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General climate and recent developments

State of legal development

In general terms, how developed are the laws on money laundering, terrorism financing and fraud in your jurisdiction?

The United Arab Emirates is, by international standards, a law-abiding country whose citizens and residents enjoy low crime rates and civil and domestic harmony. Money laundering, terrorism financing and fraud are all criminalised. While there is some level of domestic crime, the majority of serious criminal activity in the United Arab Emirates relates to either trans-shipment of prohibited goods through the high-volume port system or the commission of financial crimes and fraud-related offences in the global financial sector. According to local law enforcement, the international narcotics trade, organised crime and earnings from institutional corruption in other countries provide a large part of the proceeds of crime laundered in or through the United Arab Emirates. The majority of illegal proceeds entering the country are derived from offences committed overseas.

It is common in the United Arab Emirates to carry large amounts of cash and purchase goods and property with cash. Such large-scale cash activity can provide an effective cloak to money laundering. Recent law enforcement activity has identified a growing trend in the use of professional launderers and other third parties to launder criminal proceeds.

Terrorist activity, where it has been suspected, has been dealt with expeditiously and with the full force of severe penalties under the law. Cooperation by the United Arab Emirates with other countries after the terrorist attacks on September 11 2001 was swift and extensive.

Recent developments

Have there been any notable recent developments in relation to anti-money laundering, terrorism financing or fraud law and enforcement, including any regulatory changes, case law and convictions?

 Federal Law 9/2014 (Amending Certain Provisions of Federal Law 4/2002 Concerning the Combating of Money Laundering Crimes) (the New AML Law) was passed by the UAE Federal National Council on April 30 2013, and was gazetted and came into force on October 30 2014.

The New AML Law was issued in response to the Financial Action Task Force recommendations issued in 2012.

The New AML Law expanded the previous AML regime by, among other things, including a prohibition upon the funding of unlawful organisations. The New AML Law also clarifies the powers of the UAE Central Bank, the public prosecutor and the UAE courts to order the freezing of accounts and the seizing of funds relating to money laundering or terrorism-financing offences.

The New AML Law also clarifies that money laundering is an offence in its own right. Punishment for committing the initial crime does not prevent someone from also being punished for subsequent money laundering of the proceeds of that initial crime. In addition, the New AML Law confirms that a conviction in respect of the initial crime is not required as part of proving that money laundering has taken place.

Legal and enforcement framework

Domestic legislation

What primary and secondary legislation applies to money laundering, terrorism financing and fraud in your jurisdiction?

 Relevant laws include:

  • Federal Law 9/2014 (Amending Certain Provisions of Federal Law 4/2002 Concerning the Combating of Money Laundering Crimes) (the New AML Law);
  • Cabinet Resolution 38/2014 Concerning the Executive Resolution of Federal Law 4/2002 (the Anti-Money Laundering (AML) Regulations);
  • Federal Law 7/2014 on Combating Terrorism Crimes;
  • Federal Penal Law 3/1987 as amended (the Penal Code);
  • Federal Penal Procedures Law 35/1992 as amended (the Penal Procedures Law);
  • Regulations regarding declaration by travellers entering or leaving the United Arab Emirates carrying cash and monetary or financial bearer instruments (2011); and
  • Federal Law 5/2012 on Combating Cyber Crimes.

In addition to laws and regulations, the UAE Central Bank issues circulars from time to time to reflect local, regional and global changes in the anti-money laundering and countering financing terrorism (CFT) framework.

To whom does the legislation apply? May both individuals and organisations be held liable under the legislation? Does the legislation have extraterritorial effect?

 Article 2 of the New AML Law describes the main elements of money laundering and criminalises such actions by natural persons. Article 3 of the law states that ‘legal persons’, defined as financial institutions and other financial, commercial and economic establishments operating in the United Arab Emirates, can be prosecuted for money laundering and are criminally liable for money laundering offences intentionally committed in their name or for their account. The New AML Law is drafted in broad terms and is not limiting to funds arising from felonies or misdemeanours occurring in the United Arab Emirates.

International agreements

Is your jurisdiction a party to any international cooperation agreements to combat money laundering, terrorism financing and fraud?

 The New AML Law specifically contemplates international cooperation. It states that the United Arab Emirates will, on request by a judicial authority in another country, freeze funds that relate to money laundering, financing of terrorism or the financing of unlawful organisations. However, the alleged criminal activity in the other state that generated the funds must also be a crime in the United Arab Emirates.

The United Arab Emirates has signed the UN Vienna Convention on Money Laundering and the Financing of Terrorism. It ratified the convention by Federal Decree in May 1990, and thereby further criminalised drug trafficking and money laundering.

The United Arab Emirates has signed the Palermo Convention and ratified it on May 7 2007.

The United Arab Emirates has signed and ratified the Merida Convention on Anti-corruption.

Enforcement authorities

Which government authorities enforce the law on anti-money laundering, terrorism financing and fraud, and what is the extent of their powers?

