Anti Money Laundering Legislations - UAE

Federal Decree-law No. (20) of 2018
ON ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM AND FINANCING OF ILLEGAL ORGANISATIONS

 

We, Khalifa Bin Zayed Al Nahyan, President of UAE,
Pursuant to the perusal of the Constitution,

- Federal Law no. (1) of 1972 Federal Law No. (1) of 1972 Federal Law no. 1 of 1972 on Competencies of the Ministries and Powers of the Ministers and its amendments;
- Federal Law no. (6) of 1985 on Islamic Banks, Financial Institutions and Investment Companies;
- Federal Law no. (3) of 1987 issuing the Penal Code and its amendments,
- Federal Law no. (35) of 1992 issuing the Penal Procedures Code and its amendments;
- Federal Law no. (14) of 1995 on fighting narcotics and psychotropic substances and its amendments;
- Federal Law no. (4) of 2000 on the Emirates Securities and Commodities Authority and Market and its amendments;
- Federal Law no. (4) of 2002 on the criminalization of money laundering and combatting of the financing of terrorism and its amendments;
- Federal Law no. (8) of 2004 on the Financial Free Zones;
- Federal Law (13) of 2004 on the Supervision of Import/Export and Transit of Rough Diamonds and its amendments;
- Federal Law no. (1) of 2006 on the Electronic Commerce and Transactions;
- Federal Law no. (39) of 2006 on the International Judicial Cooperation on Criminal Matters;
- Federal Law no. (51) of 2006 Combating Crimes of Human Trafficking and its amendments;
- Federal Law no. (6) of 2007 on the establishment of the Insurance Authority and the regulation of its operations and its amendments;
- Federal Law no. (2) of 2008 on the National Societies and Associations of Public Welfare;
- Federal Law no. (6) of 2010 on the Credit Information;
- Federal Law no. (5) of 2012 on the Prevention of Information Technology Crimes and its amendments;
- Federal Decree-Law no. (5) of 2013 on weapons, ammunitions, explosives and military equipment;
- Federal Law no. (7) of 2014 on Combating Terrorism Offences;
- Federal Law no. (2) of 2015 on Commercial Companies and its amendments;
- Federal Law no. (8) of 2015 on the Federal Customs Authority;
- Federal Law no. (11) of 2015 on the supervision of trading and stamping of precious metals and stones;
- Federal Law no. (7) of 2017 on Tax Procedures;
- Federal Decree-Law no. (7) of 2017 on Excise Tax;
- Federal Decree-Law no. (8) of 2017 on the Value Added Tax;
- Federal Decree-Law no. (14) of 2018 regarding the 'Central Bank and the Organisation of Financial Institutions and Activities;
And based on the proposal made by the Minister of Finance and the approval of the Cabinet, Have issued the following Decree-Law:

Article (1)

In application of the provisions of the present Decree-Law, the following terms and expressions shall have the following meanings assigned to them unless the context requires otherwise:

