Compliance Alert: 200 UAE law firms suspended by Ministry of Justice over AML breaches

Compliance Alert: 200 UAE law firms suspended by Ministry of Justice over AML breaches – How to avoid being the next!

October 27, 2020 by

re think in Compliance

The Ministry of Justice [MoJ] – the designated Authority for licensing/supervising lawyers throughout the UAE, incl. the mainland, financial and commercial-free zones[1] – has recently announced that 200 UAE law firms had their licenses suspended for a minimum duration of one month for failing to comply with the UAE’s anti-money laundering (AML) Law[2] and procedures.[3]

Firms were sanctioned because they failed:

to appoint a compliance officer; and
answer a questionnaire about money laundering or update their data as requested.

The imposed administrative fines by the MOJ ranged from 50,000 to 5 million dirhams. [4]

Firms were also directed to take the necessary action. To date, it is our understanding that a large number of these firms failed to do so.[5]

In addition to the suspension against law firms, the MOJ also took the quite radical action against individual lawyers by suspending and in some cases cancelling their professional licenses.

This emphasizes lawyers’ personal responsibility to ensure compliance with AML regulations, and more specifically, dealing with clients carefully, reporting suspicious transactions and maintaining proper records.[6]

Why it matters

Article 3 of Cabinet Resolution 10/2019 provides that Lawyers qualify as “Designated Non-Financial Businesses and Professions’ [or DNFBPs] – and must comply with AML Law and procedures.

What is required

Complying with AML Law and procedures takes commitment, but is not rocket science! The roadmap that every law firm willing to play by the rules should follow:

Hire an independent compliance officer to take on the responsibilities of reviewing and reporting any and all suspicious transactions and prevention and/or mitigation of ML & TF occurrences and implement to include filing of STRs
Bi-annual reporting to senior management & copy to AMLSU of management response (retroactive from… 2014 !)
Commit to staff training on AML and to develop the compliance officer on AML and CTF
Maintain appropriate systems and controls for AML/CTF purposes
Keep appropriate records & ongoing monitoring of client transactions and activities & periodic updates for all clients
Comply with relevant sanctions & laws
Implement the requirements on reliance, controls, reporting and customer due diligence specifically applicable to DNFBPs.

To avoid penalties, the MOJ also called upon registered lawyers to access the “Smart Lawyer” system on the Ministry website or to contact the Ministry to update their information,

Key takeaways

AML obligations, including the mandatory appointment of a compliance officer, are all covered by UAE Cabinet Decision No. 10 of 2019 concerning the Implementing Regulation of the UAE AML Law 2018. Every financial institution and DNFBP are obliged to appoint a compliance officer.[7] This requirement extends to law firms.

The recent news highlights the importance of law firms and other DNFBPs taking the necessary measures to ensure compliance with the UAE AML law. Steps should not only cover the future, but also existing and past files.

This compliance gap analyses and its documentary remediation can be time-consuming and thus resource draining. Even an organization willing to comply is faced with a high risk of failure, if relying on ill-equipped administrative staff.

Outsourcing the compliance function – to a firm like Re/Think – is an efficient and cost-effective way to ensure regulatory standards are met at all times.

How can we assist?

Rethink is a team of highly skilled and qualified professionals, specialized expertise as a certified anti-money laundering specialist including a FATF trained legal expert examiner, experience across financial services industry and multiple related fields from reputable jurisdictions.