How to Conduct Sanction Screening to Ensure AML Compliance in the UAE?

Sanctions are a critical aspect of the International fight against financial crimes such as money laundering and financing of terrorism. Governments across the world impose sanctions to restrict trade with foreign targets, which are involved in or suspected to be involved in money laundering, terrorism financing or other financial crimes. Sanction screening is important for financial institutions and Designated none-Financial Businesses & Professions (DNFBPs) during the customer onboarding process. They can get help from AML consultants in Dubai to implement a robust screening process.

This article enlightens you about the different types of sanctions and offers you insights on how to do sanctions screening during the customer onboarding process. It would also help you ensure compliance with Anti-money Laundering & Combatting Financing of Terrorism (AML-CFT) laws in the UAE. Read ahead.

The Various Types of Sanctions 

Financial sanctions may be imposed on countries, individuals or even entities. Sanctions can be levelled against parties with no direct involvement but who act on behalf of others. The following are some of the major types of sanctions that financial institutions and DNFBPs such as auditors, real estate dealers, precious metal and precious stones dealers and trust & corporate service providers need to know.

1. Economic Sanctions 

Economic sanctions are commercial or financial penalties imposed by a country or group of countries against a target country or an individual. Economic sanctions need not strictly arise from economic reasons. It could be due to political, military or social reasons. Countries generally impose economic sanctions for undermining a target country, punish a target country or change the behaviour of a target entity. Usually, an economic sanction comes in the form of a withdrawal of customary trade or financial relations with a target country.

2. Military Sanctions 

Not all countries produce their military equipment. Countries may partially or fully depend on other countries for buying defence equipment and weapons. Such countries may be subjected to military sanctions by other countries that impose a ban on the sale of military equipment. Military sanctions are often used by the powerful states to warn weaker states.

3. Diplomatic Sanctions 

Diplomatic sanctions constitute the political measures taken as a way to express disagreement or dissatisfaction between two or more governments. It mostly includes the cancellation of senior government visits and the withdrawal of diplomatic persons from the target country.

Sanction Screening during Customer Onboarding 

To help businesses to determine criminals, organisations including the Financial Action Task Force (FATF) and the UN issue sanctions lists. Companies should incorporate the sanctions list into the internal systems and controls to identify suspicious customers.

Sanction lists are considered an effective way to minimise financial crimes such as money laundering and terrorist financing. This objective is achieved by blacklisting countries, businesses and individuals who are suspected of committing financial crimes. Companies that are under AML-CFT obligations need to screen their customers against the sanctions list to lower the risk of establishing business relationships with sanctioned entities. The companies can check sanctions lists compiled by global organisations such as the Office of Foreign Assets Control (OFAC), UN, the EU, Interpol etc.

Why it is important to screen against PEPs and sanctions lists? 

Transacting with customers who appear on sanctions lists puts organizations at greater risk. Non-compliance with watch list screening may expose financial institutions and DNFBPs to steep regulatory fines and reputational damage. The companies can implement the following best practices to screen customers to determine if they are on sanction lists:

  1. Integrate with high quality and wide range of trusted data sources
  2. Perform a risk-based approach
  3. Carry out ongoing monitoring
  4. Get help from AML compliance experts

How can the Best AML consultants in Dubai Help You? 

Financial institutions and DNFBPs are required to ensure AML compliance in the UAE to avoid hefty penalties as well as shielding themselves from the comes such as money laundering & financing of terrorism. Identifying the criminals during customer onboarding is the most important part of ensuring AML compliance. Unfortunately, many companies are still lacking in building a strong AML-CFT compliance framework. However, AML consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help the businesses wedge this gap.

JCA can assist the organisations to develop an effective AML-CFT programme or evaluate the deficiencies of already implemented AML policies. JCA provides AML consulting services in Dubai with a focus on the customer onboarding process, and customer risk profiling. Our AML consultants in the UAE can train the employees of companies to prepare them to identify and report suspicious transactions. We can also provide appeal services in case the companies incur penalties due to AML-CFT noncompliance