The Serious Organized Crime Agency (SOCA) of the United Kingdom, expressly defines money-laundering as, “Money laundering is any action to conceal, arrange, use or possess the proceeds of any criminal conduct.”
As quoted by the former Mexican President, Enrique Pena Nieto,
“I think money laundering is giving oxygen to organized crime.”
Thus, money laundering in simple terms can be defined as an act of shielding the illicit source of money from being known by using legitimate methods of financial transactions to transfer such money, thereby, concealing the act of crime out of which such money was produced. Money laundering is a tactic used by criminals to make illegal or dirty money appear to be legitimate. Inevitably, the smooth functioning of the financial sectors all across the globe are prone to get compromised by such illicit flow of cash. Hence, the need to enact stringent and dedicated legislations to combat the money-laundering activities has been acknowledged worldwide.
Accordingly, in the year 1988, United Convention against the Illicit Traffic in Narcotic Drugs and Psychotropic substances happens to be the first legal instrument to incorporate laws governing money-laundering and also to criminalize the acts of money-laundering, followed by several other incorporation of such instruments to counter and curb the money laundering activities. Some of the well-recognized financial institutions are the Financial Action Task Force (FAFT), the Egmont Group coordinating the international group of Financial Intelligence Units (FIUs), the International Money Laundering Information Network (IMoLIN) and the United Nations Office on Drugs and Crime (UNODC) plays a vital role to bring forth a set of standards, protective policy-measures and practices, penalties, governing regulatory bodies to curb the illegal activities like money-laundering and financing the terrorist groups. The United Arab Emirates (UAE) being a prime international financial hub recognized its high risks of being exposed to flow of illicit cash into its financial sectors. Ergo, in the year 2002, the UAE government took its first initiative to pass a legislation to combat the money-laundering activities, followed by several amendments in order to include the recommendations of the FAFT and other such international practices to ensure an 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 Organization 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:
Article 2 of the Anti-Money Laundering Law gives a clear definition of what acts constitutes money laundering – whoever with the knowledge of illegal source of money, deliberately involves in the following acts:
One of the key provisions of the Anti-Money Laundering Law is that it holds the criminal act of money laundering apart from the actual offence committed by the perpetrator. Which means that a person can be prosecuted separately by virtue of article 2(2) of the Anti-Money Laundering Law, irrespective of being imposed with a punishment or the judgment is yet to be decided for the offence from where such illicit money was produced. It is not necessary that the actual source or course of action of the illicit money be established in order to prove the act of money laundering used to obtain such illegitimate money.
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.
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.
Article 5 lays down the authority bestowed upon the governor, his delegates to freeze or seize any suspicious funds deposited at the financial institutions for a period of no more than seven (7) 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 a 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 provides that the aggrieved party can file for grievances in cases of seizure of the funds with the competent court from where such decision was decreed. In the event, if 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 (3) 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 such claim. Thereafter, the court shall issue its decision with regards to the same within a period of fourteen (14) 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 authority to initiate the 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 confers 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 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.
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:
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, 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:
The Central Bank of UAE is the regulatory authority over all the financial institutions, whose work is to supervise, monitor, and 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. Whereas 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 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.
The Anti-Money Laundering Law provides in article 29 (3) 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. This article intends to lay out a general overview of the prominent provisions of the Anti-Money Laundering Law. UAE has been taking relentless efforts to incorporate strong policy-measures and regulatory bodies in line with the international standards and practices in order to ensure the effective prevention of illicit cash flow into its financial systems.
Article 18 of the Anti-Money Laundering Law expressly states on providing judicial assistance to the judicial authority of another country upon their request with regards to investigation, court trials or procedures relevant to the crime, by the virtue of any enforceable agreement or reciprocity principle with UAE. Thus, the Anti-Money Laundering Law is a comprehensive and extensive piece of legislation which incorporates international conventions in its provisions and when conglomerated with other cabinet circulars of the Central Bank of UAE stands out as a stringent and effective governing legislation on combatting the money laundering and counter-terrorist activities.