Countries/Jurisdictions of Primary Concern - United Arab Emirates
The United Arab Emirates (UAE) has long thrived as a regional hub for trade and financial activity. In recent years, its robust economic development, political stability, and liberal business environment have attracted a massive influx of people, goods, and capital, which may leave the country vulnerable and attractive to money laundering activity. Dubai, especially, is a major international banking and trading center that has aggressively sought to expand its financial services business.
Risks associated with exchange houses, hawaladars, and trading companies in the UAE have received significant attention. With an immigrant population of more than 80 percent, money remittance is a pillar of the local economy. Since formal financial services are limited in large parts of many guest workers’ home countries, hawaladars and other money/value transfer services are prevalent in the UAE. There are some indications that trade-based money laundering occurs in the UAE, including through commodities used as counter-valuation in hawala transactions or through trading companies, and that such activity might support sanctions-evasion networks and terrorist groups in Afghanistan, Pakistan, and Somalia. Activities associated with terrorist and extremist groups include both fundraising and transferring funds. Bulk cash smuggling is also a significant problem.
A portion of the money laundering/terrorist financing (ML/TF) activity in the UAE is likely related to proceeds from illegal narcotics produced in Southwest Asia. Narcotics traffickers from Afghanistan, where most of the world’s opium is produced, are increasingly reported to be attracted to the UAE’s financial and trade centers. Financial networks operating both in and outside the UAE almost certainly control the funds. Domestic public corruption contributes little to money laundering or terrorism financing.
Other money laundering vulnerabilities in the UAE include the real estate sector, the misuse of the international gold and diamond trade, and the use of cash couriers to transfer illicit funds. The country also has an extensive offshore financial center, totaling 36 free trade zones (FTZs) and one financial free zone, including one under development in Abu Dhabi. There are over 5,000 multinational companies located in the FTZs and thousands more individual trading companies. Companies located in the FTZs are considered offshore or foreign entities for legal purposes. UAE law prohibits the establishment of shell companies and trusts.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: List approach
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, insurance companies, exchange houses, and securities traders
Number of STRs received and time frame: Not available
Number of CTRs received and time frame: Not available
STR covered entities: Banks, insurance companies, exchange houses, and securities traders
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: Not available
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
The UAE is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.menafatf.org/images/UploadFiles/UAEoptimized.pdf
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
The Government of the UAE continues to work on enhancing its AML/CFT program and, in 2014, worked to advance legislation strengthening efforts to combat ML/TF. In November 2014, the UAE amended its Anti-Money Laundering Law, expanding the list of ML predicate offenses, among other improvements. The law also stipulates that outbound and inbound travelers must declare the amount of money, convertible financial instruments, and precious metals and gems they hold under a disclosure regulation to be issued by the UAE Central Bank. Separately, in August 2014, the UAE issued enacted a new counterterrorism law which defines terrorist financing, imposes a minimum sentence of ten years for those found guilty of such crimes, and grants the Central Bank the authority to freeze bank accounts of those suspected of financing terrorist groups for up to seven days.
Several areas of AML/CFT implementation and enforcement require ongoing action by the UAE. The UAE should increase the capacity and resources it devotes to investigating ML/TF both federally at the Anti-Money Laundering Suspicious Cases Unit (AMLSCU) - the UAE’s financial intelligence unit (FIU) - and at emirate-level law enforcement. The AMLSCU also needs to enhance its financial information sharing capability to support cooperative efforts with counterpart FIUs. Additionally, enforcement of cash declaration regulations is weak. Law enforcement and customs officials should conduct more thorough inquiries into large declared and undeclared cash imports into the country, as well as enforce outbound declarations of cash and gold utilizing existing smuggling laws. Furthermore, the UAE should criminalize tipping off.
Law enforcement and customs officials should proactively develop cases based on investigations, rather than wait for STR-based case referrals from the AMLSCU. All facets of trade-based money laundering should be given greater scrutiny by UAE customs and law enforcement officials, including customs fraud, the trade in gold and precious gems, commodities used as counter-valuation in hawala transactions, and the abuse of trade to launder narcotics proceeds. The UAE has been considering moving forward with formulating a policy on all aspects of asset forfeiture, including asset sharing; it should take action to establish appropriate policies and procedures.