the UAE, you can hire the services of experienced AML consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA can ensure the businesses are complying with AML by providing bespoke services such as the review of current AML policies, corporate AML training for staff, AML audit & reporting, implementation of due diligence frame.