Article 9 of the New AML Law provides for the establishment of the National Committee on Anti-money Laundering and Combatting Financing of Terrorism (the AML-CFT Committee). Its functions include the facilitation of the exchange of information and coordination between the Foreign Ministry, the Ministries of Interior, Justice, Finance and Industry, Economy and Commerce, agencies concerned with issuing trade and industrial licences, the Central Bank and the Federal Customs Authority. The governor of the Central Bank is the chairman of the AML-CFT Committee. The committee meets at least six times a year, as required when a new UN list relating to terrorist financing is published, and for the consideration of other urgent matters. The committee can and often does conduct meetings by telephone, especially on urgent matters.

The AML-CFT Committee is the principal organ for AML and CFT coordination and decision-making in the United Arab Emirates. The committee’s members are senior individuals, which brings rigor and authority to the process of considering the actions to be taken, and ensures that such actions are implemented.

Statute of limitations

What is the limitation period for bringing actions in relation to money laundering, terrorism financing and fraud offences?

The UAE Criminal Procedures Code mandates three different limitation periods:

  • 20 years in respect of felonies;
  • five years for misdemeanours; and
  • one year for contraventions.

The vast majority of offences under the relevant AML and CFT legislation are classified as crimes (analogous to felonies in the original Arabic). Accordingly, the limitation period is 20 years for almost all relevant offences.  

Offences

Legal definition

How are ‘money laundering’, ‘terrorism financing’ and ‘fraud’ legally defined in your jurisdiction?

Article 2 of Federal Law 9/2014 (Amending Certain Provisions of Federal Law 4/2002 Concerning the Combating of Money Laundering Crimes) (the New AML Law) states that any person who knows that funds are the proceeds of a felony or a misdemeanour, and who wilfully commits any of the following acts, will be considered a perpetrator of the crime of money laundering:

  • transferring, transporting, depositing, safekeeping, investing or transforming the proceeds of a crime or managing the same aiming to conceal or disguise their unlawful source;
  • concealing or disguising the true nature, source or location of the proceeds, as well as the method involving their disposition, movement, ownership of or rights with respect to said proceeds; and
  • acquiring, possessing or using the proceeds.

‘Financing of terrorism’ is defined as:

The provision, collection of funds, or to ensure obtaining or transporting the same by any means, directly or indirectly, to any association, entity, organisation, centre, group, gang or to any person against whom the provisions of Law 7 of 2014 (Combatting Acts of Terrorism) apply.”

‘Fraud’ is not defined as such under UAE law. However, the act is criminalised pursuant to Federal Penal Law 3/1987 as amended (the Penal Code) in the following manner:

Whoever captures for himself or for others transferable money or documents or signing such document or cancelling, damaging or amending it through trickery or using a false name or personality for the purpose of tricking the victim and forcing him to deliver such shall be punished with a jail or a fine.

The same penalty shall be applied to whoever disposes of a building or a moveable that he knows he does not own or that he has no right to dispose of such or who disposes of anything of the same kind with the knowledge that another person has disposed of such or contract on and hence he will harm the other.”  

Principal and secondary offences

What are the principal and secondary offences in relation to money laundering, terrorism financing and fraud?

The principal money laundering offence is described in Article 2 of the New AML Law. As mentioned above, this states that any person who knows that the funds are the proceeds of a felony or a misdemeanour, and who wilfully commits any of the following acts, will be considered a perpetrator of the crime of money laundering:

  • transferring, transporting, depositing, safekeeping, investing or transforming the proceeds of a crime or managing the same aiming to conceal or disguise their unlawful source;
  • concealing or disguising the true nature, source or location of the proceeds, as well as the method involving their disposition, movement, ownership of or rights with respect to said proceeds; and
  • acquiring, possessing or using the proceeds.

In common with many other jurisdictions, the United Arab Emirates also has secondary offences in the form of a failure to disclose and tipping-off offences.

Predicate offences

How are predicate offences defined?

Under the previous regime, the crime of money laundering was confined to dealing with the proceeds of certain crimes specified in the 2002 law (eg, drug dealing, bribery, fraud). Under the New AML Law, the crime of money laundering also includes dealing in the proceeds of any felony or misdemeanour.  

De minimis rules

What de minimis rules apply to money laundering, terrorism financing and fraud offences?

The legislation contains no de minimis provisions, therefore all offences giving rise to proceeds must be reported, even if the amounts involved are trivial.  

Penalties and plea agreements

Penalties

What penalties may be issued for money laundering, terrorism financing and fraud offences?

The penalty for money laundering (including attempted money laundering) by an individual is imprisonment for up to 10 years, and/or a fine of between Dh100,000 and Dh500,000 (approximately $27,200 to $136,000).

If the offence is committed by a corporate entity, the fine is between Dh300,000 and Dh1 million (approximately $81,000 to $272,000).

Board members or employees of a company who know that money laundering offences are taking place in the business and fail to report them can be imprisoned and/or fined between Dh50,000 and Dh300,000 ($13,600 to $81,000).

Anyone who commits a ‘tipping-off’ offence can be imprisoned for up to one year and/or fined between Dh10,000 and Dh100,000 ($2,720 to $27,200).