- State: United Arab Emirates
- Ministry: Ministry of Finance
- Minister: Minister of Finance
- CBUAE: Central Bank of the UAE
- Governor: Governor of Central Bank
- Committee: National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organisations
- FIU: Financial Intelligence Unit
- Supervisory Authority: Federal and local authorities which are entrusted by legislation to supervise financial institutions, designated non-financial businesses and professions and non-profit organisations or the competent authority in charge of approving the pursuit of an activity or a profession in case a supervisory authority is not assigned by legislations.
- Law-enforcement Authorities: Federal and local authorities which are entrusted under applicable legislation to combat, search, investigate and collect evidences on the crimes including AML/CFT crimes and financing illegal organisations.
- Competent Authorities: The competent government authorities in the State entrusted with the implementation of any provision of this Decree Law.
- Predicate Offence: Any act constituting an offense or misdemeanour under the applicable laws of the State whether this act is committed inside or outside the State when such act is punishable in both countries.
- Money Laundering: Any of the acts mentioned in Clause (1) of Article (2) of the present Decree-Law.
- Financing of Terrorism: Any of the acts mentioned in Articles (29, 30) of Federal Law no. (7) of 2014.
- Illegal Organisations: Organisations whose establishment is criminalized or which exercise a criminalized activity.
- Financing Illegal Organisations: Any physical or legal action aiming at providing funding to an illegal organisation, or any of its activities or its members.
- Crime: Money laundering crime and related predicate offences, or financing of terrorism or illegal organisations.
- Funds: Assets in whatever form, tangible or intangible, movable or immovable including national currency, foreign currencies, documents or notes evidencing the ownership of those assets or associated rights in any forms including electronic or digital forms or any interests, profits or income originating or earned from these assets.
- Proceeds: Funds generated directly or indirectly from the commitment of any crime or felony including profits, privileges, and economic interests, or any similar funds converted wholly or partly into other funds.
- Means: Any means used or intended to be used to commit an offence or felony.
- Suspicious Transactions: Transactions related to funds for which there are reasonable grounds to believe that they are earned from any misdemeanour or felony or related to the financing of terrorism or of illegal organisations, whether committed or attempted.
- Freezing or seizure: Temporary attachment over the moving, conversion, transfer, replacement or disposition of funds in any form, by an order issued by a competent authority.
- Confiscation: Permanent expropriation of private funds or proceeds or instrumentalities by an injunction issued by a competent court.
- Financial institutions: Anyone who conducts one or several of the activities or operations defined in the Implementing Regulation of the present Decree Law for the account of /or on behalf of a client.
- Designated Nonfinancial Businesses and Professions: Anyone who conducts one or several of the commercial or professional activities defined in the Implementing Regulation of this Decree Law.
- Non-Profit Organisations: Any organized group, of a continuing nature set for a temporary or permanent time period, comprising natural or legal persons or not for profit legal arrangements for the purpose of collecting, receiving or disbursing funds for charitable, religious, cultural, educational, social, communal or any other charitable activities.
- Legal Arrangement: A relationship established by means of a contract between two or more parties which does not result in the creation of a legal personality such as trust funds or other similar arrangements.
- Client: Any person involved in or attempts to carry out any of the activities specified in the Implementing Regulations of this Decree Law with one of the financial institutions or designated nonfinancial businesses and professions.
- Beneficial Owner: The natural person who owns or exercises effective ultimate control, directly or indirectly, over a client or the natural person on whose behalf a transaction is being conducted or, the natural person who exercises effective ultimate control over a legal person or legal arrangement
- Transaction: All disposal or use of Funds or proceeds including for example: deposits, withdrawals, conversion, sales, purchases, lending, swap, mortgage, and donation.
- Registrar: The entity in charge of supervising the register of commercial names for all types of establishments registered in the UAE.
- Customer Due Diligence (CDD): The process of identifying or verifying the information of a Client or Beneficial owner, whether a natural or legal person or a legal arrangement, and the nature of its activity and the purpose of the business relationship and the ownership structure and control over it for the purpose of this Decree-Law and its Implementing Regulation.
- Controlled Delivery: The process by which a competent authority allows the entering or transferring of illegal or suspicious funds or crime revenues to and from the UAE for the purpose of investigating a crime or identifying the identity of its perpetrators.
- Undercover Operation: The process of search and investigation conducted by one of the judicial impoundment officer by impersonating or playing a disguised or false role in order to obtain evidence or information related to the Crime.

Article (2)

1- Any person, having the knowledge that the funds are the proceeds of a felony or a misdemeanour, and who wilfully commits any of the following acts, shall be considered a perpetrator of the crime of Money Laundering:

a- Transferring or moving proceeds or conducting any transaction with the aim of concealing or disguising their Illegal source.
b-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.
c- Acquiring, possessing or using proceeds upon receipt.
d-Assisting the perpetrator of the predicate offense to escape punishment.

