How to Establish an Effective AML-CFT Framework in your UAE Organisation?

Building an effective Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT) framework is imperative for identifying and preventing the risks such as money laundering and terrorist financing. Apart from that building, an AML-CFT program is also a mandatory compliance requirement. In the UAE, failing to implement robust AML-CFT frameworks will attract hefty penalties for financial institutions and Designated Non-Financial Businesses & Professions (DNFBPs) such as accountants & auditors, lawyers, real estate agents, dealers of precious metals & precious stones and trust & corporate service providers(TCSPs).

Many UAE organisations ( you can mention 3083 numbers yesterday news in KT/GN)  that are under the AML-CFT obligation have been subjected to hefty penalties in recent times due to non-compliance. Building an effective AML-CFT framework would have saved such companies from penalties and reputation damage. An effective AML-CFT framework can be a combination of every factor that a company does to meet the compliance requirements such as built-in internal operations, user-processing policies, accounts monitoring and detection and reporting of money laundering incidents.

However, many companies still lack adequate knowledge about how to establish an effective AML-CFT program within their organisation. This article is meant to help such companies by giving them guidance on how to build an effective AML-CFT framework within their organisation. Read ahead.

1. Having an Expert AML Compliance Professional  

Appointing an AML compliance officer is a mandatory requirement in the UAE as per Article 21 of the Cabinet Decision No 10 of 2019. Both financial institutions and DNFBPs are required to appoint a compliance officer or Money Laundering Reporting Officer (MLRO). Failing to appoint a compliance officer will attract hefty penalties.

An AML compliance officer is responsible for overseeing everything from the development of the AML-CFT program to its implementation. The officer is responsible for internal audits management, compliance analysis, and the development of appropriate guidelines, employee training programs, etc. Specifically, the MLRO handles the following duties:

  1. Detect transactions relate to any crime
  2. Review & scrutiny of records, obtain data related to Suspicious Transactions and take decisions such as notifying the Financial Intelligence Units (FIU)
  3. Assess whether internal policies & procedures of the organisation comply with UAE AML laws, propose what is needed to update or develop such procedures, prepare and send MLRO report to senior management and send a copy to Supervisory Authority
  4. Prepare, execute and document ongoing AML-CFT training programs
  5. Collaborate with FIU if necessary by giving them all the requested data

2. Training the Team on Anti-Money Laundering  

The staff and the in-house compliance team must understand their role and obligation in detecting suspicious transactions, performing KYC procedures, identifying high-risk customers etc. They should be imparted regular AML-CFT training to achieve such goals. Anti-money laundering is a dynamic area that constantly undergoes changes, updates in regulations and legislation etc. AML training keeps the employees updated with such changes along with the new methodologies used by criminals to launder money and finance terrorist outfits.

Training is essential to improve the overall skill set of the employees, which will help the management to ensure that AML/CFT measures are implemented in the best possible way. The training programme should make the entire staff aware of the AML-CFT Framework and the roles of the consultants, compliance officers, officers, senior management, and the board of directors. Also, training must be given to the staff on how to respond while encountering a suspicious activity. Companies can hire AML compliance advisers in Dubai to impart training to their staff.

3. Adopting a Risk Assessment & Risk-based Approach  

A risk-based approach is the bedrock of a highly effective AML-CFT framework. Businesses need to determine the risk level of their clients through accurate risk assessments during customer onboarding. A risk-based approach is essential for the following:

Building policies and adequate controls to reduce the risk and even the potential of money laundering

Understanding the overall levels of risks associated with business transactions and relationships

Identifying various sources of risks and evaluating all the potential risk reduction controls

Effectively running the successful AML compliance programs

Making accurate risk-based decisions about the employees as well as customers

4. Implementing Advanced AML Policies 

Implementing highly advanced AML-CFT policies is necessary to protect a company from the risk of money laundering and also to ensure compliance. Companies under obligation should ensure that their AML policies are easily verifiable by regulators and reflect the organisation’s risk appetite. Such an advanced AML policy should encompass customer risk ranking during onboarding and the Customer Due Diligence Process (CDD).

5. Strengthening Know Your Customer Processes 

Know Your Customer (KYC) process is the most important constituent of an effective AML-CFT policy as it gathers customer information accurately and completely. The KYC process is essential to understand who the customer is. After identifying who the customers are, the companies can determine their risk levels and apply Customer Due Diligence (CDD) procedures.

Determining the customer risk level with CDD makes the company’s AML control process more effective and faster. During the Customer Due Diligence process, the customer must be screened in sanction and Politically Exposed Persons (PEP) lists. If PEPs are found in these scans, then Enhanced Due Diligence (EDD) procedures should also be applied. Because customers like PEP are considered high risk by regulators and CDD procedures may not be sufficient for these customers, EDD procedures may be applied. As a result, the risks and threats of customer account opening can be detected, and AML controls can be made more effective.

6. Carrying out Ongoing monitoring  

Information and risks of customers or institutions may change. Someone who does not have PEP may become PEP by taking a new task or vice versa. Thus, it is necessary to be familiar with customer information that may change over time and change the customer risk level, and this process should be under control. The risk-based approach, which is primarily applied in businesses, addresses the current risk of the customer. Therefore, customer information should be updated at certain time intervals, and its accuracy should be confirmed not to lose the function of the risk-based approach.

7. Detecting and Reporting Suspicious Transactions 

The most fundamental objective of AML checks is to detect suspicious transactions and financial crimes. Suspicious transactions made in businesses must be detected, and the necessary persons in the company must check these transactions. Financial crimes should be detected, and necessary precautions should be taken to bring your Anti-Money Laundering processes to their true purpose. Although it is difficult to check suspicious transactions instantly, suspicious transactions can be detected with Transaction Monitoring solutions during the transaction. These transactions are immediately stopped and passed to the control of AML experts.

Hire the Best Anti-Money Laundering Compliance Advisers in Dubai 

Developing an effective AML-CFT is essential for financial institutions and DNFBPs to detect and prevent the risk of money laundering. Moreover, it’s a compliance requirement in the UAE. Achieving complete AML compliance in the UAE is a tough task for the companies. However, AML compliance advisers in Dubai such as Jitendra Chartered Accountants (JCA) can make compliance easier for companies under AML obligations.

JCA can help the companies develop an effective AML-CFT framework and assess its deficiencies of already implemented AML policies. JCA provides consulting services on customer onboarding and KYC process, and risk profiling of customers. JCA also provides AML training for companies on customer due diligence procedures and helps them remain compliant with UAE AML laws and regulations. In case, any penalty is incurred JCA can save the companies by providing AML appeal services for penalties.