What are the New Guidance and Updates on Money Laundering in United Arab Emirates?

The UAE has implemented various measures to combat money laundering and terrorist financing, including the enactment of the Federal Law No.20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and illegal Organisations (AML/CFT Law).

The AML/CFT Law imposes obligations on financial institutions and designated Non-financial businesses and professions (DNFBP’s) to implement AML/CFT measures such as customer due diligence (CDD), ongoing monitoring and reporting suspicious transactions to the authorities.

When was the latest Guidance on Money Laundering in UAE issued?

On 11th January 2023 a new guidance on the use of digital ID for customer Due Diligence was issued by the Central Bank of the United Arab Emirate (CBUAE) on anti-money laundering and combating the Financing of terrorism.

Who is the new guidance applicable to?

The new guidance is applicable for all natural and legal persons, which are licensed and/or supervised by CBUAE, in the following categories:

• National banks, branches of foreign banks, exchange houses, finance companies, issuers and providers of stored value facilities, licensed retail payment service providers, card schemes, registered hawala providers, and other LFIs; and
• Insurance companies, agencies and brokers.

What is the purpose of the new Guidance?

The purpose of the new guidance is to assist LFIs’ understanding of risks and effective implementation of their statutory AML/CFT obligations, and takes Financial Action Task Force (FATF) standards into account.

What is the Legal Basis of the new guidance?

The new guidance builds upon the provisions of the following laws and regulations:

1. The Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering ("AML") and Combating the Financing of Terrorism ("CFT") and Financing Illegal Organizations (as amended by Federal Decree Law No. (26) of 2021) ("AML-CFT Law");
2. Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation for Decree-Law No. (20) of 2018 on AML and CFT and Financing of Illegal Organizations ("AML-CFT Decision"); and
3. It also builds on global standards and best practices issued by the Financial Action Task Force ("FATF") and the Wolfsburg Group, as well as on industry standards and best practices.

What is the focus of the new guidance?

The main focus of the new guidance is:

It requires Licensed Financial Institutions(LFIs) to demonstrate compliance with its requirements in line with the relevant Central Bank of UAEnotice. The guidance further discusses the use of digital ID systems by LFIs to address their Customer Due Diligence ("CDD") obligations.

It also further focuses on the Digital ID mechanisms that LFIs should employ to perform CDD on an ongoing basis in relation to natural persons.

It specifically discusses identity proofing, enrollment and authentication mechanisms in relation to LFIs’ use of digital ID systems. LFIs are also required to utilize technology best practices, adequate governance and well-defined policies and procedures.

The new guidance also places emphasis on the use of third-party sources or providers to verify and authenticate customer identity through digital means.

What are the Identification systems in the UAE?

The national-level identification systems and processes currently in place or under development in the UAE, includes the following but not limited to:

• UAE Pass, the UAE’s first national digital identity and signature solution that enables users to identify themselves to government service providers in all emirates through a smartphone-based authentication protocol and to sign documents digitally with a high level of security. The UAE Pass app uses biometric facial recognition software to verify and register users without requiring an in person visit to a government services center. The UAE Pass also includes a "digital vault" for storing users’ digital documents and sharing them with government departments, as well as a "digital signature" function to complete official transactions without the need for paper documents or physical signatures.
• Emirates ID, the mandatory, government-issued identity card for all UAE citizens and residents. While issued as a physical card, the Emirates ID card uses public key infrastructure to attach individual identities to digital certificates that can be used to sign and encrypt data, as well as fingerprint biometrics. When verifying an Emirates ID card, LFIs should use the online validation gateway of the Federal Authority for Identity and Citizenship and should keep a copy of the Emirates ID and its digital verification in their records.
• Emirates Facial Recognition, an initiative launched by the UAE Ministry of Interior and Federal Authority for Identity, Citizenship, Customs & Port Security, together with private sector partners. The facial recognition initiative includes a "face fingerprint" system for digital verification of digital transactions and remote identities.

Can LFI’s rely on customer identification and verification undertaken by a third party at onboarding?

The new guidance states that the LFI’s are permitted to rely on customer identification and verification by a third-party onboarding provided the following conditions are satisfied:

1. the LFIs obtain all relevant information from the third party,
2. take steps to ensure that the third party will provide copies of customer documents and information used for CDD and
3. take steps to ensure that the third party complies with the CDD and record-keeping requirements set out in the Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.

The new guidance is a step in the right direction to protect the integrity and stability of the financial system and also promotes transparency and accountability in financial transactions.

Dr. Hassan Elhais is a legal consultant in Dubai, specializing in the drafting of all statements of claim, memos and consultation on litigation of all manner.