Fighting Financial Crime: The Importance of AML/CFT Compliance
Money laundering is the process of disguising illegal profits as legitimate funds to avoid detection. It is often associated with criminal activities such as drug trafficking, corruption, and weapons dealing and many more crimes. The UAE, as a global hub for oil and precious stone exports, is particularly susceptible to money laundering due to its geographical location and attractive financial sector.
To combat this, the UAE has enacted the Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organizations, which applies to both financial and non-financial sectors.
What is Money Laundering?
Money laundering is a secondary crime that follows illicit activities like drug dealing, corruption, and weapons trading from which criminals earn their illegal revenues. The process of money laundering involves injecting these ill-gotten gains into the financial sector or Designated Non-Financial Businesses and Professions (DNFBPs) while concealing their illicit origin to make them appear legitimate. This allows the money to bounce back to the criminals through legal channels, evading detection and punishment.
How the UAE is combating Money Laundering
The UAE's status as not only an oil & precious stone exports hub but also a financial hub for trading, combined with its geographic proximity to high-risk jurisdictions, makes it vulnerable to money laundering activities. To counter this, the Ministry of Finance introduced the Federal Decree-Law No. (20) of 2018, which focuses on AML and combating the financing of terrorism and illegal organizations.
Applicable to credit and financial services sectors, the AML-CFT Law was an initial move, but as a countermeasure, money launderers began to use alternative channels to conceal their criminal revenues and turned to non-financial services sectors. To address this change in criminal behaviour, in 2020, the AML and CFT standards and recommendations were extended to the non-financial sector, known as Designated Non-Financial Businesses and Professionals (DNFBPs).
The UAE government recognizes the importance of safeguarding its financial system and has implemented robust regulatory measures to prevent money laundering activities. These measures extend beyond the traditional financial sector to include non-financial entities that may also be used as channels for money laundering. By extending the AML and CFT regulations to DNFBPs, the UAE aims to create a comprehensive framework that covers all sectors of the economy and strengthens its overall efforts to combat financial crimes.
Socio-economic Impact of ML & FT
With VAT already in existence since 1 January 2018 and Corporate Tax coming into effect on 1 June 2023 (just a few weeks away), it is more important than ever for SMEs to keep on top of their Tax Return Filing. Maintaining accurate bookkeeping records through a proper system simplifies tax preparation, as all the necessary financial information is readily available. This allows SME owners to save time and money, and direct their focus on growing their business.
Therefore, it is crucial for governments and regulatory bodies to prioritize implementing effective AML regulations and enforcing anti-money laundering laws to protect economies and ensure the integrity of the global financial system. Equally, it becomes important for the relevant businesses to comply with the regulations in order for them and their clients to remain protected against Money Laundering & Terrorist Financing.
Not sure if you are a Designated Non Financial Business and Profession? Contact us to find out more about DNFBPs and discover what you may be required to comply with
