Based on international best practices the United Arab Emirates has a robust set up for curbing financial crimes, which is governed and updated regularly.
There are various laws in the UAE where financial crimes are recognized and punished like crimes that are related to money laundering, financing terrorism and unlawful organizations are codified in the Federal Decree Law Number 20 of 2018 (AML Law).
Punishment for crimes such as fraud, breach of trust, and bribery is set out in Federal Decree Law Number 31 of 2021 (UAE Penal Code). The Government of UAE introduced a new Penal code called the UAE penal code, which came into force on January 2, 2022, and has been replaced by the previously existing Federal Law No. 3 of 1987.
The most recently amended law is crimes relating to bounced cheques (Federal Decree Law Number 14 of 2020). These are codified under Federal Law Number 18 of 1993 (Commercial Transactions Law) concerning commercial transactions law.
A perpetrator of a money laundering offence, according to Article 2 of the AML Law, is a person who is aware that the funds that have been laundered (including all kinds of assets such as cheques, shares, currencies, crypto etc.) have been obtained from an illegal activity and movement or reshuffles the proceeds or positions the proceeds/money with the intention of disguising or concealing their origin; or disguising their source; conceals or disguises the true nature, source or location of the proceeds including the manner of disposal; acquires, possesses or uses the proceeds on procuring them; or is an accessory to a crime that is committed by a person for a felony/misdemeanour to evade punishment.
Under Article 22/1, Money laundering is punishable by imprisonment of up to 10 years or a fine of up to 5 million dirhams or both.
Under Article 22/2 in the event the perpetrator abuses his influence or power vested in him by virtue of his profession to launder money, he is punishable by imprisonment of up to 15 years and fine of up to AED 10,000,000 (Ten million dirhams). Similar punishments are applicable if the crime is committed through a non-profit organization or an organized criminal group.
Under the AML Law, even an attempt to commit money laundering triggers full penalties.
Under Article 451 of the UAE Penal Code, unlawful appropriation of movable property, whether for one self or another person, or obtaining a benefit, document or signature on a document, It would be considered fraud to deceive the victim using fraudulent methods.
Any act of fraud is punishable with jail or fine. Any attempt with the intention to commit fraud is also punishable with jail of up to 2 years or a fine of up to twenty thousand dirhams.
Under Article 453 of the UAE Penal Code a person shall be liable to a jail sentence or a fine who embezzles, disperses, or uses money or any movable property or documents, with the intention of inflicting damage to their rightful owners when they are delivered to such person on the basis of a deposit, lease, mortgage, loan for consumption, or agency. Breach of trust is a criminal offence under the UAE Penal Code which is punishable with jail or a fine.
Article 275 to 287 governs the anti-bribery practices in the UAE Penal Code. With recent amendments followed by issuance of the new UAE Penal Code, the applicability of bribery provisions to individuals has expanded and includes foreign public servants, employees in the private/ public sector as well as employees of international organization in addition to its applicability on public servants and persons entrusted with public service.
Any act of bribery by a public official, foreign public official or an employee of an international organization is punishable with temporary imprisonment.
Article 641 bis (2) and (3) in the Commercial Transactions Law prescribes imprisonment and fines for bounced cheque-related offences. It includes knowingly using a forged or fake check, wrongfully using/benefitting from the check drawn in the name of a third party or whose use is associated with fraud, forging or faking a check or imputing it to a third party through a change in the data with the intent to cause harm to the third party, accepting amounts paid by a forged or fake check, etc.
Under Article 641 bis (4), if a person knowingly accepts amounts which are paid by a forged or a fake check for a terrorist purpose, he is punishable with imprisonment for life and fine of up to 1 million dirhams.
For a country’s economic impact on its credit rating and ability to entice foreign investments, a positive Anti-money laundering (AML) rating is important. An essential part of creating a business-friendly environment which is a precondition for economic development is fighting money laundering and terrorist financing. This presents an overview of the focus areas in the UAE and provides permissions that aid to enhance the overall effectiveness of the framework to mitigate the misuse of the system by financial criminals on the back of the recently issued UAE FATF Mutual Evaluation report. Given there is a five-year limitation for addressing these references of the report this requires prompt decision making and actions taken. As the UAE remedies the findings in the Mutual Evaluation report, the reevaluation will be on an ongoing basis by the Financial Action Task Force (FATF).
The publication also provides a number of considerations for the authorities wherein if implemented appropriately it can greatly enhance the outcomes established from financial crime fighting measures that are taken at the national level. One of the key approaches involves deploying the services of professionals from the private sector to improve investigation and prosecution outcomes by leveraging public private partnerships to help law enforcement and public prosecution.
By addressing the key points above the UAE will be able to improve the effectiveness of its financial crime controls and consolidate its position as a global financial and business hub.
Technology offers one of the biggest opportunities as well as poses one of the most disruptive threats in the global financial system. It is also pertinent to note that it has been progressive as we enter a post-Covid world.
The UAE is working on building a strong and sustainable structure to fight financial crime in the country and to harness digital transformation in the economy and societies as a force to fight financial crime. It also builds on the country’s clear policy and political commitment to combating illicit finance and preserving the integrity of the global financial system.
The first is to strengthen the defences in the UAE and the main objective is to equip the public and private sectors in the UAE with the tools needed to strengthen the defences. This consist of building the institutional capabilities set out in the UAE’s National Risk Assessment, National Action Plan and National Strategy for AML/CTF.