Those who fail to provide information in connection with an anti-money laundering (AML) investigation can also be imprisoned or fined, as can those who make a malicious AML report.

Acts of fraud are punishable with imprisonment for up to two years and fines of up to Dh10,000 ($2,720).  

Plea agreements

Are plea agreements available? If so, how often are they used and what rules, standards and procedures apply?

There are no formal procedures governing plea agreements in the United Arab Emirates in relation to AML offences. However, the concept of a plea bargain is not completely unknown to the UAE criminal justice system. Drug offenders, in particular, can reduce or avoid sanctions if they acknowledge their crimes and demonstrate that they are seeking treatment. Similarly, corrupt government employees have avoided criminal charges by agreeing to return embezzled funds. Further, Federal Penal Law 3/1987 as amended (the Penal Code) contains provisions whereby individuals can avoid liability and penalties if they report certain activities before they are detected by the competent authorities. The specific provisions relate to issue of state security, bribery and kidnapping.

Defences

Available defences

What defences are available in your jurisdiction to parties accused of money laundering, terrorism financing or fraud?

The applicable legislation does not contain specific defences.

Record keeping, disclosure and compliance

Record-keeping and disclosure requirements

What record-keeping and disclosure requirements apply to companies and relevant individuals under the anti-money laundering, terrorism financing and fraud legislation?

Banks and other financial institutions in the United Arab Emirates are required to identify their customers, including beneficial ownership. There is an obligation to understand the ownership and control structure of all legal entities. There is also an ongoing obligation in respect of customer due diligence (CDD).

Enhanced CDD is required for:

  • politically exposed persons;
  • dealers in precious metals or stones;
  • real estate brokers;
  • dealers in luxury goods;
  • auction houses;
  • private banking clients; and
  • non-resident account holders.

Banks and other financial institutions in the United Arab Emirates are required to investigate all unusual transactions and to record their findings in writing. These records must be maintained for at least five years. Where the institution determines that the transaction is suspicious, it must make a report to the UAE Central Bank.

The obligation to report occurs at the point where there are reasonable grounds to suspect that the funds in question are proceeds of a criminal activity or to be used for terrorism, a terrorist act or for financing terrorism.

Compliance

What internal compliance measures are required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?

The UAE Central Bank does not dictate what internal compliance measures are required, other than requiring that all compliance staff be ‘fit and proper’ and that the compliance department be subject to periodic independent audit. These audit reports must then be provided to the senior executive of the financial institution.  

What customer and business partner due diligence is required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?

The UAE Central Bank does not prescribe an exhaustive list of documents that must be obtained for know your customer purposes. At a bare minimum, any financial institution in the United Arab Emirates will require corporate customers to provide a copy of a currently valid commercial licence and fully authenticated corporate resolutions authorising the opening of an account. Natural persons will be required to provide a copy of their passport and, frequently, a currently valid UAE residency permit.

When opening an account, the bank should obtain all information and necessary documents, including the full name of the account holder, the current address and the place of work; the bank should also physically check the UAE ID card or passport, and keep a copy thereof initialled by the account opening officer with a note that is a “true copy of the original". In case of corporate entities, the bank should check and keep a copy of the trade licence.

It is strictly prohibited to open accounts with assumed names or numbers. 

Private enforcement

Private actions

Can private actions be brought in your jurisdiction for damages arising from money laundering, terrorism financing or fraud? If so, who may file such actions and what filing procedures apply?

Private actions can be brought in the United Arab Emirates by any person who believes that he or she has been harmed in some way by another person or organisation. Filing lawsuits requires the plaintiff to submit a statement of claim and supporting documents to the court. Each defendant is entitled to receive a copy of the plaintiff’s claim. 

The statement of claim must include:

  • the plaintiff's and the defendant's personal details and addresses;
  • the subject matter of the lawsuit;
  • the requests and grounds;
  • the date of submission of the lawsuit to the court;
  • the name of the court before which the lawsuit is filed; and
  • the signature of the plaintiff or his or her representative.

If the case is related to nullification, revocation or validation of a contract, a copy of the contract is required.

For the implementation of judgments issued abroad, the UAE's Ministry of Foreign Affairs and International Cooperation should attest the original judgment.

Documents presented to the UAE's courts must be in Arabic. If the original documents are not in Arabic, they must be translated by a legal translator approved by the UAE's Ministry of Justice.

The plaintiff must sign the lawsuit if it is to be submitted by an attorney. After submitting the documents, the plaintiff or the attorney will be asked to pay the court fee.

Following this, the court will assign the case a number and a date for the hearing. The clerk, through the court official (bailiff), will serve a notification on the defendant within 10 days of the date the statement was filed.

The litigant should ensure that the particular court has jurisdiction to hear the case.  

How are damages calculated?

Damages are calculated on the basis of proven losses. The courts frequently appoint experts to assist in the quantification of losses.  

What other remedies may be awarded to successful claimants?

UAE courts confine themselves to the award of monetary damages in the vast majority of cases. Equitable remedies are rarely, if ever, awarded.