How Can Corporate Service Providers Ensure AML / CFT Compliance in the UAE?

Professional entities providing corporate services are an inevitable force in an investor paradise like the UAE. Foreign investors who are new to the country seek the assistance of company service providers to establish a company or for other services such as opening a business bank account. However, corporate service providers are considered highly vulnerable to the risk of money laundering and should comply with the requirements set out in the AML / CFT regulations.

Corporate service providers who help people in the establishment and administration of legal entities are subject to misuse, exploitation and targeted recruitment of criminals engaged in money laundering. Given this, such professionals and businesses are categorised under Designated Non-financial Businesses and Professions (DNFBP). Professionals who provide company services need to implement AML / CFT measures to minimise the risk of money laundering. They can avail the assistance of AML consultants in Dubai for ensuring compliance.

This blog serves as a guide for company service providers, helping them to comply with AML / CFT. Read ahead.

Corporate Service Providers Under AML / CFT Purview

Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree-Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations (the “AML-CFT Decision”) is the governing legislation for corporate service providers. The law subjects corporate service providers to specific AML/CFT obligations when they are engaged in certain covered activities on behalf of their customers.

Corporate service providers are required to comply with AML / CFT obligations when they execute a transaction on behalf of their customers in respect to the following activities:

  1. Acting as an agent for the establishment of companies.
  2. Acting as or arranging for another person to act as director or secretary of a company/act as a partner in a company.
  3. Providing registered office, address, residence, mailing address or administrative address for companies.
  4. Act as a trustee for a trust or arranging another person to act as a trustee.
  5. Act as a nominee shareholder in favour of another person.

Checklist for Corporate Service Providers to Check Money Laundering Risk

Corporate service providers should carefully consider factors such as customer risk, geographic risk, channel risk, and product and services risk while dealing with their clients. In addition to these, they should consider the following factors:

  1. Check whether the customer is an individual or a legal person; if a legal person check whether it’s part of a larger or complex group.
  2. Check whether the customer is UAE national or a foreign national; if foreign national check if the customer is from a High-Risk country.
  3. Be vigilant about the channel by which the customer is introduced – (referrals, walk-in customers, through the internet etc.).
  4. Examine the type, size, complexity, transparency, and geographic origins of financial arrangements.
  5. Check for any unique or unusual financial arrangement or structure associated with customer’s transactions.

Customer Due Diligence Measures for Corporate Service Providers

When a customer approaches corporate service providers, adequate screening and background checks must be conducted. The service providers should be alert to due diligence factors such as,

  1. Compatibility of customer’s profile.
  2. The utilisation of complex non-transparent legal structures such as trusts, foundations and offshore companies.
  3. Check if the customer has links with any Politically Exposed Persons (PEP).
  4. Bribe or coerce to influence the transparency with which service providers carry out duties.
  5. Prior association between the parties to a transaction.

How can Corporate Service Providers Ensure AML / CFT Compliance

Since corporate service providers are vulnerable to the risk stemming from covered activities, ensuring AML / CFT compliance is critical for them. Failing to implement AML / CFT compliance measures will result in fines up to AED 1 million. The following are the compliance measures the corporate service providers must implement immediately.

  1. Identify money laundering risk.
  2. Develop policies and procedures to mitigate money laundering risk; update and document such policies.
  3. Identify and report suspicious transactions.
  4. Implement an adequate AML / CFT governance framework including appointing a compliance officer and training staff.
  5. Maintain adequate records for all the above.
  6. Ensure compliance with directives of the Ministry of Economy and other competent authorities.

How can Jitendra Chartered Accountants Help?

Corporate service providers are misused or exploited when criminals or criminal networks approach them for company formation or administration services. The criminals use complex legal structures like offshore companies, trusts, foundations and investment funds as a channel to launder money and finance terrorist organisations. Given such heightened risks, ensuring AML / CFT compliance with the help of AML consultants in Dubai becomes imperative for corporate service providers.

At present, Jitendra Chartered Accountants (JCA) is one of the best consultants that offer AML compliance services in Dubai, UAE. JCA can help the corporate service providers by providing services such as assessment of tools and controls design, review of current AML Policy review, AML/ KYC/ CFT Plan and framework, AML audit & reporting, due diligence Frameworks and process implementations and corporate training.