Significance of Customer Identification in AML Compliance

The UAE’s robust laws for Anti-Money Laundering and Combating Financing of Terrorism (AML-CFT) have yielded promising results in terms of countering money-laundering crimes. Virtual Assets Service Providers (VASPS), Financial Institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs) are required to comply with the UAE AML-CFT Laws to avoid hefty penalties.

Customer identification is a critical component of the AML-CFT compliance process and businesses need to exert more focus towards it for the early detection of suspicious transactions. AML consultants in Dubai can help you comply with AML-CFT laws. Read ahead to know more about the significance of customer identification in AML compliance:

What Is the Customer Identification Process?

The process of customer identification in AML involves the verification of a customer’s identity before starting a business relationship with them. The customer identification process helps you to protect your business against financial crimes by ensuring only legitimate customers are carrying out transactions with your company.

Customer identification generally includes gathering information such as name, address, date of birth, Id number, and other relevant data points. Companies need to verify this information through reliable sources before accepting their money or providing them with goods or services. AML advisers in Dubai can advise you further on the customer identification process.

Why Is the Customer Identification Process Important?

The customer identification process is an indispensable part of the AML compliance process as it helps businesses determine whether the customer they are dealing with is a legitimate person or a money launderer. By verifying the customer’s identity ahead of commencing the business relationship, companies can protect themselves from financial crimes and ensure that they remain compliant with UAE AML regulations. Moreover, it helps to build trust between businesses and their customers.

Components of the Customer Identification Program

The UAE has put in place a strong regime to counter the crime of money laundering. The country has adopted a progressive approach towards ensuring AML compliance in the UAE. The UAE AML regulations and the guidelines issued by the Supervisory Authorities provide effective customer identification procedures that DNFBPs, VASPs and Financial Institutions must follow to identify suspicious transactions.

The Financial Action Task Force (FATF) provided recommendations around the Customer Identification Program – international guidelines to combat money laundering and terrorist financing. Some of the most important components of the Customer Identification process are given below:

  • Obtaining identifying information from each customer, such as name, address, date of birth, and government-issued identification number;
  • Verifying the customer’s identity using reliable, independent source documents;
  • Maintaining records of the information used to verify each customer’s identity; and
  • Making reports of suspicious activities or transactions to the Supervisory Authority

Elements of Customer Identification Program

Apart from the general customer identification requirements, businesses must also undertake specific actions to verify the identity of the customer. This includes collecting copies of documents for proving the identities such as a driver’s license or passport. Companies must also obtain additional pieces of information such as residential address or date of birth in order to verify that they are dealing with the correct person. Finally, you need to keep records on file in case they need to refer back to them later. Avail of AML consulting services in Dubai for more clarity on customer identification measures.

Who Does the Customer Identification Program Affect?    

The customer identification process affects all the customers who open an account with banks, brokerages, crypto exchanges, and businesses that accept deposits or handle currency transactions such as the DNFBPS. Such businesses need to identify their customers not only for ensuring AML compliance in the UAE but to safeguard their companies from fraud and money laundering activities. By implementing a comprehensive customer identification program, businesses can make sure that they are taking all necessary steps to ensure compliance with AML regulations.

How does the customer identification process work?

Typically, the process starts with collecting all the information and relevant documents from the customer. Then, in the first step, you need to verify whether all the gathered information matches up. You can match the information with the data in public records or other databases commonly used to confirm identities. If any discrepancy is detected, further verification steps must be taken before proceeding with the customer onboarding process.

Another critical step in the identification process is to check for any potential red flags or signs that could indicate money laundering activity. The red flags may include attempts at identity theft or an attempt to commit financial fraud against the business or its customers. If any red flag is identified at this stage, you may inform Supervisory Authorities or any relevant law enforcement authority.

Hire the Best AML Consulting Services in Dubai, UAE

Even though the UAE government has released AML Laws and guidelines, many businesses incur hefty penalties due to the lack of awareness of the compliance requirements. However, it is advisable to hire AML advisers in Dubai such as Jitendra Chartered Accountants (JCA) to ensure AML compliance and defend your business against money launderers and financiers of terrorism. JCA provides robust AML consulting services in Dubai that will enable you to ensure AML-CFT compliance without any hassle. We provide services such as implementing AML Policy and Procedures, assessment of tools and controls design, review of current AML Policy, planning of AML-CFT framework, AML audit and reporting, AML training for the staff, Assistance with goAML registration and AML penalty appeal services.