AML in the UAE Best Practices for Effective KYC Procedures

Before on-boarding customers, Know Your Customer (KYC) procedures are very important for businesses to ensure compliance with Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT) laws. Businesses need to implement flawless KYC procedures to assess and mitigate risk. Having a weak KYC procedure will increase the risk of facilitating the crime of Money Laundering and Financing of Terrorism (ML-FT), leading to possible fines, the closing of the bank account, sanctions and reputational damage.

Financial Institutions (FI) and Designated Non-Finance Businesses and Professions (DNFBP) such as real estate agents, dealers of precious metals and stones, trust & corporate service providers and auditors are required to include robust KYC procedures as part of the AML-CFT framework. KYC is also essential to protect your company from fraud and losses resulting from illegal funds and transactions. If you are unaware of the efficiency of your KYC procedures, you must seek help from AML consultants in Dubai.

The following article will enlighten you on the best KYC practices to ensure effective AML compliance in the UAE. Keep reading for more information:

1. Implement a strong customer identification programme

As part of their KYC guidelines, organisations must carry out Customer Identification Programs (CIP) to verify that customers are who they say they are and are being truthful about the business they are engaged in. The CIP sets the minimum requirements for onboarding new customers. An effective CIP enables businesses to gain a reasonable understanding of the true identity of each customer.

The data gathered as per the CIP includes name, address, contact number, nationality, date of birth, place of birth, occupation, employer name, the purpose of the transaction, beneficial owner and identification number. AML advisers in Dubai can provide more information on building an effective CIP. The CIP can also include the following:

  • The types of accounts offered
  • The methods of opening accounts
  • The types of identifying information available
  • The organization’s size, location and customer base, including the types of products and services used by customers in different locations

2. Put in place an effective Customer Due Diligence Programme

An FI, DNFBP or any organisation facing increased ML-FT risk must first determine if they can trust a potential customer. You need to carry out robust Customer Due Diligence (CDD) is a critical element of effectively managing your risks and protecting yourself against criminals, terrorists and Politically Exposed Persons (PEPs) who might present a risk. There are three levels of CDD based on the risk posed by the potential customer:

  • Simplified Due Diligence (“SDD”) if the ML-FT risk is low and a full CDD is not necessary. For example, low-value accounts or accounts.
  • Basic Customer Due Diligence (“CDD”) is information obtained for all customers to verify the identity of a customer and asses the risks associated with that customer.
  • Enhanced Due Diligence (“EDD”) is carried out for higher-risk customers to provide a deeper understanding of customer activity to mitigate relevant risks. EDD is often initiated when the customer is from a high-risk country or a Politically Exposed Person (PEP)

3. Carry out ongoing monitoring

Checking your customer once will not suffice. Businesses need to monitor their customer on an ongoing basis. The ongoing monitoring programme may include oversight of financial transactions and accounts based on thresholds developed as part of a customer’s risk profile. Depending on the customer, you should also track the sudden fluctuations in transaction activities, unusual cross-border activities, transactions involving sanctioned entities or individuals or those on watch lists, and adverse media reports. Consult with the best AML consultants in Dubai for further guidance on ongoing monitoring.

Ensure Compliance through the Best AML Consultants in Dubai, UAE

Verifying the identity of the customer through effective KYC procedures is critical for FIs, DNFBPs and other relevant entities to ensure flawless AML compliance in the UAE. The best practices listed in this blog may help you develop an effective KYC procedure and avoid penalties and reputation damage. If you are struggling with developing a robust AML compliance programme, consult with the best AML consultants in Dubai such as Jitendra Chartered Accountants (JCA).

We are one of the leading providers of AML consulting services in Dubai dedicated to saving your organisation from a possible compliance failure. JCA chiefly offers the following types of AML services in the UAE:

  • Industry-specific AML Risk Assessment
  • Implementation and review of effective AML/CFT program
  • Advice on staffing requirements for AML/CFT department
  • Assistance with staff awareness training
  • AML Penalty Appeal Services