United Arab Emirates - Financial Action Task Force

1 April 2020 Anti-money laundering and counter-terrorist nancing measuresUnitedArab EmiratesAnti-money laundering and counter-terrorist nancing measuresUnited arab EmiratesMutual Evaluation Report The Financial Action T ask Force (F ATF) is an independent inter-governmental body that develops and promotes policies to protect the global Financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CTF) standard. For more information about the FATF, please visit the website: This document and/or any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

2 This assessment was adopted by the FATF at its February 2020 Plenary meeting. Citing reference: 2020 FATF-. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue Andr Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: Photo Credit - Cover: Getty Images FATF (2020), Anti-money laundering and counter-terrorist financing measures United arab Emirates , Fourth Round Mutual Evaluation Report, FATF, Paris 1 Anti-money laundering and counter-terrorist financing measures in the United arab Emirates FATF-MENAFATF | 2020 Table of Contents Executive Summary 3 Key Findings 3 Risks and General Situation 6 Overall Level of Compliance and Effectiveness 6 Priority Actions 13 Effectiveness & Technical Compliance Ratings 16 MUTUAL EVALUATION REPORT 17 Preface 17 CHAPTER 1.)

3 ML/TF RISKS AND CONTEXT 19 ML/TF Risks and Scoping of Higher Risk Issues 20 Materiality 23 Structural Elements 23 Background and Other Contextual Factors 23 CHAPTER 2. NATIONAL AML/CFT POLICIES AND CO-ORDINATION 35 Key Findings and Recommended Actions 35 Immediate Outcome 1 (Risk, Policy and Coordination) 37 CHAPTER 3. LEGAL SYSTEM AND OPERATIONAL ISSUES 47 Key Findings and Recommended Actions 47 Immediate Outcome 6 ( Financial Intelligence ML/TF) 52 Immediate Outcome 7 (ML investigation and prosecution) 66 Immediate Outcome 8 (Confiscation) 77 CHAPTER 4. TERRORIST FINANCING AND FINANCING OF PROLIFERATION 85 Key Findings and Recommended Actions 85 Immediate Outcome 9 (TF investigation and prosecution) 89 Immediate Outcome 10 (TF preventive measures and Financial sanctions) 104 Immediate Outcome 11 (PF Financial sanctions) 115 CHAPTER 5.

4 PREVENTIVE MEASURES 119 Key Findings and Recommended Actions 119 Immediate Outcome 4 (Preventive Measures) 120 CHAPTER 6. SUPERVISION 131 Key Findings and Recommended Actions 131 Immediate Outcome 3 (Supervision) 133 CHAPTER 7. LEGAL PERSONS AND ARRANGEMENTS 169 Key Findings and Recommended Actions 169 Immediate Outcome 5 (Legal Persons and Arrangements) 171 2 Anti-money laundering and counter-terrorist financing measures in the United arab Emirates FATF-MENAFATF | 2020 CHAPTER 8. INTERNATIONAL CO-OPERATION 181 Key Findings and Recommended Actions 181 Immediate Outcome 2 (International Cooperation) 183 TECHNICAL COMPLIANCE ANNEX 199 Recommendation 1 Assessing risks and applying a risk-based approach 199 Recommendation 2 - National Cooperation and Coordination 202 Recommendation 3 - Money laundering offence 204 Recommendation 4 - Confiscation and provisional measures 205 Recommendation 5 - Terrorist financing offence 206 Recommendation 6 - Targeted Financial sanctions related to terrorism and terrorist financing 209 Recommendation 7 Targeted Financial sanctions related to proliferation 215 Recommendation 8 Non-profit organisations 220 Recommendation 9 Financial institution secrecy laws 228 Recommendation 10 Customer due diligence 228 Recommendation 11 Record-keeping 232 Recommendation 12 Politically exposed persons 233 Recommendation 13 Correspondent banking 234

