UAE central bank circular issued against anti-money laundering

The UAE Central Bank have issued a circular (246/2013) in order to implement UN security resolution (No. 1844), which was issued and adopted on 20 November 2008. This resolution strengthened the arms embargo on Somalia and Eritrea by specifying sanctions against certain individuals. There was also a UN council committee set up to oversee the ban, which attempts to get different countries to comply with enforcing the resolution.

The 3 individuals listed in the UAE circular are:

  1. Samar Elyas Assaf: a Lebanese female bank executive.
  2. Armin Esmail: a US resident, and executive director of a property firm. Court records show that an individual with this name was convicted twice in the US on narcotics charges and unsuccessfully fought his subsequent removal from America.
  3. Haseeb Khan Israfeel Khan: listed as a Pakistani national.

The circular mentions members of the insurgent group Al Shabab, whose accounts should also be frozen.

The circular puts an obligation on all UAE banks and financial institutions to notify and send a form to the Suspicious Cases Department of the UAE Central Bank, to confirm compliance with the circular by 27 August 2013. Banks and financial institutions where these individuals have accounts have been ordered to freeze all their accounts. The circular also goes further by asking banks and financial firms to take action against commercial or economic entities, whether owned individually or jointly by the individuals named in the circular.

Amendments made to DFSA rulebook

On 13th June 2013 the DFSA published the DFSA Anti-Money Laundering Module (AML). These new rules came in to force on 14th July 2013. This new module provides clarity by providing DFSA-regulated and authorised firms detailed rules in relation to anti-money laundering, counter-terrorist financing and sanctions.

The key changes include:

  • KYC Information – There is an obligation on DFSA-authorised firms to carry out various KYC checks on their customers at the start of the engagement. The new AML rules set out a simplified checklist for entities to follow when gathering KYC information. There is a positive obligation on the DFSA-regulated firms to clearly identify their direct client from who they will be receiving funds or who they do business for. The new AML provisions include a requirement to identify the beneficial owners of customers. The 5% beneficial ownership threshold has been removed from the new AML module and, in order to identify beneficial owners, a risk-based assessment of the customer is required to be made. Beneficial ownership is no longer defined by threshold. The new definition states that to identify beneficial ownership firms must look at 'the ownership interest which should not be so small that it poses no or negligible risk of money laundering'.
  • The new AML provisions introduce a business risk-based approach required to be undertaken by the relevant person in the DIFC-authorised entity. Section 4 of the AML module confirms that the relevant person must assess and address the AML risks by adopting an approach which is proportionate to the risks to which the firm is exposed as a result of the nature of its business, customers, products, services and any other matters which are relevant in the context of anti-money laundering. Firms must ensure that, the assessment is (i) objective and proportionate to the risks; (ii) based on reasonable grounds; (iii) properly documented and reviewed and updated at appropriate intervals.

The guidance confirms that such assessment should be applied to all aspects of the authorised firms policies and procedures including its business, customers, client due diligence policies and practices, reliance on third parties and training given to employees.

  • Politically exposed persons – the new AML rules gives a degree of flexibility in identifying PEPs and state that it is not assumed that all PEPs are high risk. There is more relaxed approach to the KYC required for PEPs.
  • The customer risk assessment must be completed before customer due diligence is carried out. The risk assessment must include consideration of the customer’s ownership and control structure and the identity of its beneficial owners. Prescribed low risk customers may automatically be assigned a low risk rating without undertaking a risk assessment. If an authorised firm fails to complete customer due diligence, they must terminate or suspend the customer relationship.

All Firms must now review their policies and procedures to ensure that the new risk-based approach is taken into account. All client files also need to be reviewed to ensure they are in compliance with the new DFSA rules. The DFSA has indicated that they want all DFSA-authorised firms to be in full compliance with these AML rules by the end of the year. For all new customer accounts after date of incorporation, the new rules should automatically be applied.