Customer Due Diligence: A Critical Component of AML Compliance in UAE

Financial Institutions and DNFBPs in the UAE are required to verify the identity of their customers before establishing a business relationship with them. As part of ensuring AML compliance in the UAE, such entities must verify customer identity while opening an account, or before executing a transaction for a customer with whom a business relationship doesn’t exist. We call the process Customer Due Diligence ( CDD), which is a mandatory requirement as per Federal Decree by Law No (20) of 2018 on Anti-Money Laundering and Combatting the Financing of Terrorism (AML-CFT).

The best AML consultants in Dubai can help you to adopt the best practices of CDD. Meanwhile, read ahead to know more about verifying the customer’s identity to fight money laundering and ensure AML compliance in the UAE.

Circumstances where Customer Identification is Mandatory 

As per Cabinet Decision No (10) of 2019, Financial Institutions and DNFBPs are required to undertake CDD measures in certain pre-defined circumstances. They are:

  • When creating a business relationship with the customer
  • Conducting occasional transactions in favour of a customer for amounts equalling or exceeding AED 55,000, irrespective of whether it’s a single transaction or multiple transactions that seem to be connected
  • Conducting occasional transactions through Wire Transfers for amounts equalling or exceeding AED 3,500
  • Circumstances where suspicion of a crime arise
  • Circumstances where doubts about the veracity or adequacy of previously obtained Customer’s identification data arise

Key Components of Customer Identification Program 

As per the UAE AML Law, financial institutions and DNFBPs must conduct customer identification measures such as the following:

  • Audit transactions performed during the entire course of the business relationship to ensure that the transactions are consistent with the information the entities possess about customers, their type of activity and the risks they pose, including the source of funds
  • DNFBPs and financial institutions need to make sure that the documents, data or information obtained through the CDD measures are up-to-date and appropriate. They should ensure it by reviewing the records, especially those of high-risk customer categories

Process of Verifying Customer’s Identity 

Financial Institutions and DNFBPs are required to identify a customer’s identity, whether the Customer is permanent or walk-in, and whether the Customer is a natural or legal person or legal arrangement, and verify the identity of the customer as well the Beneficial Owner. This process should be carried out with the help of documents, data or any other identifying information from a reliable and independent source as follows:

1. For Natural Persons:

  • Name as per the ID card or travel document
  • Nationality
  • Address
  • Place of birth
  • Name and address of employer
  • Copy of the original and valid ID card or travel papers

2. For Legal Persons:

  • Name, legal form and Memorandum of Association
  • Office address of the headquarters or address of the principal place of business (in case of a foreign legal person, mention name and address of its legal representative in the State and submit the necessary documentary evidence)
  • Articles of Association or similar documents approved by the concerned authority in the state
  • Names of persons holding senior management positions in the legal person

Steps in Customer Identification 

The CDD measures implemented by Financial Institutions and DNFBPs must include the following steps:

Verify Customer Identity 

It involves identifying the customer and customer identity using various data

Identify Ultimate Beneficial Owner 

It involves the identification of the Ultimate Beneficial Owner (UBO) and verifying the identity of the UBO. It provides a clear answer to the DNFBPs and financial institutions about the ownership of the legal person or legal arrangement. It also helps them understand the extent of financial control exercised by the customer.

Purpose of Business 

It involves getting information about and understanding the purpose of the business relationship.

Ongoing monitoring 

Ongoing monitoring and due diligence must be carried out on the business relationship. Proper examining of transactions must also be conducted during the business relationship.

How can Jitendra Chartered Accountants Help you? 

All the processes mentioned in this article are mandatory to ensure AML compliance in the UAE and it helps you to identify the customer. As per the UAE AML law, banks, DNFBPs, and other financial institutions are required to meet the requirements detailed here to enhance their AML framework. AML consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help you to endure compliance with the law.  JCA can help you to follow the norms of the CDD Program and keep the process in sync with the AML laws and regulations as imposed by the UAE Government and the Financial Action Task Force (FATF).