UAE strengthens enforcement against money laundering

UAE is 'one of the highest risk areas' for money laundering,” says KPMG head.

The UAE has taken steps to clear up concerns about money laundering in the region with new rules clamping down on illicit financial flows.

The Federal National Council on Wednesday passed a draft law aimed at combating money laundering and terrorism financing in line with international recommendations by the Financial Action Task Force (FATF), an inter-governmental body. The UAE is a member of FATF through the GCC.

“We’ve identified that the UAE is one of the highest risk areas for money laundering,” said Ian Gomes, a partner and the regional head of advisory and markets at KPMG. “At the same time, the UAE is also one of the most proactive in taking steps to reduce the risk. The new legislation reinforces the integrity of its anti-money laundering framework.”

Money laundering is becoming an increasing area of focus for governments and companies as sanctions have widened against countries including Iran, Sudan and more recently, Russia. US regulators have also been issuing hefty fines to banks falling foul of money laundering rules. In the UAE, the US treasury department last year targeted an exchange house and a trading company for allegedly helping Iranian attempts to circumvent sanctions.

Dubai has also been accused by the NGO Global Witness of trading in smuggled gold, while research by the World Bank and the United Nations has alleged that Dubai has served as a funnel for funds linked to Somali piracy.

Under the new law, a national panel – made up of representatives from multiple government bodies – will be set up to oversee the fight against money laundering and terrorist financing. The legislation also poses penalties for money launderers, including jail terms of up to 10 years, fines of up to Dh500,000, or both. Businesses face even harsher penalties, including fines ranging between Dh300,000 and Dh1 million.

Money laundering by an individual or company was criminalised in the UAE in 2002, while the Central Bank can also impose sanctions and revoke the licence of banks falling foul of its anti-money laundering procedures. But the new legislation further beefs up the regulatory framework. It penalises board members, managers and staff of companies that fail to report money laundering or terrorist financing carried out by their companies with a jail term of up to three years, a fine of up to Dh100,000, or both.

For the first time, whistleblowers voluntarily reporting suspected money laundering or terrorist financing will also be protected by law.

“Protection to whistleblowers and witnesses is important as previously these people may have been scared to come forward,” said Mr Gomes.

He said the focus was now increasingly on banks to bolster their internal anti-money laundering rules, saying some in the region were “lagging behind” their international peers.

Globally, anti-money laundering costs are rising at an average rate of 53 per cent for banks, according to a KPMG survey released last week.

Bryan Stirewalt, managing director of supervision at the Dubai Financial Services Authority, said: “Every country in the world has vulnerabilities to criminal elements and illicit finance, and these vulnerabilities must be addressed in an effective manner. Without question, a comprehensive legal framework to identify and combat serious crimes and illicit financial gains benefits the economy and society as a whole.”

tarnold@thenational.ae

Follow us on Twitter @Ind_Insights

Published: May 1, 2014 04:00 AM

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