UAE Money Laundering & Terrorism Financing Defense | Legal Advice and Representation
Under the Federal Decree Law No. 7 of 2024 amending some provisions of Federal Decree Law No. 20 of 2018 regarding Combating Money Laundering Crimes and Combating the Financing of Terrorism and the Financing of Illegal Organisations, a person can be charged with money laundering if they knowingly engage in the transfer, concealment, acquisition, or possession of funds that were derived from a criminal act, such as a felony or misdemeanor.
Additionally, Cabinet Resolution No. 71 of 2024 strengthens the regulatory framework concerning anti-money laundering (AML) and counter-terrorism financing (CTF) measures in the UAE.
The resolution outlines a structured approach to penalizing violations of AML and CTF regulations. It establishes clear administrative penalties for individuals and entities that fail to comply with these procedures, including fines and the suspension or revocation of licenses.
One of the central features of this resolution is the emphasis on financial institutions’ responsibilities.
These entities are required to implement stringent customer due diligence processes, conduct continuous monitoring of transactions to identify suspicious activities, and report these activities to the relevant authorities.
Furthermore, financial institutions must appoint a dedicated compliance officer to oversee adherence to these measures, ensuring that all employees are trained to detect and report potential violations effectively.
Money Laundering vs. Anti-Money Laundering: Understand The Key Definitions
- Money laundering is the act of concealing or disguising illicitly obtained money to make it appear as legally acquired.
- Anti-money laundering (AML) refers to the laws, regulations, and procedures designed to prevent money laundering and related financial crimes.
- AML efforts aim to detect and block the integration of illegal funds into the legitimate financial system and disrupt the activities of individuals or organizations involved in such crimes.
In other words, money laundering is a criminal activity, while anti-money laundering is a set of measures used to prevent and combat that criminal activity.
Penalty Structure Under New AML Law
Under the new AML framework, as updated by Federal Decree-Law No. 7 of 2024, several amendments were made to strengthen the UAE’s anti-money laundering and countering the financing of terrorism policies. Notably, it emphasises the establishment of key oversight bodies like the National Committee to Combat Money Laundering, alongside the Higher Committee Overseeing the National Strategy on Anti-Money Laundering and Countering the Financing of Terrorism. The Decree aims to improve enforcement and ensure compliance with international AML standards.
Regarding penalties, the amendments include increased penalties for non-compliance, but specific details on the updated fine structures or sanctions are governed under the broader provisions of previous laws, such as Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019. These earlier frameworks laid the foundation for severe penalties, including imprisonment and fines for individuals and entities that fail to adhere to reporting obligations or engage in money laundering activities.
- For individuals, imprisonment has increased from a maximum of 7 years to up to 10 years. Fines now range from AED 100,000 to AED 500,000, compared to the previous range of AED 30,000 to AED 300,000.
- Whistleblower incentives: If multiple individuals are involved in a money laundering offense, the court may waive penalties for an informant whose information helps identify other perpetrators.
The penalties for institutions have been, as well, significantly raised. Under Article 14 of the New AML Law, institutions found guilty of money laundering can be fined between AED 300,000 and AED 1 million for each offense.
Anti Money Laundering Penalties in UAE
The UAE government enforces stringent AML regulations with severe penalties, including:
- For individuals committing money laundering offenses, imprisonment of up to 10 years, along with fines ranging from AED 100,000 to AED 500,000, as mentioned above.
- For institutions involved in money laundering, terrorism financing, or supporting illegal organizations, fines range from AED 300,000 to AED 1 million.
- Failure to report suspicious transactions: If a company representative fails to report suspicious activities, whether intentionally or unintentionally, they could face imprisonment and/or fines between AED 50,000 and AED 300,000.
The court may also order the dissolution of the company and closure of its offices involved in the criminal activity.
- For suspects of money laundering, the penalty includes imprisonment of up to one year, along with a fine ranging from AED 10,000 to AED 100,000.
If the suspect voluntarily reports the crime before authorities are aware, and the information leads to the arrest of others or the recovery of laundered funds, the court may reduce or waive the imprisonment penalty.
Consequences of Non-Compliance with UAE AML Regulations
Entities subject to AML regulations, such as financial institutions, Virtual Asset Service Providers (VASPs), and Designated Non-Financial Businesses and Professions (DNFBPs), face severe consequences for non-compliance, including:
- Administrative Penalties: Regulated entities may incur fines of up to AED 5,000,000 for AML violations, with penalties increasing for repeated offenses.
The Central Bank of the UAE (CBUAE), the Dubai Financial Services Authority (DFSA), and the Financial Services Regulatory Authority (FSRA) are responsible for enforcing these penalties.
- Business License Revocation: Severe violations may result in the suspension or cancellation of a business’s operating license, particularly if the entity is unable to comply with AML requirements or poses a risk to the financial system.
- Reputational Damage: Non-compliance can severely damage a business’s reputation, leading to loss of trust from customers, investors, and partners.
For financial institutions and VASPs, this can result in lost business opportunities and a tarnished brand image, which is especially detrimental in the competitive financial sector.
- Operational and Financial Risks: Non-compliant businesses may experience operational disruptions, increased costs (such as legal fees), and loss of access to critical financial services, all of which can negatively affect overall business operations.
- Criminal Liability for Individuals: In cases of deliberate non-compliance, individuals such as compliance officers or senior executives may face criminal charges, including imprisonment and fines, for facilitating or participating in money laundering activities.
Read more about: 7 examples of money laundering cases in dubai
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