Targeted Financial Sanctions for FIs & DNFBPs: Reporting Obligations & Penalties

Entities in the UAE, including natural and legal persons, are required to comply with the Targeted Financial Sanctions (TFS) requirements as per Cabinet Resolution No. 74 of 2020. TFS obligations are also applicable to financial institutions (FIs) as well as Designated Non-financial Businesses and Professions (DNFBPs). Introduced as part of the Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT), TFS in the UAE presents a new set of compliance requirements for entities. Businesses can consult with AML consultants in Dubai to meet their TFS obligations.

Failing to meet TFS compliance requirements in the UAE will attract severe consequences including penalties. FIs and DNFBPs must see the advice of AML advisers in Dubai to keep away from such penalties. Meanwhile, you can go through this article to understand the key reporting obligations and penalties associated with TFS in the UAE. Read ahead.

What are Targeted Financial Sanctions?

TFS encompasses sanctions (travel bans, arms embargos, Sectorial sanctions i.e Gold- Kongo, Charcol-Somalia) and WMD related goods and materials ) imposed on specific individuals or groups to combat the financing of terrorist activities. TFS can be executed by imposing actions including asset freezing and other financial prohibitions to curb funds or other assets from being made available, directly or indirectly, for the benefit of listed individuals, groups and entities or organisations that are sanctioned.

FIs and DNFBPs operating in the UAE must meet their TFS obligations as specified in the Cabinet Resolution No. 74 of 2020 and the Guideline issued by the Central Bank of UAE. Such entities must apply policies, procedures and controls to implement TFS to those sanctioned and referred in the UN List and the local UAE Terrorism List. FIs and DNFBPs can seek the advice of AML consultants in Dubai to understand their TFS reporting obligations.

Reporting obligations of the financial institutions and DNFBPs

As per the CBUAE guideline, any person or entity is required to report the Supervisory Authorities and the Executive Office about any freezing measure or attempted transactions. This must be reported within two business days from taking such measures. Meanwhile, the Supervisory Authorities must report to the Executive Office within the following three business days.

FIs and DNFBPs are required to provide all information regarding the frozen funds, including their status, nature, value and the measures taken and any other related information. In addition to these general TFS obligations, FIs and DNFBPs must also meet the following requirements:

1. Identifying actions/funds that have been initiated as per the relevant United Nations Security Council (UNSCR) or as per the Cabinet Resolution No. 74 of 2020

2. Detecting any match with listed individual, group or entities, details of the match data, and actions

3. Report to Supervisory Authority if the entity finds one of its previous customers or occasional customers listed on Sanctions List

4. Report to Supervisory Authority if an FI or DNFBP identifies that one of its customers (previous or current) had a business relationship with or facilitated a transaction (directly or indirectly )with listed individuals or entities

5. Report when the entity under TFS obligation is unable to dismiss any false positive though available or accessible information after initiating the fund freezing measure

6. Report to Supervisory Authority all the information on the in respect of which Freezing has been cancelled. The information must include their status, nature, value and the measures that were taken

Consequences of Not Complying with TFS Reporting Obligations

Any natural or legal person will be subjected to imprisonment or a fine in the range of AED 50,000 and AED 5,000,000. Apart from that, FIs and DNFBPs will be subjected to a set of penalties and consequences if they fail to comply with their TFS obligations in the UAE. AML consultants in Dubai can help you comply with TFS and avoid penalties. The following are the major consequences of TFS non-compliance in the UAE:

1. Issuance of a warning letter

2. Administrative penalties in the range of AED 50,000 and AED 5,000,000 for each violation

3. Ban the violator from working in the sector in which the violation was reported. The period of the ban will be determined by the supervisory authority

4. Restricting the powers of the Board members, supervisory or executive management members, managers or owners who are responsible for the violation including the appointment of a temporary inspector

5. Suspend Managers, board members and supervisory and executive management members who are proven to be responsible for the violation. The period of suspension will be  determined by the Supervisory Authority

6. Suspension of activity or profession for a period as determined by the supervisory authority

7. Cancellation of license

How Can Jitendra Chartered Accountants Help?

FIs and DNFBPs are required to comply with TFS reporting obligations under the Cabinet Resolution No. 74 of 2020. Severe consequences including administrative penalties and imprisonment await those who fail to comply with TFS obligations in the UAE. However, AML consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help you avoid the penalties by ensuring compliance.

JCA has a team of qualified professionals who are well-versed in AML-CFT laws and regulations. JCA can advise the organisations on how to comply with TFS requirements and help with sanction screening. Consult with JCA today to avoid penalties and reputation damage. Contact our consultants today to avail yourself of the best AML compliance services in Dubai.