Dubai: Law of Offshore
The National Anti-Money Laundering Committee was formed in July, 2000, with representatives from Central Bank of UAE, Ministry of Interior, Ministry of Finance and Industry, Ministry of Justice, Islamic Affairs and Awqaf, Ministry of Economy and Commerce, the UAE Customs Council, the Secretariat General of Municipalities, the Federation of Chambers of Commerce and Industry.
In December 2001 the United Arab Emirates' Federal National Council (FNC) approved the long-awaited anti-money laundering draft law which covers banking and financial activities in Dubai. After a long debate, FNC members approved the draft with minor amendments and those were mainly concerned with terms and the language used in the draft.
The promulgation of the Federal Law by the UAE authorities regarding the criminalisation of money laundering took place on January 22, 2002.
Any person who intentionally commits one of the acts in respect of property derived from any of the crimes listed in Article 2/2 of the Act is an offender under the Anti-Money Laundering Act.
Further, the conversion, depositing or transference of proceeds, for the purpose of concealing or disguising the illicit origin of such proceeds will be considered as a crime under the Act.
The law provides for jail terms of up to seven years and a fine ranging from AED2,000 to AED1 million, or both, in addition to freezing of property, depending on the nature of the crime.
The Federal Law on Criminalisation of Laundering of Property Derived from Unlawful Activity defines money laundering as any act involving transfer, conversion or deposit of property, or concealment or disguise of their true nature, knowing that such property is derived from any of the offences stated in Article 2:
- Trafficking in narcotics and psychotropic substances;
- Kidnapping, piracy and terrorism;
- Offences committed in violation of the environment law;
- Illicit dealing in firearms and ammunition;
- Bribery, embezzlement, and damage to public property;
- Fraud, breach of trust and related offences;
- Any other related offences stated in the international conventions to which the State is party.
The term freezing or seizure under the law means temporarily prohibiting the transfer, conversion or disposition of, or movement of property, on the basis of an order issued by the competent authority.
The law also stipulates permanent deprivation of property by order of a competent court of those found involved in money laundering offences.
Under the law, a Financial Information Unit has been established at the Central Bank to deal with money laundering and suspicious cases. Reports of suspicious transactions will be sent to the Unit from all financial institutions and other financial, commercial and economic establishments.
The law further stipulates that financial, commercial and economic establishments operating in the country will be criminally liable for the offence of money laundering if it is committed in their names or for their financial account.
In March, 2004, the UAE's stock market regulator stepped up the region's campaign against money laundering and terrorist financing. In a circular sent to the Abu Dhabi and Dubai stock exchanges, and to 25 stockbroking firms in the United Arab Emirates, the UAE Securities and Commodities Authority announced that: "You are requested to verify all information and documents when accepting cash or opening accounts for clients."
A UAE-based broker explained that: "You can say it is an official umbrella. Before, we did not have written instruction concerning money laundering. Most of us had refused to accept big amounts of cash before because we wanted to make sure the money is clean and legal. But now the process is more organised and clear as we have official instructions in this respect. You can say that we are now part of the campaign launched by the UAE against money laundering."
Earlier in the year, speaking during a two-day seminar on "Interrogation and Litigation in Money Laundering Crimes" at the Dubai Chamber of Commerce and Industry, American Consul General in Dubai, Jason Davis, praised the cooperation which exists between the United Arab Emirates and the United States with regard to anti-money laundering initiatives.
He suggested that Federal Law No. 4 (2002), which allows financial authorities to seize suspicious funds whilst investigations are taking place, gives the UAE the necessary edge when it comes to combating money laundering and terrorist financing, and highlighted the continued importance of working together and sharing intelligence and expertise.
"We are here today to educate and learn at the same time. We are always interested in benefiting from other people's expertise," he announced, revealing that officials from the US Department of Justice periodically attend similar seminars in the UAE for the purposes of discussion and exchange of information.
Speaking at a Global Banking Strategy Summit held in Dubai in April, 2004, Abdulrahim Mohamed Al Awadi, assistant executive director in charge of the UAE Central Bank's Anti-Laundering and Suspicious Cases Unit announced that the UAE is willing to provide assistance to other countries looking to draft new anti-money laundering legislation and to create financial intelligence units.
He also reiterated the commitment of the United Arab Emirates to its own anti-money laundering and terrorist financing campaign, and suggested that the jurisdiction has shown leadership in the region.
"Being in the vanguard in the global fight against money laundering and financing terrorism, the UAE is keen to share its experience with regulators from other jurisdictions," Mr Al Awadi told delegates.
Outlining initiatives put in place by the authorities in the United Arab Emirates, he revealed that: "The Central Bank of the UAE has set a ceiling of AED40,000 for the amount that may be brought into the country in cash or equivalent without the need for declaration. A regulation has also been issued exclusively to money-changers to ensure that all outward remittances of AED2,000 and above are duly documented with proper identification of customers."
The Central Bank official additionally revealed that under new rules issued by the Securities and Commodities Authority of the UAE, the settlement of transactions amounting to more than AED40,000 is required to be properly documented, and the identity of the investor verified.
Meanwhile, in February 2005, Dubai Financial Services Authority (DFSA) signed two memoranda of understanding with the Isle of Man's Financial Supervision Commission and Insurance and Pensions Authority.
The two agreements aim to provide a framework for the provision of mutual assistance and information exchange between the two jurisdictions with regard to cross-border transactions. In addition, the agreements are designed to improve compliance, thereby helping to prevent money laundering and fraud.
Similar agreements have since been signed with a raft of jurisdictions, including China, Egypt, France, Germany, Greece, Guernsey, Iceland, Japan, Jersey, Jordan, Luxembourg, Netherlands, New Zealand, the Netherlands, Malaysia, Singapore, South Africa, South Korea, Sweden, Switzerland, Taiwan, Turkey and the United States.
In February 2009, the DFSA entered into a Memorandum of Understanding (MoU) with the Anti- Money Laundering Suspicious Cases Unit (AMLSCU) of the Central Bank of the United Arab Emirates, regarding co-operation and exchange of regulatory information. The MoU was signed by Paul Koster, Chief Executive of the DFSA, and Abdulrahim Mohamed Al Awadi, Assistant Executive Director of the CBUAE and Head of the AMLSCU.
Commenting at the time of signing, Koster said: “The signing of today’s MoU has formalised arrangements for co-operation and information sharing that already exists between us. It recognises that both regulators place reliance on the quality of regulatory standards administered in the other’s jurisdiction. Continuing close co-operation and future joint initiatives will reinforce our mutual commitment to ensuring financial stability and promote sound economic growth in the region."
In October 2012, the DFSA proposed changes to its anti-money laundering (AML) and ancillary service provider regimes. The proposals were made as a result of a review of the AML rules, and the aim is to simplify and rationalize the framework and ensure that it is up-to-date.
The DFSA is proposing the replacement of the current AML module and all AML rules contained in other modules. A single, consolidated AML module would take its place, and would apply to all those who are subject to the AML regime.
The DFSA is also recommending changes to the articles of the Regulatory Law 2004 that deal with its exercise of powers on behalf of other regulators and with the delegation of functions and powers to other regulators. Under the changes, the "other regulators" category would be expanded to include a governmental or regulatory authority exercising powers and performing functions relating to counter terrorist financing or international sanctions.
This would allow the DFSA to exercise its power on behalf of other regulators, including the Anti-Money Laundering Suspicious Cases Unit of the United Arab Emirates (UAE) Central Bank, or to delegate its functions and powers to another regulator in cases of suspected terrorist finances or sanctions breaches.
The DFSA's consultation on its proposals closed on December 16, 2012.