2- The crime of Money Laundering is considered as an independent crime. The punishment of the perpetrator for the predicate offence shall not prevent his punishment for the crime of Money Laundering.

3- Proving the illicit source of the proceeds should not constitute a prerequisite to sentencing the perpetrator of the predicate offence.

Article (3)

Without prejudice to the provisions of Federal Law No. (3) of 1987 referred to, and Federal Law No. (7) of 2014 referred to herein:
1- Is guilty of the crime of financing terrorism whoever intentionally commits any of the following:
a- Any of the acts specified in Clause (1) of Article (2) of the present Decree-Law, if he is aware that the proceeds are wholly or partly owned by a terrorist organisation or terrorist person or intended to finance a terrorist organisation, a terrorist person or a terrorism crime, even if it without the intention to conceal or disguise their illicit origin.

b- Providing, collecting, preparing or obtaining Proceeds or facilitating their obtainment by others with intent to use them, or while knowing that such proceeds will be used in whole or in part for the commitment of a terrorist offense, or if he has committed such acts on behalf of a terrorist organisation or a terrorist person while aware of their true background or purpose.
2- Is guilty of financing illegal organisations crime whoever intentionally commits any of the following:
a- Any of the acts specified in Clause (1) of Article (2) of this Decree-Law, if he is aware that the proceeds are wholly or partly owned by an illegal organisation or by any person belonging to an illegal organisation or intended to finance such illegal organisation or any person belonging to it, even if without the intention to conceal or disguise their illicit origin.
b- Providing, collecting, preparing, obtaining Proceeds or facilitating their obtainment by others with intent to use such proceeds, or while knowing that such proceeds will be used in whole or in part for the benefit of an Illegal organisation or of any of its members, with knowledge of its true identity or purpose.

Article (4)

The legal person shall be criminally responsible for the crime if it is committed in their name or for its account intentionally, without prejudice to the personal criminal responsibility of the perpetrator and the administrative penalties as prescribed by law.

Article (5)

1- The Governor or his delegate shall have the right to freeze suspicious funds deposited at financial institutions for no more than (7) seven working days, in accordance with the rules and controls stipulated in the Implementing Regulation of the present Decree-Law, renewable by order of the public prosecutor or his delegate.
2- The Public Prosecution and the competent court, as the case may be, shall request the identification, tracking, or evaluation of suspicious funds, proceeds and instrumentalities or of whatever is of equivalent value or seizing or freezing them if they are the result of, or in connection with, the crime without pre-advising the owner and issuing a travel ban until the investigation or trial is completed.
3- The Public prosecution and the competent court, as the case may be and when necessary, shall take the necessary decision to prohibit trading or disposing of such funds, proceeds and instrumentalities and take the necessary actions to prevent any act aiming at evading related freezing or seizing orders, without prejudice to the rights of bona fide third parties.
4- All freezing orders of funds held by financial institutions licensed by the CBUAE may be only be executed through the CBUAE.
5- Any grievance against the Public Prosecution's decision to freeze or seize shall be filed in accordance with the provisions of the present Article before the competent court in whose jurisdiction the public prosecution issuing the decision is located. If the grievance is rejected, a new one may be lodged only after the expiry of three months from the date of rejection of the previous one, unless there is a serious reason to do so before the expiry of that period.
6- The grievance shall be filed by submitting a report to the competent court. The president of the court shall set a date to review the report and notify the plaintiff and any concerned parties of the date. The public prosecution shall submit a memorandum expressing its opinion on the grievance. The court shall issue its decision on this grievance within no more than (14) fourteen business days from the date of its submission.
7- The Public prosecution and the competent court, as the case may be, shall appoint whomever they find suitable to manage the funds, proceeds and instrumentalities seized, frozen or confiscated, also allowing the receiver to sell or dispose of it, even before the issuance of a court decision if needed. The proceeds of the sale shall be transferred to the UAE treasury in case of a final judgment of conviction. These funds shall be earmarked to any rights awarded legally to any party acting in good faith, proportionately to its value.
8- The Implementing Regulation of the present Decree-Law shall define the rules and procedures for implementing the dispositions of the present Article.