Information sharing is one of the guiding principles and the Central bank has launched a Public-Private Partnership Committee, chaired by an Executive Office. It includes members from 16 government agencies along with the private sector. The Central Bank in the UAE is working closely with the Ministry of Foreign Affairs and International Co-operation on financial crime concerns to facilitate cooperation and coordination with the international community. This dynamic alliance helps to sharpen the focus on improving the investigation conducted and the prosecution of financial crimes that include intelligence sharing and analysis, across the UAE and internationally.
Another important aspect is training and the Central Bank in the UAE is making investments to develop and encourage training. There are around 2,000 participants across all corners of the UAE economy – offshore and onshore financial institutions, as well as the members of designated non-financial businesses and professions (DNFBPs), have joined recent seminars for encouraging enhanced engagement between the public and the private sectors in the prevention of financial crimes.
There are more than 11 AML/CFT compliance workshops done in English and Arabic which had 7,000 attendees that were organized by the UAE Ministry of Economy included representatives from real estate, precious metals, and other such high-risk industries.
The UAE’s regulatory authorities and ministries are organizing more training sessions with industry representatives that will focus on key obligations such as building strong financial crime compliance controls and reporting suspicious activity
Another major factor is co-operation. There are 65 memoranda of understanding signed with international counterparts by the UAE’s Financial Intelligence Unit (UAE-FIU). The Central Bank in the UAE is also employed to ensure that the country’s domestic authorities have the necessary resources to coordinate with the UAE-FIU, including cases related to international concerns.
Furthermore, the UAE frequently participates in exchanging knowledge and skill-building workshops with international partners that include the EU, the UK and the US. As partnerships greatly benefit all the participants and lead to significant tangible outcomes, in July, 2022 the Central Bank in the UAE welcomed high-level visits from the US Department of the Treasury
Transparency plays a key role in reducing these financial crimes. The UAE lately introduced enhanced regulations that require the registration of companies’ beneficial owners. Furthermore, 93 per cent of UAE-based entities have registered successfully in the Ultimate Beneficial Ownership Database as of mid-August this year.
As Technology offers one of the biggest opportunities it also poses one of the most disruptive threats to the global financial system and the consequences are severe for those who do not comply.
There was an issuance of 78,787 first-step written warnings by August which was followed by 42,011 second-level penalties of Dh15,000 ($4,000), totalling Dh630 million. Whereas a third-level penalty will cost double that amount. This will be beneficial as an effect of wide-ranging transparency across the financial systems in the UAE thus making investigations more effective and operative in reducing risks of financial crime. There are multiple authorities using this information through appropriate legal procedures. The Central Bank in the UAE is starting to understand interconnected entities in several confidential and high-profile investigations by combining the use of advanced analytics.
banking and finance lawyers play a vital role in helping combat financial crimes. A gang of 40 people were convicted of money laundering and fraudulent activity, in August, with fines totalling Dhs860m and sentences issued between 5 and 10 years and has been recognized internationally.
Last year June resulted in a guilty plea to accusations of money laundering in a US court by the arrest of a high-profile individual by Dubai Police wherein the US authorities accredited the extensive co-operation of the UAE police in bringing the perpetrator to justice.
The concerning issue here is the interconnectedness of international organized criminal networks which is often accelerated by technological advancement. But there are significant measures taken through the power of intelligence, advanced analytics, technology, investigations and public-private partnerships.
There is encouragement taken from the progress made so far and it will continue to accelerate the abilities of the country in detecting, investigating and understanding money laundering and terrorist financing as the Central Bank advances financial crime compliance frameworks in the UAE and around the world.
Law Number 37 in Article 1 relates directly to illegitimate funds, and public funds, and gives clear definitions of what are illegitimate funds, and what are public funds.
Article 2 expressly states that in the event that a final judgment is rendered proving that a person has obtained illegitimate funds as defined in Article 1, and fails to pay the money back for any reason, the enforcement Judge must, upon the request of the debtor (i.e., civil claimant/victim), order the imprisonment of the debtor (fraudster) for:
Article 3 specifically states that the periods of imprisonment applicable in Article 2 are also applicable if the funds are deemed to be public funds. This a progressive step which removes the distinction between public and private entities that have been defrauded.
Article 4 states that the sentence for failure to pay back the money stolen is in addition to the sentence imposed for the commission of the offence which had given rise to the illegitimate funds.
A very big calculus to the fraudster is the potential gain against the risk of punishment in the event of apprehension in most cases of fraud. Law Number 37, in the Emirate of Dubai, is a big preventive measure taken in the fight against financial crime. In the event of conviction, a fraudster is less likely to embark on his criminality as he knows he faces the choice of up to 20 years in prison or the return of the money stolen. Of the countries that need extra monitoring, the so-called “gray list”, the UAE is well placed as one of the most important anti-money laundering watchdogs for them.
The Paris-based Financial Action Task Force has stated that the UAE has made “significant progress” in enhancing its systems for fighting financial crime which includes improvements in its ability to confiscate criminal proceeds and cooperate with investigators from other countries whenever necessary.
According to the study of FAFT, there are improvements that need to be made in several areas consisting of a necessity that strengthens the ability to be able to tail high-risk money laundering threats which demonstrates a “sustained increase” in the investigation for effective money laundering and prosecutions.
The UAE government stated that “The UAE takes its role in protecting the integrity of the global financial system seriously and will work closely with the FATF to quickly remedy the areas of improvement identified.”