COMPLIANCE FOR HIGH VALUE DEALERS
The UAE’s first AML legislation, Federal Law No 4 of 2002 concerning the Criminalisation of Money Laundering as amended and updated by Federal Law No 9 of 2014 concerning Combating Money Laundering and Terrorism Financing, presents a comprehensive anti-money laundering and combatting terrorist financing framework. Cabinet Resolution No 38 of 2014 concerning the Executive Regulation of Federal Law No 2002 describes both the powers of the regulatory authorities and to whom the regulation applies setting its remit and significant penalties. Specifically, the law extends to include High Value Dealers (HVDs). It is paramount that HVDs review their internal operating procedures to ensure that they are aligned with the increased requirements or risk significant penalties.
1. What is a high value dealer?
An HVD is any firm or sole trader that receives high value payments of €15,000 or more in cash in exchange for goods e.g. car dealers, jewellers, antique and fine art dealers, boat dealers, builders, auctioneers and brokers. A business is defined as an HVD where it deals in goods and accepts cash equivalent to €15,000 or more in any currency. This applies whether the transaction is executed in a single cash payment or in several linked instalments.
2. How will an HVD business be affected by the new rules?
The law imposes very severe penalties on anyone involved in money laundering. The regulations require HVDs to adopt anti money laundering procedures to protect themselves against abuse by money launderers and the risk of prosecution. If a business deals in high value goods and accepts large cash payments, then one
is required to appoint and officer who can operate with sufficient independence to ensure compliance with the rules and to be the point of contact with the Central Bank of UAE. One needs to ensure that anti money laundering systems are put in place so that you can establish the identify of your clients can be established and any suspicious transactions reported.
3. Why was this regime introduced?
The aim of the regime is to help protect society and to combat money laundering and the criminal activity which underlies it, including terrorism. As money launderers have resorted to more sophisticated ways of disguising the source of their funds, new legislation and regulation, aligned with international standards, aimed at catching those involved became necessary.
4. What is money laundering?
Money laundering is the process by which criminally obtained money or other assets (criminal property) are exchanged for ‘clean’ money or other assets with no obvious link to their criminal origins. Criminal property may take any form, including money or money’s worth, securities, tangible property and intangible property. It also covers money which is used to fund terrorism This includes any conduct wherever it takes place, which would constitute a criminal offence if
committed in the UAE.
Under the legislation there are three principal money laundering offences covering criminal activity and two related money laundering offences:
- concealing, disguising, converting, transferring or removing criminal property
- making arrangements which facilitate the acquisition, retention, use or control of criminal property by or on behalf of another person
- acquiring, using or possessing criminal property
- failure to disclose knowing or suspecting or having reasonable grounds for knowing or suspecting that another person is engaged in money laundering or terrorist funding
- revealing that a disclosure of suspicion of money laundering has been made or that an investigation into money laundering offences is being carried out, or considered, where this is likely to prejudice an investigation. This is known as ‘tipping off’.
HVDs must be aware of how these actions could affect their business, for example, as the proceeds of crime are spent (or laundered) within their business.
5. What are the minimum requirements for high value dealers?
- establish proper systems to identify clients
- satisfy specific minimum requirements for customer due diligence (CDD) applicable for individuals
- confirm source of wealth of politically exposed foreigners and their families
- keep records for a minimum of five years
- report suspicious transactions to the Financial Information Unit of the Central Bank
- appoint a money laundering reporting officer who is able to operate independently. The scope of the officer’s responsibilities should include reviewing records, reporting suspicious transactions to the Financial Information Unit of the Central Bank (FIU), reviewing regulations and procedures, producing biannual reports, overseeing training, and liaising and cooperating with the FIU.
- Train all staff on anti money laundering procedures.
- Prohibit ‘tipping off’.
6. Who makes and enforces the rules?
The Central Bank of UAE is the primary enforcer of the rules with far-reaching powers. Where appropriate, it delegates to the following‘control authorities’ to enforce compliance with the new AML/CFT rules for HVDs:
- The Dubai Financial Services Authority (DFSA) for entities in the Dubai International Financial Centre and the Financial Services Regulatory Authority (FSRA) for entities in the ADGM
- The Real Estate Regulatory Agency (RERA) and other relevant Emirate-level Land Departments for real estate brokers.
- The Dubai Multi- Commodities Centre Authority (DMCCA) for Jewellery, precious metals and stone traders.
- The UAE Ministry of Justice for lawyers, legal consultants, private and public notaries.
7. What is a customer due diligence?
HVDs must establish the identity of any customer who makes a total cash payment equivalent to €15,000 or more for a single transaction or linked transactions. Establishing identity requires you to be satisfied that your customer is who they claim to be by obtaining evidence of their name, address and date of birth.
8. Failure to comply
Failing to comply with responsibilities under the regulations could lead to either prosecution or a civil penalty. Conviction under the regulations can incur imprisonment and / or a fine.
9. How can we help?
If you would like to discuss any of the issues raised above, please do contact us. We are able to provide comprehensive assistance to help you understand your regulatory obligations. We can design and implement a risk based anti-money laundering programme with policies and procedures, which includes transaction monitoring. We can offer initial and ongoing staff training as well as an ad hoc consultancy service to use to address specific cases.
Who we are
Rethink is a boutique accounting, audit, advisory, compliance and tax advisory firm with offices in Dubai and Abu Dhabi (ADGM), focused on providing
businesses of varying sizes with timely, proactive, and customized business solutions from start-up and early development to the latest stages of a
We offer tailored regulatory expertise and focus on guiding clients to reduce the risk of non-compliance across a wide range of compliance services
and regulatory advice. While we focus on compliance consultancy services including advisory, training and process improvement, we do not just tell you
what to do, we give you practical ways to make things work for your business.