Article (6)

1- Without prejudice to the provisions of Article (5) of this Decree-Law, no criminal proceedings shall be instituted against the perpetrator of money laundering, financing terrorism, or financing of illegal organisations in accordance with the provisions of this Decree-Law except by the public prosecutor or his delegate.
2- The Public prosecutor or his delegate and the competent court as the case may be shall issue a decision to take the necessary procedures to protect the intelligence information and the means and methods of obtaining such information or instruct the competent authorities to protect the witnesses, or the undisclosed sources, the accused or other parties involved in the case if there is a serious threat to their safety.

Article (7)

1- The Public prosecution may, sue sponte or upon the request of the law enforcement authorities, should there be sufficient evidence of the occurrence of the crime, request direct access to accounts, records and documents held by third parties and request access to the stored data in the computer system and information technology programs, memorandums, correspondences and packages, identify track and seize the funds, control the accounts, issue travel bans and other procedures aiding in uncovering the crime and its perpetrators without prejudice to the legislation applicable to the UAE.
2- The Law Enforcement Authorities may conduct undercover operations and adopt other investigative methods and initiate the controlled delivery operation aimed at detecting the crime or its evidence or identifying the source and destination of the funds, proceeds or instrumentalities or arresting the perpetrators without prejudice to the legislations applicable in the UAE.
3- Any person involved in an undercover operation or a controlled delivery operation by Law Enforcement Authorities shall not be held criminally responsible unless such person has instigated the perpetration of the crime or exceeded the powers granted to him by the Law Enforcement Authorities.
4- The Competent authorities in the UAE shall keep comprehensive statistics on the reports of suspicious transactions, investigations and crime-related judgments, seized, frozen or confiscated funds, international cooperation requests and any statistics related to the efficiency and sufficiency of crime combating procedures.

Article (8)

Any person shall disclose whenever he brings into the UAE or take out any currency or bearer negotiable instruments or precious metals or stones of value, in accordance with the disclosure system issued by the Central Bank.

Article (9)

CBUAE shall establish an independent “Financial Intelligence Unit” (FIU) to which suspicious transaction reports, information on all financial institutions and designated nonfinancial businesses and professions shall be sent exclusively for consideration and analysis and referral to the competent authorities, either automatically or upon request. The Financial Intelligence Unit shall have competence over the following:
1- Requesting financial institutions and designated nonfinancial businesses and professions and the competent authorities to submit any information or further documentation related to received reports and information and other information deemed necessary for FIU to perform its duties on schedule and in the form determined by the Unit.
2- Exchanging information with its counterparts in other countries, with respect to Suspicious Transactions Reports (STR) or any other information to which the FIU has exclusive access or is the exclusive recipient, whether directly or indirectly, according to international agreements to which the State is a party or bilateral agreements signed by the FIU with its counterparts governing bilateral cooperation or conditional upon reciprocity. The FIU may communicate to its counterparts its findings derived from the use of the information provided by its counterparts and the results of the analysis conducted based on this information. Such information shall be used only for the purposes of combating the crime and shall not be disclosed to third parties without the FIU’s permission.
3- Establishing a database or a special register to record all available information and to implement data privacy and data security procedures to protect this information including procedures for handling, archiving transferring and accessing the data, and make sure that access to its premises, its database and its technology systems is restricted.
4- Any other dedicated activities to be specified in the Implementing Regulation attached to the present Decree-Law.

Article (10)

1- The Public prosecution may seek the opinion of the FIU about incoming reports it receives related to cases of money laundering, financing of terrorism and of illegal organisations.
2- Law Enforcement Authorities shall be responsible for receiving and following-up on suspicious transactions reports received from the FIU and gathering related evidence.
3- Law Enforcement Authorities may obtain the information that it deems necessary to perform its duties from the relevant authorities as stipulated under the Implementing Regulation of the present Decree- Law.

