Compliance Alert: Corporate Service Providers & Law Firms: Adapt or Perish (and be fined)
Did you know that Corporate Service Providers and Law Firms are at the highest level of risk of having their business shut down on account of non-compliance with the UAE AML Law[1]?
The Background
Following the Financial Action Task Force’s (FATF) Mutual Evaluation Report on the UAE in 2020, we pointed[2] out that drastic changes in regards to AML rules were on the horizon for designated non-financial businesses and professions (DNFBP) such as dealers in precious metals and stones, CSPs, lawyers, accountants and auditors. The reason being that these sectors are deemed to be “high risk” from a financial crime perspective.
The FATF is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent illegal activities and the harm they cause to society.
While there was no enforcement action on the UAE, the FATF’s recommendations were to be implemented imminently. Since then, there has been a real regulatory push for DNFBPs including CSPs and Law Firms to ensure compliance with the UAE AML Law.
All operators in these sectors – look out!
Times are changing
In recent months, there has been a clear indication that the UAE’s regulatory bodies (including Central Bank, Ministry of Justice and Ministry of Economy) are becoming stricter towards implementing the UAE AML Law including enforcement for non-compliance. Earlier this month, the Ministry of Economy announced that the grace period for taking certain actions by the DNFBPs has been extended until 31 March 2021.
Other more serious measures recently taken by the authorities include enforcement action against financial businesses and law firms. Some instances are listed below:
- In January 2021, the Central Bank of UAE imposed financial sanctions on 11 banks for AML deficiencies[3];
- In November 2020, 7 Law Firms were fined for AML breaches; and
- In October 2020, over 200 UAE law firms had their license suspended for a month by the Ministry of Justice[4].
Think it can’t do this to YOU? Think again!
What actions must be taken?
To avoid sanctions similar to the above, CSPs and Law Firms are required to do the following:
- Register the entity in the Financial Intelligence Unit (goAML) system and Sanctions related system;
- Appoint a Compliance Officer to take on the responsibilities of reviewing and reporting any and all suspicious transactions and prevention and/or mitigation of money laundering and terrorist financing occurrences;
- Maintain appropriate systems and controls for AML including policy and procedures;
- Bi-annual reporting to senior management and the relevant regulator (retroactive from… 2014!);
- Commit to staff training on AML;
- Keep appropriate records & ongoing monitoring of client transactions and activities & periodic updates for all clients;
- Comply with relevant sanctions & laws; and
- Implement the requirements on reliance, controls, reporting and customer due diligence specifically applicable to DNFBPs.
How can we assist?
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.
Depending on the nature of your business and your existing AML framework, we assess the extent of support that may be required to ensure AML compliance under the UAE AML Federal Law. Our scope of work includes:
- AML health check
- AML Business Risk Assessments
- Develop AML Framework including Policy, Procedures, Forms, Templates, Register, etc.
- Remediation of Client and Business Partner Files to ensure necessary due diligence measures and procedures adopted
- Provide a designated compliance professional as Outsourced Compliance Officer
- AML Training to senior management, client servicing team & compliance team
Who are we?
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.
We are currently advisors to corporate service providers, law firms, accounting and audit firms, real estate agents and regulated entities within UAE. We also act as the appointed Compliance Officer for some of these firms.
[1] Federal Law 20 of 2018 http://rethink-hq.com/wp-content/uploads/2021/02/قانون-20-لسنة-2018.pdf
[2] FATF Mutual Evaluation Report on the UAE released – Rethink (rethink-hq.com)
[3] http://rethink-hq.com/aml-compliance-alert-for-uae-firms-11-banks-fined-for-aml-deficiencies/
[4] http://rethink-hq.com/200-uae-law-firms-suspended-by-ministry-of-justice-over-aml-breaches-how-to-avoid-being-the-next/
Authors
Gail Goring
Partner & Head – Regulatory & Compliance Services
Nisha Shah
Associate Director – Regulatory & Compliance Services
Collaborator
Jade Efole
Compliance Consultant