5 Recommendation 14 Money or value transfer services 234 Recommendation 15 New technologies 236 Recommendation 16 Wire transfers 237 Recommendation 17 Reliance on third parties 239 Recommendation 18 Internal controls and foreign branches and subsidiaries 240 Recommendation 19 Higher-risk countries 241 Recommendation 20 Reporting of suspicious transaction 242 Recommendation 21 Tipping-off and confidentiality 243 Recommendation 22 DNFBPs: Customer due diligence 243 Recommendation 23 DNFBPs: Other measures 245 Recommendation 24 Transparency and beneficial ownership of legal persons 246 Recommendation 25 Transparency and beneficial ownership of legal arrangements 250 Recommendation 26 Regulation and supervision of Financial institutions 253 Recommendation 27 Powers of supervisors 256 Recommendation 28 Regulation and supervision of DNFBPs 257 Recommendation 29 - Financial intelligence units 259 Recommendation 30 Responsibilities of law enforcement and investigative authorities 263 Recommendation 31 - Powers of law enforcement and investigative authorities 265 Recommendation 32 Cash Couriers 266 Recommendation 33 Statistics 268 Recommendation 34 Guidance and feedback 268 Recommendation 35 Sanctions 269 Recommendation 36 International instruments 272

6 Recommendation 37 - Mutual legal assistance 272 Recommendation 38 Mutual legal assistance: freezing and confiscation 274 Recommendation 39 Extradition 275 Recommendation 40 Other forms of international co-operation 275 Summary of Technical Compliance Key Deficiencies 280 Glossary of Acronyms 283 Anti-money laundering and counter-terrorist financing measures in the United arab Emirates FATF- MENAFATF| 2020 Executive Summary EXECUTIVE SUMMARY report summarises the anti-money laundering and counter-terroristfinancing (AML/CFT) measures in place in the United arab Emirates (UAE) as at thedate of the on-site visit from 1 18 July 2019. It analyses the level of compliance withthe FATF 40 Recommendations and the level of effectiveness of the UAE s AML/CFTsystem, and provides recommendations on how the system could be Findings a)In the past few years, the UAE has made significant improvements to itsAML/CFT system including developing the National Risk Assessment (NRA),addressing technical deficiencies in legislation and regulation, strengtheningco-ordination mechanisms across the Emirates , strengthening the FinancialIntelligence Unit (FIU) and assigning supervisors for previously non-coveredsectors.

7 Many of these enhancements to the system are recent, and while they havea positive impact on the UAE s technical compliance, their impact on theeffectiveness of the system was not fully evident at the time of the on-site )The UAE has demonstrated a high-level commitment to better understandand mitigate its money laundering/terrorist financing (ML/TF) risk in acoordinated way and has an emerging understanding of its ML/TF risks. The NRAis a good starting point for expressing ML/TF threats and vulnerabilities at anational level. However, the NRA and other assessments provide only a basicdescription of the complex ML issues facing the jurisdiction. Issues identified withthe methodology bring into question some conclusions authorities have madeabout TF risk.

8 Authorities ability to articulate relevant ML/TF risks beyond theNRA is varied. The National AML/CFT Committee has begun implementing anambitious National AML Strategy to strengthen the UAE s overall AML/CFTframework. These are important steps in improving overall effectiveness,however, it is too early to assess their impact in mitigating sophisticated risksposed by, for example, professional ML networks or trade-based 4 4 Anti-money laundering and counter-terrorist financing measures in the United arab Emirates FATF-MENAFATF | 2020 4 | EXECUTIVE SUMMARY c) A strong feature of the UAE s Financial intelligence framework is that authorities have access to a broad range of Financial information sources to aid Financial investigations.

9 However, apart from in TF and fraud investigations, Financial intelligence is not fully exploited in response to other significant risks, including ML, or in relation to the recovery of the proceeds of crime. Particular issues are the underutilisation of customs data and international cooperation and the absence of STR reporting by DNFPBs (real estate and DPMS) which limits the Financial intelligence available in relation to high-risk sectors in the UAE. The limited role and capacity of the FIU has impacted the quality of Financial intelligence available to investigators. The FIU has taken steps to address its resource needs and analytical capability, but the results of these measures are at early stages. d) Following recent changes, the UAE has a sound statutory ML offence and a policy shift in 2018 seeks to prioritise ML.

10 Although there are various opportunities to detect ML, LEAs are not routinely identifying and targeting significant ML cases in line with the UAE s risk profile. Across the Emirates , between 2013 and 2018, there were 282 ML cases identified by police and prosecutors of which 224 were further investigated by PPs, 50 prosecutions and 33 convictions for ML. The low number of ML prosecutions in Dubai is particularly concerning considering its recognised risk profile. A number of recent investigations, supported by increased coordination, training, awareness and resources, suggest that authorities are placing a stronger emphasis on sophisticated ML risks. However, many of these activities are at early stages and it has not been demonstrated that the component parts of the system (investigation, prosecution, conviction and sanctions) are functioning coherently to mitigate ML risks.