Article (11)

A committee chaired by the Governor, called "National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organisations", shall be established by virtue of the provisions of this Decree- Law. A decision on the formation of the Committee shall be issued by the Minister.

Article (12)

The Committee shall have the following competences:
1- Preparing and developing a national strategy to combat crime and proposing related regulations, policies and procedures in coordination with the competent authorities, and monitoring their implementation.
2- Determining and assessing the risks of the crime on the national level.
3- Coordinating with the relevant authorities and referring to related international sources of information in order to identify high-risk countries in relation to money laundering and financing of terrorism and instructing the supervisory authorities to ensure the adherence to the required due diligence procedures by financial institutions, designated nonfinancial businesses and professions, and non-profit organisations which are under their supervision.
4- Facilitating the exchange of information and coordination among the various bodies represented therein.
5- Collecting and analysing statistics and other information provided by the Competent Authorities to assess the effectiveness of their Regulations on combating Money laundering, Terrorism financing and financing of illegal organisations.
6- Representing the State in international forums related to Money laundering.
7- Proposing the Implementing Regulation covering the work of the Committee, and submitting it to the Minister for approval.
8- Any other matters referred to the Committee by Competent Authorities in the UAE.

Article (13)

The Supervisory Authorities shall, each within the scope of its competence, carry out supervision, monitoring and follow up to ensure compliance with the provisions provided for in the present Decree-Law and its Implementing Regulation and shall have in particular, the following competences:
1- Conduct a risk assessment on the likelihood of the perpetration of a Crime within the financial institutions, designated nonfinancial businesses and professions and non-profit organisations.
2- Conduct Control and audit inspections over financial institutions, designated nonfinancial businesses and professions and non-profit organisations, both remotely and on site.
3- Issue the decisions related to the administrative penalties in accordance with the provisions of this Decree-Law and its Implementing Regulation, the grievance mechanism, and keep statistics of measures taken and penalties imposed.
4- Any other specialized activities stipulated in the Implementing Regulation of the present Decree-Law.

Article (14)

1- The Supervisory authority shall impose the following administrative penalties on the financial institutions, designated nonfinancial businesses and professions and non-profit organisations in case they violate the present Decree-Law and its Implementing Regulation:
a) Warning
b) Administrative penalties of no less than AED 50,000 (fifty thousand dirham) and no more than AED 5,000,000 (five million dirham) for each violation.
c) Banning the violator from working in the sector related to the violation for the period determined by the supervisory authority.
d) Constraining the powers of the Board members, supervisory or executive management members, managers or owners who are proven to be responsible of the violation including the appointment of temporary inspector.
e) Arresting Managers, board members and supervisory and executive management members who are proven to be responsible of the violation for a period to be determined by the Supervisory Authority or request their removal.
f) Arrest or restrict the activity or the profession for a period to be determined by the supervisory authority
g) Cancel the License.
2- Except for paragraph (g) of Clause (1) of this Article, The Supervisory Authority may upon imposing the administrative penalties, request regular reports on the measures taken to correct the violation.
3- In any case, the Supervisory Authority shall publish the administrative penalties through various means of publication.

Article (15)

The Financial institutions and designated nonfinancial businesses and professions shall, upon suspicion or if they have reasonable grounds to suspect a transaction or funds representing all or some proceeds, or suspicion of their relationship to the Crime or that they will be used regardless of their value, to inform the Unit without delay, directly and provide the Unit with a detailed report including all the data and information available regarding that transaction and the parties involved, and to provide any additional information required by the Unit, with no right to object under the confidentiality provisions.
Lawyers, notaries, other legal professionals and independent legal auditors shall be exempted from this provision if the information related to these operations have been obtained subject to professional confidentiality.
The Implementing Regulation of the present Decree-Law shall determine the rules, controls and cases of the obligation to report suspicious transactions

