What Are the Key Elements of a Risk-Based AML-CFT Approach?

Governments across the world, including the UAE government, have passed strong laws to counter the crime of Money Laundering and Financing of Terrorism (ML/FT). However, organisations need to adopt a risk-based approach to combat ML/FT crimes and to ensure compliance with the UAE Law on Anti-Money Laundering and Combatting the Financing of Terrorism (AML-CFT). A risk-based AML-CFT approach will help the companies minimise the amount of dirty money that the criminals aim to launder.

AML consultants in Dubai can help companies incorporate a risk-based approach into their compliance strategy. Read ahead to know further:

What is a Risk-Based AML-CFT Approach?

In 2012, the Financial Action Task Force (FATF) published a series of recommendations for nations to counter money laundering within their borders. The FATF recommendations were based on the idea of risk-based approaches to AML-CFT. A risk-based approach requires the relevant businesses to carefully assess any potential risk associated with illicit activities such as ML/FT they may face in order to deploy relevant resources before taking control measures as a response to such risks.

As part of a risk-based approach, you may require to Know your Customer (KYC) and find out about the prospective and actual clients’ business operations, industries, and characteristics. Carrying out robust KYC procedures will enable you to assess how likely they would be to engage in money laundering and other illegal activities. By knowing the customer better, you can react to potential problems much more quickly and effectively. Companies offering AML consulting services in Dubai can assist you with more information.

Why is a Risk-Based Approach to AML Important?

Organisations must adopt a risk-based approach towards AML as it allows them to take a more proactive stance towards illicit activities such as ML-FT. A risk-based AML approach allows you to implement stop gaps rather than waiting till the illegal transactions and transfers have already taken place. A risk-based AML approach helps you make sure that no illegal transaction has taken place or minimizes the amount of money that has already been transacted. AML advisers in Dubai can advise you further on the importance of adopting a risk-based AML-CFT approach.

Key Elements of a Risk-Based Approach in AML Compliance

You need to ensure that your risk-based AML approach includes the following elements:

Anti-Money Laundering Transaction Monitoring

Businesses need to appropriately apply the ML risk rating of the customers. It is essential to monitor and restrict transactions and is essential within the scope of the application of money-laundering risk-rating techniques. Businesses and relevant organisations need to combine their risk characterisation to increase the efficiency of transaction monitoring along with restriction measures within their system.

Know Your Customer Guidelines

KYC guidelines require a company to verify a customer’s identity and business claims. Information you gather may include basic identification information such as name, birth date, address and identification number. It also includes more detailed financial information such as occupation, location, the expected pattern of transactions, and more. Having all of this information will help the financial institution paint a more detailed picture of any risk associated with the customer.

AML Compliance Officer

An AML compliance officer plays a key role in identifying threats related to ML/FT and has the authority to report cases to the relevant authorities. Appointing an AML compliance officer is a mandatory requirement in the UAE as per Article 21 of Cabinet Decision No 10 of 2019. Both FIs and Designated Non-Finance Businesses and Professions (DNFBPs) such as Dealers of Precious Metals and Stones, Real Estate Brokers, Trust and Corporate Service Providers and auditors are required to appoint an AML compliance officer in the UAE. The responsibilities of an AML compliance Officer include:

  • Detect transactions related to any crime
  • Review & scrutiny of records, obtain data related to Suspicious Transactions and take decisions such as notifying the Financial Intelligence Units (FIU)
  • 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
  • Prepare, execute and document ongoing AML-CFT training programs
  • Collaborate with FIU if necessary by giving them all the requested data

Adverse Media Screening

Check if there is any negative news about an individual customer or a business enterprise. Such adverse media reporting can broadly impact the decision to work together. Keeping an eye on such news is the best way to protect your organization from any potential risks that might come into the picture upon dealing with clients with high-risk profiles.

Hire the Best AML Consultants in Dubai

Adopting a risk-based approach is essential for an organisation to ensure AML compliance in the UAE. AML consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help businesses implement a risk-based AML-CFT strategy. JCA is one of the top providers of AML consulting services in Dubai with a dedicated in-house compliance team. Our highly qualified team of AML consultants in Dubai is dedicated to ensuring you comply with the AML Law without incurring any penalty.