The United Arab Emirates is a prime international financial hub that recognized its high risks of being exposed to the flow of illicit cash into its financial sectors. In the year 2002, the UAE government took its first initiative to pass legislation to combat money-laundering activities, followed by several amendments in order to include the recommendations of the financial action task force (FAFT) and other such international practices to ensure effective legislation on money laundering. At present, Federal Law Number 20 of 2018 on Facing Money-Laundering and Combatting the Financing of Terrorism and Illegal Organizations is the primary legislation governing the money-laundering activities and funding of terrorist bodies (the Anti-Money Laundering Law).
Some of the key features of the Anti-Money Laundering Law are as follows:
Definition of Money Laundering
Article 2 of the Anti-Money Laundering Law gives a clear definition of what acts constitute money laundering – whoever with the knowledge of an illegal source of money, deliberately involves in the following acts:
Transferring of the illicit money obtained, in order to conceal the original source or course of action from where such illicit money has been produced;
Any act carried out with an intention to disguise or conceal the actual source or nature of the act involved to produce such illegal money, along with the methods used to dispose or exchange of such illicit money;
Accepting, using or possessing such illicit money;
Being complicit in the crime from where such illegal money was generated by helping the offender to escape the punishment.
Money Laundering for Financing the Illegal or Terrorist activities and Organization
Article 3 of the Anti-Money Laundering Law also recognizes the act of money laundering committed by a person with the knowledge that such illicit money belongs to the terrorist organization or terrorist person, or it is for the purpose of funding the terrorist activities or organizations or a terrorist, even if such act is done without an intention to hide the illicit source of the money. The act of accepting, preserving, providing, collecting the illicit money, either with an intention to use, or with a prior knowledge that such illicit money is going to be used for the benefit of an illegitimate organization shall be punishable.
Criminal Liability of the Legal Person
As per Article 4 of the Anti-Money Laundering Law, a legal person can be held accountable for the offence committed either in his name or for his account with his prior knowledge, without prejudicing the criminal liability of the person who committed such offence.
The Authority Vested in the Governor, his Delegates, the Public Prosecution and the Competent Court
Article 5 lays down the authority bestowed upon the governor, and his delegates to freeze or seize any suspicious funds deposited at the financial institutions for a period of no more than seven days. Likewise, even the public prosecution and the competent court may request for the identification, tracking and evaluation of such suspicious funds and methods used to exchange such suspicious money without prior notice to the owner and also may impose a travel ban until the investigation proceedings are completed. They can also prohibit the trading of such suspicious funds if they are convinced that such action is being done to non-comply with the freezing or seizure orders. However, the provisions of the Anti-Money Laundering Law provide that the aggrieved party can file grievances in cases of seizure of the funds with the competent court from where such a decision was decreed. In the event, that such plea for grievance has been rejected, then the aggrieved party may initiate a new claim for grievance on expiry of a period of three months from the date when the previous plea was dismissed, except if it is necessary for filing a plea of grievance before the expiry of the stipulated date to initiate a such claim. Thereafter, the court shall issue its decision with regard to the same within a period of fourteen business days from the date of submission of such plea for grievance. The public prosecution and the competent court may further appoint a suitable person to manage such seized funds or to sell or dispose of such illicit funds and proceeds. The amount made out of the sale shall then be deposited into the court’s treasury.
It is pertinent to note that no one has the authority to initiate criminal proceedings against the person who committed any act of money laundering or funded the terrorists or illegal organization, besides the public prosecutor or his delegates. The provisions of the Anti-Money Laundering further confer the public prosecutor either on its own motion or upon the request by the law enforcement authorities to exercise its authority to obtain access to relevant materials or accounts in the case where there is enough proof of the occurrence of the crime. The law enforcement authorities may further carry out undercover operations for the purpose of detecting the crime or gathering required evidence of such crime.
The Regulatory Bodies
Pursuant to article 11 of the Anti-Money Laundering Law a National Committee for Combatting Money Laundering and the Financing of Terrorism and Illegal Organizations, with the governor as the head of the committee, is established. The National Committee’s key responsibilities are as follows:
Come up with national strategies, and put forth relevant policies, procedures and regulations to counter the crime of money laundering;
Analyze and decide the risks of such crimes at a national level;
To work along with relevant authorities and to instruct the supervisory authorities to ensure compliance by the financial institutions to implement protective measures such as conducting due diligence in carrying out their functions. They are also responsible to cross-check with international sources of information in order to detect high-risk countries with respect to money laundering;
Representing the state before the international forums for matters involving money laundering;
To receive and evaluate the information given by the competent authorities to determine the effectiveness of their policies or regulation to curb the money laundering.
