UAE improves anti-money laundering and anti-terrorist financing system

He Ministry of Economy held a briefing, during which he reviewed the main updates related to the development of the anti-money laundering and counter-terrorism financing (AML/CFT) system in the country, namely Cabinet Decision No. 109 of 2023 on the organization of beneficial ownership procedures.

Another update is the Cabinet Decision on administrative sanctions for non-compliance with the provisions of Cabinet Decision no. 109 of 2023 on the organization of beneficial ownership procedures, which aims to support the competitiveness of the domestic business environment and enhance the leading position of the UAE economy globally. regional and global levels.

Abdullah Ahmed Al Saleh, Undersecretary of the Ministry of Economysaid the development of actual beneficiary procedures is a key focus area within the UAE AML/CFT system.

He noted that the latest resolutions represent a new milestone in supporting the country’s ongoing efforts, strengthening efforts to address suspicious financial activity. It is designed to develop the regulatory and legislative economic environment and promote the national business environment and its governance. These are among the Ministry’s strategic objectives and are in line with global standards issued by the Financial Action Task Force (FATF).

Al Saleh He said the adoption of these two new resolutions constitutes an important addition to the previous AML legislation enacted by the country, particularly the regulation of beneficial ownership procedures. It includes new updates to improve the collection, evaluation and registration of actual beneficiary data of all private sector companies within the country, including those in commercial free zones, in cooperation with relevant local licensing entities.

The measure ensures that actual beneficiary data is collected and recorded from all relevant private companies, as there are almost 700,000 companies operating in various sectors in the UAE.

The Undersecretary explained that the modifications include new mechanisms for the country’s registration authorities, through measures of registrars and legal entities, to provide the minimum regulation of beneficial ownership procedures in accordance with the licensing, registration, partner or shareholder registration procedures.

These amendments aim to achieve the highest levels of compliance and improve the overall economic situation of the UAE. They also include the development of effective and sustainable operational and regulatory mechanisms and procedures to regulate the beneficial ownership procedures of all companies registered in the country, according to the best international standards of transparency.

He Ministry stressed that these amendments better support the regulation of beneficial ownership procedures. They also create associations based on the consolidation of procedures according to a unified national system that involves all registrars, presenting semi-annual performance reports on them. It strengthens the coordination and monitoring mechanism and gives indications of compliance by the Registrar with the provisions of the resolution.

He Cabinet Resolution No.109 highlights the regulation of actual access of beneficiaries in complex structures and the establishment of standards and complaints controls. Requires registrars to apply a risk-based approach to improve their access to risk identification, policies and measures. This aims to reduce risk by applying simplified or enhanced due diligence requirements and support its ability to report suspicious transactions to the Financial Reporting Unit, supporting integrated national efforts to strengthen the country’s AML system.

In addition, the amendments include a number of clauses on the organization of beneficial ownership procedures. They provide that a nominal member of the Department, such as any natural person acting following the directives, instructions or will of another person, is formally appointed or holds a position in the legal entity and generally as a representative of shareholders, members or any other interested party. party.

The decision also defines complex structure as an institutional mechanism that identifies the legal entity as part of a group of different and complexly linked entities to conceal the identity of the natural person who owns or controls the legal entity.

According to the decision, the true beneficial owner of the legal entity will be the person, whoever he may be, who ultimately owns or controls, either directly through a chain of ownership or control or by other means of control and has the right to appoint or dismiss. the majority of its directors, 25 percent or more of the shares or 25 percent or more of the voting rights of the legal entity.

The resolution also establishes five steps to identify the true beneficial owner. Firstly, the application of the Registrar’s risk-based approach will be considered, particularly in complex legal entity structures; secondly, the true beneficial owner must be located through any number of legal entities or structures of any type; and third, if more than one person jointly owns or controls a proportion of the capital of the legal entity, all of them will be considered co-owners or controllers of said proportion.

Fourthly, if no natural person is identified as the beneficial owner even after considering all reasonable means, or if there is reasonable doubt that any natural person identified as the beneficial owner is the true beneficial owner of the legal entity, then the person person who controls the legal entity through other means of control will be considered as the beneficial owner; Fifth, the natural person who acts as a senior manager will be considered the final beneficiary.

The resolution also defines the duties of the nominated board members as follows. First of all, a manager or board member acting as a member of the proprietary board must inform the legal entity that he is a member of the proprietary board and provide all the data referred to in article 10 of this Regulation within 15 days. following his incorporation as a member of the proprietary council. A nominated member of the board who acquired such capacity before the promulgation of this decision must inform the legal entity of this fact within 30 days from the date of promulgation of this decision.

Secondly, a nominal member of the board must inform the legal entity of any change in the data referred to in article 10 hereof within 15 days of making such change; and third, a nominal member of the board must inform the legal entity that he/she has ceased to be a nominal member of the board within 15 days following said cessation.

The decision also emphasizes the need to apply a certified risk management-based approach to registered companies to ensure that the legal entity is not used for money laundering and terrorist financing.

The approach includes classifying, assessing, addressing and mitigating potential risks related to money laundering and terrorist financing operations on an annual basis; take the necessary measures to reduce and prevent these risks through the evaluation, verification and monitoring of risks of legal entities; and implement the necessary procedures to manage risks and ensure their effective implementation.

Furthermore, it addresses the establishment of an AML/CFT unit of the Registrar as follows: The Registrar will have an administrative unit responsible for the implementation of policies, procedures and requirements to counter money laundering offences, combat the financing of terrorism and illicit organizations in accordance with the provisions of the decree-law, its executive regulations and the pertinent regulatory decisions.

The unit will be required to submit real-time reports and updates to the Ministry. The Registrar will issue a decision on the mechanism and functions of the unit after coordination with the Ministry and according to the organizational structure. This unit will be attached to the senior management of the Registrar.

Meanwhile, the Cabinet Decision on administrative sanctions focuses on the sanctions imposed on violators of the provisions of Resolution No. 109 through 16 points, ranging from a warning to the first financial sanction and then a second financial sanction in case of non-compliance and exit from license suspension for one month or more at the discretion of the Registrars.

Al Saleh stated that the Ministry of Economy, in its capacity as regulatory entity, will spare no effort to strengthen the national AML/CFT system. It strives to increase awareness and compliance levels among businesses targeted by all these legal requirements, thereby enhancing the UAE’s position as a global economic hub.

News source: Emirates News Agency