TFS in the UAE: Top Entities Vulnerable to Terrorist Financing Risks

UAE entities are required to comply with the Targeted Financial Sanctions (TFS) requirements as stipulated by the Cabinet Resolution No. 74 of 2020. Both institutions (FIs), as well as Designated Non-financial Businesses and Professions (DNFBPs), are required to meet the TFS requirements in the UAE. Introduced as part of the Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT), TFS in the UAE is especially applicable to entities that face the risk of terrorism financing. Businesses can consult with TFS consultants in Dubai to understand how to comply with TFS.

Failing to meet TFS compliance requirements in the UAE will attract severe consequences including penalties. FIs and DNFBPs must see the advice of TFS consultants in Dubai to avoid such penalties. Meanwhile, you can go through this article to understand the key entities that are vulnerable to the risk of terrorist financing in the UAE. Read ahead.

Banking Services 

The formal banking system is one of the top entities vulnerable to the risk of terrorist financing. Criminals or criminal organisations can misuse the banking services to circumvent the sanctions related to terrorist financing. Financial product services can be misused to finance terrorists or terrorist organisations because it’s tougher to distinguish between legitimate and illegitimate low-cost transactions and detect indirect transactions. Most transaction monitoring programs are unable to identify terrorism financing.

Money Remitters 

The money remittance sector is another critical segment that can be misused to move illegitimate funds, making it vulnerable to terrorist financing. Remittance service providers are the prime target for cross-border funds transfer activity in countries where access to banking services is limited. Remittance service providers experience a greater risk of Terrorist Financing in the jurisdictions where they remain unregulated, not subject to appropriate AML/CFT supervision, or where they operate without a license (thus working without any AML/CFT controls).

Exchange Houses 

Exchange houses have been the target of Terrorist Financing for many years and the UAE has fined many exchange houses recently for not adhering to the AML-CFT rules. The UAE authorities have recently arrested an individual for transferring money to a jihadist group in the Philippines with allegiance to the ISIL terrorist organisation. The suspect got money from persons from different places in the UAE using Exchange House. Instead of sending the money in a single payment, the culprits transferred the fund through multiple payments of small amounts to avoid the suspicion of UAE authorities. This means exchange houses need to build a strong TFS control system with the help of TFS consultants in the UAE.

Hawala and Other Similar Service Providers  

Hawala and Other Similar Service Providers (HOSSP) are under a greater risk of terrorist financing vulnerability owing to a wide range of reasons. Some of the reasons are stated below:

  • No registration and monitoring
  • Settlement across multiple jurisdictions through value or cash outside of the banking system
  • Use of unregulated financial institutions,
  • Use of net settlement and the commingling of licit and illicit proceeds

Online Payment Facilities  

Online payment facilities offered through various dedicated websites facilitate the smooth transfer of funds between parties electronically. Fund transfers in this mode often happen through electronic wire transfer, credit card, or alternate online payment facilities. Such online payment facilities are vulnerable to identity theft, credit card theft, wire fraud, stock fraud, intellectual property crimes, and auction fraud. The rise of Fintech in the UAE in recent years has to be seen in this background. Fintech firms should consult with TFS consultants in Dubai to minimise the threat of terrorist financing.

The Misuse of Non-Profit Organizations  

Non-Profit Organisations can be misused for terrorist financing. Individuals and organisations aiming to raise funds for terrorist outfits or to support extremist activities may establish Non-Profit Organizations (NPO). They form NPOs to disguise their activities by claiming to be engaged in legitimate charitable or humanitarian activities.

The Misuse of Legal Entities  

Terrorists and terrorist organisations often misuse legal entities to circumvent sanctions taking advantage of the peculiar characteristics of specific legal entities. They use a legal entity as a shell company or complex legal structures to hide the identity of the beneficial owner. Another common method is to misuse the economic activity developed by the legal entity. Trade and commercial activities are the most vulnerable activities used by terrorists to circumvent the sanctions.

How Can Jitendra Chartered Accountants Help? 

Entities in the UAE that face the risk of terrorism financing are required to comply with TFS reporting obligations under the Cabinet Resolution No. 74 of 2020. Failing to comply with the TFC obligations in the UAE will lead to consequences such as administrative penalties and imprisonment. However, TFS consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help you avoid the penalties by ensuring compliance.  JCA’s team of highly qualified professionals are well-versed in AML-CFT laws and regulations. Our team can advise the organisations on how to comply with TFS requirements and help with sanction screening. Consult with our TFS consultants today to avail yourself of the best TFS compliance services in Dubai.