Countries/Jurisdictions of Primary Concern - United Arab Emirates
The United Arab Emirates (UAE) is a regional hub for transportation, trade, and financial activity. In recent years, its robust economic development, political stability, and liberal business environment have attracted an influx of people, goods, and capital, which may leave the country vulnerable to money laundering activity. Dubai, especially, is a major international banking and trading center that has aggressively sought to expand its financial services business.
Money laundering risks in recent years have increased commensurate with the growth of large numbers of exchange houses, hawaladars, and trading companies in the UAE. Furthermore, remittances are transferred through these establishments from non-nationals in the UAE, who comprise more than 80 percent of the population and often are unable to access the formal financial sector in their home countries. There are some indications 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, Iran, Iraq, Syria, Yemen, 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 reported to be attracted to the UAE’s financial and trade centers. 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, with 37 free trade zones (FTZs) and two financial free zones. 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. Activity in the Dubai International Financial Center, supervised by the Dubai Financial Services Authority, is largely from major international banks/institutions.
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: All serious crimes
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: 3,484: January 1 - December 11, 2014
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:
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
The Government of the UAE continues to work on enhancing its AML/CFT program and has demonstrated its willingness and capability to take action again illicit financial actors. In November 2015, the Central Bank of the UAE (CBUAE), with assistance from the Dubai Police General Headquarters’ Anti-Money Laundering Unit and the U.S. Drug Enforcement Administration, took action against a Treasury-designated money exchange that was supporting a money laundering racket.
The Securities and Commodities Authority (SCA) in September 2015 announced that it ordered all UAE-based securities and commodities brokerage companies to electronically connect with the CBUAE’s Anti-Money Laundering and Suspicious Cases Unit (AMLSCU), the UAE financial intelligence unit (FIU). The procedure marks the first phase of SCA’s plan to connect all SCA-licensed companies with the AMLSCU.
The Government of the UAE in 2014 amended its Anti-Money Laundering Law, expanding the list of ML predicate offenses to all serious crimes, among other improvements. The AML Law explicitly states that money laundering offenses are stand-alone offenses and that the punishment of the offender for committing the predicate crime shall not preclude also punishing the offender for money laundering. Further, the new AML Law states that a conviction for the predicate offence is not required for evidencing the unlawful source of the proceeds being laundered.
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 AMLSCU and at emirate-level law enforcement. The AMLSCU also needs to enhance its financial information collection and sharing capability to support cooperative efforts with counterpart FIUs. The AMLSCU should also develop its analytical capacity. 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 money laundering 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 should take action to establish appropriate policies and procedures regarding all aspects of asset forfeiture, including asset sharing. The UAE should release annual numbers of AML/CFT prosecutions and convictions so as to better gauge the effectiveness of its regime.