Three Reasons AML Compliance Department is Vital for Big Corporates

Due to recently increased Anti-Money laundering compliances in the UAE, big corporate groups and MNCs are advised to have a compliance department or hire an ACAMS-qualified professional employee in the legal team before onboarding customers from high-risk countries, starting a partnership with a partner based in the high-risk country or his associate is Politically Exposed Persons(PEP) and accepting payment from the third parties.

Large companies and MNCs often ignore to factor in the risk of money laundering and financing of terrorism (ML/CT) while doing business internationally with multiple global entities. Most of them have an in-house legal team but they fail to consider the ML/CT risks while drafting the legal agreements. This will result in serious business losses such as bank accounts getting blocked or remittances getting blocked or non-renewal of the trade license or frozen of the funds if the Partner or the customer is linked with the terrorist or partner’s associate is a PEP and who is not providing the documents and information asked by the banks to conduct EDD (Enhanced Due Diligence Procedure.)

Companies without an AML compliance department may unknowingly engage in a business relationship with a customer from a high-risk country or a customer who is a Politically Exposed Person (PEP) or partner’s associate (Father or brother or son) connected to a PEP. They might even receive third-party payments from such customers. The following article will enlighten you on the three reasons why an AML compliance department is a must for MNCs and big corporate groups:

1. Helps you Avoid Dealing with High-risk countries

Financial Action Task Force (FATF) defines high-risk countries (HRCs) as jurisdictions with weak measures to combat ML/CT. FATF publishes the list of HRCs in two public documents thrice a year. AML compliance team can apply enhanced due diligence measures (EDD) before starting a business relationship or transaction with customers from the FATF blacklist including natural persons and legal persons and those acting on their behalf.

Your AML compliance department will help you identify HRCs at the time of establishing or in the course of the customer relationship or when conducting transactions on behalf of a customer. A penalty of AED 200,000 or more will be incurred if you fail to implement the measures recommended by the National Committee for Combating Money Laundering regarding customers from high-risk countries. Providers of AML consulting services in Dubai can further guide you on this.

2. Helps you Avoid Accepting Third-party Payments

An AML department is necessary to detect and counter the ML/CT risks arising out of accepting payments from third parties. MNCs do not often consider third-party payments as a high-risk activity. However, businesses receiving payments for invoices must scrutinize who is paying the company and ensure that they are the same party. For example, if XYZ LLC sends Customer A an invoice for USD 1000, and receives a payment for the invoice from an unknown third party from an obscure location, XYZ may be conducting a financial transaction involving suspected proceeds of illegal activity.

Your organisation’s AML compliance team will conduct due diligence to determine the identity of the third-party payer, the relationship between your customer and the third party and the reasons why you are receiving the payment from that person. In this way, your AML compliance team can save you from unwittingly being part of an ML crime and also ensure AML compliance in the UAE.  AML consultants in Dubai can support you to develop and train your AML compliance department.

3. Helps you Prevent Partnering with PEPs

Politically Exposed Persons (PEPs) are individuals who are or have been entrusted with prominent public functions in the State (UAE) or any other foreign country. PEPs can be Heads of States or Governments, senior politicians, senior government officials, judicial or military officials, senior executive managers of state-owned corporations, senior officials of political parties and persons who are or have previously been, entrusted with the management of an international organisation or any prominent function within such an organisation. The Cabinet Decision No (10) of 2019 on AML-CFT stipulates that FIs and DNFBPs must carry out screening for both domestic and foreign PEPs during customer onboarding.

Unlike ordinary customers, PEPs have more opportunities to gain assets through illegal means such as bribes and money laundering. They use their title for facilitating acts of money laundering and terrorism financing. AML departments are the best defence against the risk posed by PEPs. A fine of AED 100,000 will be imposed on organizations that do not follow due diligence measures on PEPs before establishing or maintaining a business relationship. It is advisable to seek advice from AML advisors in Dubai before creating an AML compliance department within your organization.

Strengthen your AML Framework with AML Consultants in Dubai, UAE

An AML compliance department is your best defence against ML/CT crimes and you can develop it with the help of AML consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA has a dedicated department to provide robust AML consulting services in Dubai, UAE. We can advise the MNCs and big corporate groups on how to comply with AML-CFT requirements and help with screening for the high-risk country, third-party payment and PEP risks. Consult with JCA today to ensure seamless AML compliance in the UAE.