Transparency International named the country the least corrupt in the Arab world, and it ranked 25th in the world in terms of corruption perception. According to the official, the UAE has made every effort since the start of the global recession to ensure that charges are filed against the corrupt as soon as possible. The Prosecution of Public Funds was established in 2009. Since then, this prosecutor’s office has been investigating financial irregularities such as bribery, racketeering, embezzlement, and contract fraud. Its goal is to put an end to the misappropriation of public funds. As far as anti-bribery and corruption (“ABC”) efforts are concerned, the United Arab Emirates (UAE) continues to lead the Arab world. In addition to offering a business-friendly environment and a competent public administration, the UAE criminalizes active and passive bribery, embezzlement, abuse of functions, and facilitation payments, enforces its ABC legislation, and continues to collaborate with international partners to fight corruption and bribery.
In UAE law, “bribery” has no “set in stone” definition. The United Nations Convention Against Corruption, which was adopted in accordance with Federal Decree-Law 8/2006, specifically Chapter 3, defines bribery as an offence committed with the intent to commit:
Transparency International, a non-governmental civil society organization that leads the international fight against corruption, publishes an annual Corruption Perceptions Index (“CPI”) that ranks 180 countries around the world based on perceived levels of public sector corruption. The CPI rankings are determined by Transparency International using expert assessments and opinion polls. It then assigns a score to each country ranging from zero (representing a high level of corruption) to 100. (Representing no corruption). Transparency International then ranks each country from one to 180 based on these scores.
The UAE has been fighting bribery and corruption since the 1980s, when Federal Law 3/1987, also known as the UAE Federal Penal Code, and specifically Articles 234 to 239. Bribery is also combated by the Federal Human Resources (Federal Decree Law number 11/08).
The Code of 1970 and Dubai Law 37/2009 on the Procedures for the Recovery of Illegally Obtained Public and Private Funds supplement the above laws in Dubai.
Other laws, as follows, have the secondary effect of combating bribery and corruption:
Transparency International ranked the UAE 37th out of 133 countries in 2002. The UAE finished 21st out of 180 countries in both 2019 and 2020.
The UAE most recently finished 24th in 2021. Despite a slight decrease from previous years, the UAE maintained its position as the least corrupt country in the Middle East and North Africa (“MENA”) region, continuing to outperform many non-MENA countries such as the United States, South Korea, Spain, Portugal, and Italy.
According to Federal Decree Law Number 8/2006, the United Arab Emirates has ratified the United Nations Convention Against Corruption (UNCAC). On December 21, 2010, the United Arab Emirates signed the Arab Convention to Combat Corruption, which includes 21 Arab countries, including the UAE.
Both the UNCAC and the Arab Council (which created the Arab Convention) were established specifically to combat corruption on a global and territorial scale, respectively. Ratification of the UNCAC means that, as of October 2017, the UAE, along with all 178 countries, can combat corruption on a global scale. With so many countries ratifying the agreement, a unified front against corruption is being presented, and all members are addressing the problem in the same or similar ways. Membership in the Arab Council is also important: the Arab states face unique corruption problems that may not be applicable in the rest of the world, so it is critical that the Arab states join forces to combat corruption on a global scale.
The modernized law resulted in increased enforcement activity, and a number of recent prosecutions appear to support that prediction.
For example, one investor was sentenced to a year in prison for offering a bribe of AED 10,000 to a customer service representative at a government center.
The investor requested that the official change the investor’s company from a management consultancy to an investment fund manager without requiring any documentation. Instead of accepting the bribe, the official reported it to the Department of Economic Development and Dubai police.
Through a structured PPP program, the UAE may seek to expand private sector outreach on these issues. A public-private partnership (PPP) is a collaboration between financial institutions (FI), law enforcement agencies, the FIU, public prosecution, policymakers, and the regulatory community to combat financial crime. It can contribute to the development of an effective intelligence-led financial crime model in the UAE. The formation of a PPP is based on the recognition that there is a clear overlap in the interests of all stakeholders in combating financial crime, and that by developing frameworks that allow more intelligence and insight to flow between parties, it is possible to more effectively disrupt malign actors and effectively prevent further criminal incursions into the financial system. The FATF broadly supports development. Second, similar to the overhaul of the UAE’s ABC legislation, the UAE has undertaken a series of actions to develop and deploy a sophisticated financial crime compliance framework in accordance with the expectations and recommendations of the Financial Action Task Force (“FATF”), an intergovernmental policymaking body whose purpose is to establish international standards, as well as to develop and promote policies, both at the national and international levels, to combat financial crime.
Third, the UAE has implemented reforms in reporting practices and transparency in registering beneficial interests and nominee directors. In summary, Cabinet Resolution No. (58) of 2020 regulating Beneficial Owner Procedures (the “Resolution”) imposed new obligations on UAE entities to disclose their beneficial owners. The Resolution’s main goal is to improve corporate governance, increase the transparency of entities registered in the UAE, and prevent financial fraud and tax evasion.
The anti-corruption legislation is based on the Federal Penal Code, which includes the majority of criminal offences.
The following financial-related offences are included in the bribery legislation:
This list is not exhaustive and only highlights a few examples of anti-corruption offences identified in the legislation.
Dubai police recently arrested Atul and Rajesh Gupta in response to an international warrant issued by South Africa for widespread bribery, corruption, and misappropriation of state assets. They are now awaiting extradition in accordance with a 2018 extradition treaty between the two countries, which will be ratified in 2021. Even more recently, the UAE announced plans to sign seven new extradition treaties this year in order to combat corruption.
These actions highlight the UAE’s concerted effort to prevent its misuse by financial criminals seeking to hide illicit funds. A negative AML rating can have serious economic ramifications, affecting a country’s credit rating and ability to attract foreign investment. Combating money laundering and terrorist financing is thus a critical component of creating a business-friendly environment, which is required for economic development.
Financial crime risks from money laundering, terrorist financing, non-compliance with sanctions, fraud, corruption, and tax evasion may increase in the current economic climate, as criminals have more time and avenues to exploit banking channels.
Systemic abuse of legitimate financial channels can result in reputational risks as well as a loss of customer and investor trust. Since the last evaluation, the UAE has taken significant steps to strengthen its financial crime framework, including the passage of AML laws and the completion of a National Risk Assessment. It has shown a high-level commitment to better implement the necessary controls across the industry in order to combat financial crime in a coordinated manner. Addressing the gaps identified in this report will position the UAE as a leader in the fight against financial crime and contribute to a favourable outcome through positive re-rating in the next review. To know more about the latest legal updates get in touch with Fotis International Law Firm.