Anti-money laundering law

Following is the updated final version draft of the proposed anti-money laundering law which is formally being called Criminalisation of Laundering of Property Derived from Unlawful Activity. The law is yet to be issued.

We, Zayed bin Sultan Al Nahyan, President of the UAE, having perused: The Constitution and, Federal Law No (1) of 1972, regarding jurisdictions of the ministries and powers of the ministers, and amending laws thereof, and, Union Law No (10) of 1980, regarding the Central Bank, the monetary system and organisation of banking and amending laws thereof, and, The Penal Code promulgated by Union Law No (3) of 1987, and, The Penal Code Procedures promulgated by Federal Law No (35) of 1992, and,Federal Law No (14) of 1995 regarding Fighting Narcotics and Psychotropic Substances, and, Federal Decree No (55) of 1990, regarding approval to join the 1988 United Nation’s Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, and,In accordance with presentations by the Minister of Finance and Industry, approval of the Cabinet, and ratification of the Supreme Union Council, Promulgate the following law

Article 1

In the application of this law, and unless the context otherwise indicates, the following words and expressions shall bear the meanings cited against each:

  • The State: The United Arab Emirates
  • The Minister: The Minister of Finance & Industry
  • The Central Bank: The Central Bank of the United Arab Emirates
  • The Governor: The Governor of the Central Bank
  • The Committee: The National Anti-Money Laundering Committee
  • Property: Assets of every kind, whether corporeal or incorporeal, moveable or immovable, and legal documents or instruments evidencing title to those assets or any rights related thereto.
  • Money Laundering: Any act involving transfer, conversion or deposit of property, or concealment or disguise of their true nature, knowing that such property is derived from any of the offences stated in paragraph (2) of Article (2) herein.
  • Proceeds: Any property derived from or, directly or indirectly obtained through the commission of any of the offences stated paragraph (2) of Article (2) herein.
  • Freezing or Seizure: Temporarily prohibiting the transfer, conversion or disposition of or movement of property on the basis of an order issued by the competent authority.
  • Confiscation: Permanent deprivation of property by order of a competent court.
  • Instrumentalities: Any item in any way used or intended for use in commission of any of the offences stated in paragraph (2) of Article (2) herein.
  • Financial Institutions: Any bank, finance company, money exchange house, financial or monetary intermediary or any other establishment licensed by the Central Bank, whether publicly or privately owned.
  • Other Financial, Commercial and Economic Establishments: Establishments licensed and regulated by agencies other than the Central Bank, such as insurance companies, stock exchanges and others.

Article 2

  • Where a person intentionally commits any of the following acts in respect of property derived from any of the offences stated in item (2) of this article, such person shall be considered a perpetrator of the money laundering offence:
    • The conversion or transference of proceeds, for the purpose of concealing or disguising the illicit origin of such proceeds.
    • The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to or ownership of proceeds.
    • The acquisition, possession or use of such proceeds.
  • For the purposes of this law, property shall mean those derived from the following offences:
    • Narcotics and psychotropic substances
    • Kidnapping, piracy and terrorism
    • Offences committed in violation of the environment law
    • Illicit dealing in fire arms and ammunition
    • Bribery, embezzlement, and damage to public property
    • Fraud, breach of trust and related offences
    • Any other related offences stated in international conventions to which the State is party.
  • Article 3

    Without prejudice to administrative penalties stated in the law, financial institutions and other financial, commercial and economic establishments operating in the country shall be criminally liable for the offence of money laundering if committed in their respective names or for their respective accounts.

    Article 4

    The Central Bank may, in accordance hereof, order the freezing of suspected property with financial institutions, and for a period not exceeding seven (7) days.

    The Public Prosecution may order seizure of suspected property, proceeds or instrumentalities, in accordance with its established procedures.

    The competent court may order provisional attachment, for undetermined periods, on property, proceeds or instrumentalities, if such property, proceeds or instrumentalities have resulted from, or were associated with a money laundering offence.

