The UAE has put anti-money laundering (AML) regulations in place that mandate businesses declare their Ultimate Beneficial Owner i.e. UBOs to the license-issuing authorities. Non-compliance puts businesses at the risk of facing severe penalties, making them lose both financial and operational stability and sometimes delay the license renewal with penalties. This article discusses how failing to comply with requirements for UBOs in the UAE can affect businesses.
Jitendra Chartered Accountants, JCA, helps you comply with all hard and fast business regulations in UAE including UBO regulations.
Why Do UBO Regulations Matter?
The UAE government introduced UBO regulations to ensure transparency in ownership structures and to combat unlawful activities. These rules apply to mainland companies and non-financial free zone companies (Financial free zones, DIFC and ADGM have separate UBO regulations). Businesses must identify and disclose individuals who own or control at least 25% of the entity or exercise significant control over its operations.
UBO data must be accurately recorded, regularly updated, and submitted to the relevant licensing authorities. Failure to do so can result in serious repercussions.
Immediate Consequences for Noncompliance with UBO Regulations in UAE
Businesses that do not comply with UBO are first issued a warning letter. When they do not correct the violation, the consequences worsen. Here are some of the consequences:
- Fines: The amount of fines ranges between AED 1,000 to AED 1,000,000 as a consequence of the violation and repetition.
- License Suspension: Suspensions of the trade license issued to the company can range from one to twelve months due to repeated offenses.
- Operational Restrictions: The powers of board members, directors, or owners may be limited if they are found responsible for violations.
Specific Violations and Penalties for Noncompliance with UBO Regulations in UAE
Failure to Create a Beneficial Owner Register
- First Offense: Written warning.
- Second Offense: AED 50,000 fine and a warning to rectify within 30 days.
- Third Offense: AED 100,000 fine and trade license suspension for 12 months.
Incomplete or Inaccurate Data
- First Offense: Written warning.
- Second Offense: AED 20,000 fine with a 15-day correction period.
- Third Offense: AED 40,000 fine and six-month license suspension.
Failure to Submit UBO Details to Authorities
- First Offense: Written warning.
- Second Offense: AED 15,000 fine and a 15-day correction period.
- Third Offense: AED 30,000 fine and three-month license suspension.
Failure to Maintain Shareholder Records
- First Offense: Written warning.
- Second Offense: AED 30,000 fine with a 15-day correction period.
- Third Offense: AED 60,000 fine and six-month license suspension.
Wider Effects of Non-Compliance with UBO Regulations in UAE
The penalties for failing to comply with UBO regulations are not limited to fines and license suspensions. Other penalties that may be incurred include:
- Reputational Damage: Non-compliance can damage the reputation of a business and affect relationships with clients and investors.
- Operational Disruption: Suspension or restrictions on directors can freeze the operations of a business and cause losses.
- Legal Liability: Prolonged non-compliance can lead to further investigations and additional penalties.
How to ensure compliance with UBO Regulations in UAE?
Businesses in the UAE need to be proactive in ensuring that UBO requirements are met by doing the following:
- Maintain Accurate Records: Keep the UBO data updated and accurate at all times.
- Submission: Provide all information needed to the licensing authorities as early as possible.
- Maintain Accurate Records: Regularly update UBO data and ensure its accuracy.
- Timely Submission: Submit all required information to licensing authorities promptly.
- Engage Experts: Take assistance from professional UBO service providers like JCA to avoid any sort of complexity on the way.
Why Choose Jitendra Chartered Accountants in UAE?
It is not a choice, but rather a legal obligation, to abide by the regulations regarding UBO in the UAE. JCA helps you in ensuring transparency and implementing what’s needed for complying with UBO. Our professionals at JCA have top notch expertise in dealing with UBO matters and can help you comply with all UBO regulations effectively.