Important Terms used in Anti-money Laundering Policies
Money laundering can impact the whole society. It weakens financial institutions, it is a threat to economic stability, increases crime and corruption and ultimately leads to economic recession. Anti-Money Laundering controls seek to stop financial criminals from disguising illegally obtained funds as legitimate ones. Financial institutions and other regulated entities are required to have a robust program to prevent, detect and report money laundering.
The United Arab Emirates is fully committed to confronting money laundering and that is why the relevant authorities in the country have established an institutional system for supervision, control and gathering information on all practices that may lead to financial crimes, including terrorist financing. The Government of UAE has introduced relevant Anti-money Laundering (AML) policies and regulations for compliance with AML regulations.
The Ministry of Economy is the supervisory authority entrusted with the supervision of the ‘Designated Non-financial Businesses and Professions’ (DNFBPs). The sectors include:
- Brokers and real estate agents
- Dealers of precious metals and gemstones
- Independent accountants and auditors
- Corporate service providers
These businesses are mostly exposed to the risks of money laundering and misuse of commercial transactions and the funds traded in them for the purposes of money laundering or other illegal practices, given the nature of the services they provide or the products they deal with. All of them had to register for goAML by March 31,2021. The goAML portal is an integrated platform used to file Suspicious Transaction Reports (STR) and/or Suspicious Activity Reports (SAR). The DNFBPs who have not registered have already received the notices and further delays in registering and reporting may lead to heavy fines.
Together we all can make a difference to the quality of social and economic life by being vigilant and timely reporting of any suspicious activities. So, whether it is Covid-19 or Money laundering, we all must be responsible and vigilant so that together we can make a difference to our society, country and world at large!
# We all are responsible.
List of important Anti-Money Laundering terms
Not many businesses are aware of important Anti-Money Laundering policies and their allied implications. Every business owner ought to be aware of the important terms related to AML during these current times, where a business could fall prey to money-laundering. Having clarity on the meaning of AML policies and their frequently used terms will help you better understand the rules, strategically gauge the financial situation prevailing in your organization and take actions proactively to mitigate any threat and its implication on business. Here is a list of frequently used terms in AML:
The process by which criminals attempt to hide and/or disguise the origins of the proceeds of crime. This includes intentional concealment of the source of illegal funds obtained from illegal activities (such as terrorist funding or narcotic supply) and falsely presenting it as a legitimate money source by passing it under some commercial transactions.
AML – Anti-Money Laundering
It is the set of all rules, processes, strategies, systems and controls that regulated firms are required to put in place in order to prevent, detect and report money laundering activities.
AMLID- Anti-Money Laundering International Database
AMLID is a database for research and analysis of varied AML laws and regulations of various countries. It is mainly multi-lingual which enables different enforcement officers to analyze and evaluate these international laws. It is a compendium of analyses that include two general classes of money laundering control measures (domestic and international)as well as information on national authorities. A secure database of AMLID is an important reference tool for law enforcement officers.
CFT (Counter Financing of Terrorism)
Counter Financing of Terrorism also known as Combating the Financing of Terrorism, is a set of government laws, regulations and other practices that are intended to restrict access to funding and financial services for those whom the government designates as terrorists. By tracking down the source of the funds that support terrorist activities, law enforcement may be able to prevent some of those activities from occurring.
FIU (Financial intelligence units)
FIU are the central or national agencies that focus on combating criminal activities such as money laundering and terrorist financing by collecting financial information from different authorities concerned with suspicious activities. The core function of an FIU is the receipt, analysis and transmitting of reports of suspicions identified and filed by the private sector. The FIUs therefore function as an intermediary between the private entities, subject to AML/CFT obligations, and law enforcement agencies.
SAR (Suspicious Activity Report)
Suspicious Activity Report (SAR) or Suspicious Transaction Reports (STR) is a document that financial institutions, and those associated with their business, must file with the Financial Intelligence Units (FIU) whenever there is a suspected case of money laundering or fraud. These reports are tools to help monitor any activity within finance-related industries that is deemed out of the ordinary, a precursor of illegal activity, or might threaten public safety.
FATF – Financial Action Task Force
G7 nations founded FATF, an intergovernmental organization to develop standards and policies for fighting money laundering in the world.
DNFBPs – Designated Non-Financial Businesses and Professions
Financial Action Task Force (FATF) has identified some non-financial businesses and professions that face risk of money laundering and terrorism financing as businesses. These DNFBPs include dealers in precious metals and stones, trusts and company service providers, real estate agents, lawyers, notaries, and other independent legal professionals.
This is the first stage in the money laundering process where illegal money enters the financial system.
This is the second stage in the money laundering process where the illegal money is covered up by passing it as a commercial transaction in disguise so that detecting such illicit sources of funds gets difficult.
It is a technique used by criminals in the layering stage where the illicit money is divided into small transactions and dispersed between different accounts to avoid suspicion from authorities.
The]is is the last stage in the money laundering process where the illicit money moves in the system as clean money.
Also known as identity fraud, identity theft is the process by which criminals (acting as an imposter) access the personal and financial information of individuals without their consent to impersonate themselves and utilize the identity for illicit activities.
Any funds, property or documents obtained or acquired, through direct or indirect means, by committing a crime punishable pursuant to the provisions of this Law.
RBA (Risk Based Approach)
Risk based approach is a strategy used by companies and organizations to evaluate in-depth the risks of money laundering which their company is exposed to and combat those risks by framing adequate policies and control mechanisms.
AML or CTF compliance audit
It is the procedure to review the entire AML/CTF policies, check for compliance, assess the Know Your Customer (KYC) submissions, scrutinize all financial transactions, and evaluate the efficiency of the AML systems adopted in the organization. Directors are responsible for validation and approval of AML policies and can be criminally liable in case of any default highlighted in the reports of the Chief Compliance Officer (CCO) or Money Laundering Reporting Officer (MLRO).
Customer due diligence (CDD)
CDD is at the heart of Anti-Money Laundering (AML) and Know Your Customer (KYC) initiatives, and is designed to help banks and financial institutions verify if customers are who they say they are, confirm they’re not on any prohibited lists and assess their risk factors
A front company is a fully functioning company with the characteristics of a legitimate business, serving to disguise and obscure illicit financial activity.
They are the intermediaries between people or activities, who primarily help in transferring money from one place to another. Lawyers, accountants, notaries, company service providers and investment advisors act as gatekeepers for money laundering. Identifying gatekeepers will help to prevent money laundering and identify the source of operations.
Do you have more queries relating to AML in UAE? Contact our Taxation Experts for clarifications.
Our Tax experts can help you to arrive at an accurate interpretation of AML regulations and ensure timely compliance with the rules of the region. Our well-experienced team is always ready to help clients with their taxation queries. We can help you file reports and requested documents related to goAML.