    Article 5

    • Without prejudice to provisions of Article (4) herein, the Attorney General shall have the exclusive authority to initiate criminal action against a perpetrator of any of the offences stated herein.
    • Orders for seizure of or provisional attachment on property with financial institutions shall only be executed through the Central Bank.

    Article 6

    The Central Bank shall set a ceiling for the amount that may be brought into the country in cash without the need for declaration, and any amount in excess thereof shall be subject to the declaration system as established by the Central Bank.

    Article 7

    There shall be established, within the Central Bank, a unit named ‘The Financial Information Unit’ to deal with money laundering and suspicious cases, and to which reports of suspicious transactions shall be sent from all financial institutions and other financial, commercial and economic establishments.

    The Committee shall determine the format for reporting suspicious transactions and methods of communicating reports to the said unit. The said unit shall render the information available with it at the disposal of law enforcement agencies to facilitate their investigations.

    The said unit may exchange information on suspicious transactions with their counterparts in other countries in accordance with international conventions to which the State is party, or on basis of reciprocity.

    Article 8

    • Following study of cases reported to it, the unit stated in Article (6) herein should notify the Attorney General to take necessary action.
    • If a money laundering case was directly reported to the Public Prosecution, the latter shall proceed with necessary action following consultations with the said Unit on contents of the report.

    Article 9

An anti-money laundering committee named ‘The National Anti-Money Laundering Committee’ shall be formed under the chairmanship of the Governor of the Central Bank, consisting of representatives of the following agencies, as per their respective nominations:

  • The Central Bank, The Ministry of Interior, The Ministry of Justice, Islamic Affairs and Awqaf; The Ministry of Finance and Industry, The Ministry of Economy and Commerce,
    Municipalities, economic departments or other agencies concerned with issuing trade licenses, The UAE Customs Council

Article 10

The terms of reference for the said committee shall be as follows:

  • Propose anti-money laundering rules and procedures in the State
  • Facilitate exchange of information and coordination between agencies represented therein
  • Represent the State in international anti-money laundering forums
  • Propose organizational regulation’s regarding works of the committee
  • Any other matters referred to it by competent authorities

The Board of Directors of the Central Bank shall determine remuneration for the committee’s members, and the organizational regulations shall determine the timings and manner of discharge of the committee’s tasks.

Article 11

Agencies concerned with licensing and supervision of financial institutions or other financial, commercial and economic establishments are required to establish appropriate mechanisms to ensure compliance of those institutions with anti-money laundering rules and regulations in the State. This should include reporting of suspicious cases, upon detection thereof, to the Unit stated in Article (6) herein.

Article 12

All concerned agencies must treat the information made available to them in respect of the criminal offences established herein, as confidential, and must refrain from breaching their confidentiality except to the extent required for use in investigations, legal actions, or lawsuits relating to violations to the provisions of this law.

Article 13

Whoever commits any of the acts stated in item (l) of Article (2) of this law, shall be punished by imprisonment for a term not exceeding seven years, or by a fine not exceeding Dh300,000, or by both penalties, in addition to confiscation of proceeds, or the equivalent thereof, if such proceeds were wholly or partially converted into, or mixed up with, other property derived from lawful sources.

Article 14

Whoever violates the provisions of Article (3) of this law shall be punished by a fine not less than Dh300,000, and not exceeding Dh1,000,000, in addition to confiscation of proceeds, or property of value equivalent thereto, or the equivalent of those proceeds if the latter were wholly or partially converted into, or mixed up with other property derived from lawful sources.

Article 15

Chairmen, directors, managers and employees of financial institutions or other financial, commercial and economic establishments who know of, yet fail to report to the Unit any act that occurred and was related to the money laundering offence, shall be punished by imprisonment or by fine not exceeding Dh100,000 or by both penalties.

Article 16

Whoever informs any person that his transactions are being scrutinised for possible involvement in suspicious operations, or that security authorities or other competent authorities are investigating his possible involvement in suspicious operations, shall be punished by imprisonment for a term not exceeding one year, or by a fine not exceeding Dh50,000 or by both penalties.