The Committee shall further carry out other responsibilities required to facilitate the coordination and exchange of information among the relevant bodies. The Anti-Money Laundering Law further appoints supervisory authorities to keep a check, monitor and follow up with the relevant financial institutions to ensure that they without fail comply with the provisions of this law. Further, the supervisory authorities can impose administrative penalties like issuing a fine, banning the violator, and seizing the powers of the board members, among others, of the financial institutions which failed to observe the provisions of this law. Article 16 of the Anti-Money Laundering lays down the responsibilities to be carried out by the financial institutions in line with the Implementing Regulation of the Law, such as:
Detecting the crime risks probably in the scope of their work with the help of well-qualified finance lawyers by conducting continuous assessments based upon the factors specified by the implementing regulation of this law;
Taking all the required due diligence measures and procedures;
Not accepting any kind of financial or commercial transactions under any anonymous name or number or any service in connection to such unknown persons.
Initiate and implement risk mitigation policies and measures as approved by the senior management of the institution;
Quick implementation of the directive’s issues by chapter seven of the UN Convention for the Prohibition and Suppression of the Financing of Terrorism and Proliferation of a weapon of mass destruction;
Maintain a record containing all the data and information of each local or international transaction.
Article 22 of the Anti-Money Laundering Law sets forth the punishments on a person convicted of the offences specified in the clause one (1) of article 2, as shall be imposed with imprisonment for a period of ten years and a fine of not less than UAE Dirhams one hundred thousand (AED 100,000) but not exceedingly more than UAE Dirhams five million (AED 5,000,000).
A fine of not less than UAE Dirhams three hundred thousand (AED 300,000) but not exceeding UAE Dirhams ten million (AED 10,000,000) and a temporary imprisonment shall be imposed on the person convicted of the crimes such as abuse of power vested by the virtue of any profession, if such act is committed by a non-profit organization or through an illegal group or recidivism of the crime.
In the cases of legal person or their managers, agents or representatives if convicted of this crime, they shall be made subject to a fine of not less than UAE Dirhams five hundred thousand (AED 500,000) but not exceedingly more than UAE Dirhams fifty million (AED 50,000,000)
A person convicted for attempting the act of money laundering shall be imposed with an punishment of life imprisonment or an temporary imprisonment for a period of at least ten (10) years and a fines of not less than UAE Dirhams three hundred thousand (AED 300,000) but not beyond UAE Dirhams ten million (AED 10,000,000); the same amount of fines shall be applicable on person found using such illicit proceeds to finance the unlawful organization, but with a temporary imprisonment instead of life imprisonment.
Any person who deliberately violates or neglects the provisions of article 15 of this law shall be imposed with a fine of not less than UAE Dirhams one hundred thousand (AED 100,000) but not more than UAE Dirhams one million (AED 1,000,000)
Any person who obstructs the investigation procedures by warning, revealing or notifying of any transaction which is under the review by the competent authorities shall be made subject to a fine of not less UAE Dirhams one hundred thousand (AED 100,000) but not more than UAE Dirhams five hundred thousand (AED 500,000) or be imposed with imprisonment for a term of not less than six months
Any person who is found to violate the provisions of this law shall be imposed with imprisonment or a fine of not less UAE Dirhams ten thousand (AED 10,000) but not more than UAE Dirhams one hundred thousand (AED 100,000).
Role of the Central Bank of UAE and the Financial Intelligence Units
The Central Bank of UAE is the regulatory authority over all the financial institutions, whose work is to supervise, monitor, come up with policy-measures and instructions necessary for protecting the credibility of the UAE’s financial system. It also issues licenses to the financial institutions and can take actions against the financial institution which fails to observe the regulations. One of the prominent cabinet decisions which the Central Bank of UAE has passed with respect to combatting the money laundering activities is the Cabinet Decision Number 10 of 2019 concerning the Implementing Regulation (the Implementing Regulations) of Federal Law Number 20 of 2018 on the Anti-Money Laundering and Combatting the Financing of Terrorism and Illegal Organizations. The implementing regulation provides for various provisions like steps to be taken by the financial institution to mitigate risks, principle of due diligence, clearly defines the kinds of financial transactions and various such aspects to ensure an effective implementation of the provisions of the Anti-Money Laundering Law. Article 5 (4) of the Anti-Money Laundering Law states that all the freezing orders of funds held by the financial institution licensed by the Central Bank of UAE, can only be executed through the Central Bank of UAE. Where as the primary role of the independent Financial Intelligence Units (FUIs), as authorized by the Central Bank of UAE, is to send the reports of any suspicious transactions or any other such information on all the financial institutions to the competent authorities for the purpose of analyzing and assessing such reports. It shall also assume the role of exchanging information’s with the FUIs of other countries with regards to any suspicious transaction reports or any other information necessary to detect the suspicious funds. It shall also be responsible to maintain a database of all the vital information available.
Statute of Limitation
The Anti-Money Laundering Law provides in article 29 that the criminal case under this law shall be exempted from the statute of limitation. Therefore, the sanctions shall not lapse with time or with the lapse of any related civil cases.