Article (16)

1- Financial institutions and designated nonfinancial businesses and professions shall:
a) Identify the crime risks within its scope of work as well as continuously assess, document, and update such assessment based on the various risk factors established in the Implementing Regulation of this Decree- Law and maintain a risk identification and assessment analysis with its supporting data to be provided to the Supervisory Authority upon request.
b) Take the necessary due diligence measures and procedures and define their scope, taking into account the various risk factors and the results of the national risk assessment and retain the records received during the implementation of this process. The Implementing Regulation of the present Decree-Law shall specify the cases in which such procedures and measures are applied, and the conditions for deferring the completion of customer or real beneficiary identity verification.
c) Refrain from opening or conducting any financial or commercial transaction under an anonymous or fictitious name or by pseudonym or number, and maintaining a relationship or providing any services to it. d)Develop internal policies, controls and procedures approved by senior management to enable them to manage the risks identified and mitigate them, and to review and update them continuously, and apply this to all subsidiaries and affiliates in which they hold a majority stake; the Implementing Regulations of this
Decree-Law shall specify what should be included in said policies, controls and procedures.
e) Prompt application of the directives when issued by the competent authorities in the state for implementing the decisions issued by the UN Security Council under Chapter (7) of UN Convention for the Prohibition and Suppression of the Financing of Terrorism and Proliferation of weapons of mass destruction, and other related directives.
f) Maintain all records, documents, and data for all transactions, whether local or international, and make this information available to the competent authorities promptly upon request, as stipulated in the Implementing Regulation of this Decree-Law.
g) Any other obligations stipulated in the Implementing Regulation of this Decree-Law.
2- for the purposes of this Decree-Law, the Implementing Regulation of this Decree-Law shall regulate:
a) The obligations of non-profit organisations.
b) Retaining information and records by the registrar, to be provided upon request and taking procedures for access by the public.
c) Retaining information and records by the legal person and legal arrangement, and making it available upon request.

Article (17)

All authorities shall abide by the confidentiality of the information obtained in relation to suspicious transaction or the crimes provided for in this Decree-Law, and not disclose them except to the extent necessary for use in investigations, prosecutions or cases in violation of the provisions of this Decree-Law.

Article (18)

1- The competent judicial authority shall, upon request of a judicial authority of another country bound by an enforceable agreement with the UAE or by virtue of the reciprocity principle, provide judicial assistance in relation to investigation, court trials or procedures relevant to the crime and issue orders as follows:
a) Identify, freeze, seize or confiscate any funds, proceeds and instrumentalities generated from the crime, used or intended to be used in the crime or take any other procedures applicable under the enforceable legislations in the UAE, including, to provide records retained by financial institutions, or designated nonfinancial businesses and professions or non-profit organisations, to inspect persons and buildings, to collect witnesses’ statements, gather evidence, use investigative methods including undercover operations, intercepting communications, collecting statements and electronic data and controlled delivery.
b) Extradite, handover and handback persons and items relevant to the crime in a prompt manner in accordance with the legislations applicable in the UAE.

2- The competent authorities shall exchange information related to the Crime promptly with the foreign authorities, respond to requests made by any competent entity in the foreign countries which are bound by an applicable convention with the UAE or in accordance with the reciprocity principle. The competent authorities shall gather information from the relevant authorities in the UAE and take the necessary action to ensure the confidentiality of the information is used only for its intended purpose stated in the request for information and in accordance with applicable legislations in the UAE.

Article (19)

1- Competent Authorities shall give priority to requests for international cooperation related to countering money laundering and combating terrorism financing and ensure prompt handling of those requests and take efficient measures to ensure the confidentiality of the information received.
2- In application of the present Decree-Law, the request for international cooperation shall not be rejected based on any of the following grounds:
a) That the crime involves tax and financial affairs
b) That the crime is political or related to politics.
c) That the confidentiality