Article 17

The false notification penalty shall be inflicted on whoever notifies the competent authorities, in bad faith, of the commission of the money laundering offence, with intent to cause damage to another person.

Article 18

Whoever violates provisions of Article (6) herein shall be punished by a fine not less than Dh2,000 and not exceeding Dh10,000. Amounts subject of the violation shall be attached, and unless proven to be associated with another offence, shall be released by a Public Prosecution order.

Article 19

Whoever violates any of the other provisions herein or the regulations and decisions issued in implementation thereof shall be punished by a fine not less than Dh100,000.

Article 20

Financial institutions and other financial, commercial and economic establishments, as well as their directors, employees and authorised representatives shall be immune to any criminal, civil or administrative liability, which may result from providing required information, or breaking a restriction imposed, for safeguarding confidentiality, by a legislative, contractual, regulatory or administrative provision, unless such reporting was proved to have been done in bad faith.

Article 21

The competent judicial authority may, as per request of a judicial authority in another country to which the State is bound by an approved treaty and provided the act is established as a criminal offence in the State, or on condition of reciprocity, order the pursuit, freezing or provisional attachment of property or proceeds derived from or instrumentalities used in a money laundering offence.

Article 22

Any ruling or judicial order providing for the confiscation of property, proceeds or instrumentalities relating to money laundering offences, issued by a court or a competent judicial authority in a country to which the State is bound by a ratified treaty.

Article 23

The Council of Ministers shall, upon proposal by the Committee and presentations by the Minister, issue the executive regulations for the provisions of this law.

Article 24

Any provision contrary to or contravenes the provisions of this law shall be repealed.

Article 25

This law shall be published in the Official Gazette and shall come into force as from date of publication thereof.

Banks ‘will need to share information’ While the UAE anti-money laundering law is “world-class” as it goes, a framework for greater cooperation within the industry to share information is also needed, as is a proper mechanism to implement and enforce the law, Andrew Duff, UAE CEO and Gulf head of corporate banking, Standard Chartered Bank, suggested yesterday.

Interestingly, the bank has teamed up with another international bank to offer staff joint training courses on money laundering through simulation exercises – a rare instance of the industry getting together here, even if in a “non-competitive arena”.

Other bankers have also been “entire supportive” on the need to share information, he added.

“We have always cooperated with the regulators, providing them every assistance – but the bank-regulator interchange is only one part of the equation,” he argued.

“Banks also need to share privileged information and to talk to each other – while, of course, following a prescribed code of conduct and best practices. Further, law enforcement agencies” need to be given more teeth.

He pointed out there are a number of ways in which this could be achieved, including through the proposed National Anti-Money Laundering Committee, as also a website that offers limited access only to select bank representatives, or a Central Bank risk bureau.

The senior banker noted that every country in the world has a money-laundering problem, with up to an estimated $1.5 trillion – or almost 4 per cent of the world’s GDP – being whitewashed annually through the banking system.

“But for money-laundering to take place, obviously a crime has to have taken place; and if banks can choke off money-laundering 90 cents to the dollar it would help fight crime itself,” he observed.

Duff declared the additional framework still to be instituted provides the UAE an opportunity to demonstrate leadership, while taking it further along its ambition of becoming the Middle East’s financial centre.

“Increasingly a financial centre is viewed these days as one with transparency, efficient telecommunications, and effective capital markets. With the officials here also working on boosting the stock markets, it provides the UAE a platform to enhance its own status in the region.”

He refuted talk that sharing customer information with other banks might be viewed as breaching the code of conduct, or a violation of human rights that could legitimately have the client sue the bank:

“If the news or transaction is suspicious enough to be reported to the Central Bank, it can also be shared with other banks.”

He also warned that the proliferation of the Internet today offers more opportunities to money-launderers, who can ‘star-burst’ their bid to open new accounts with multiple banks through a single effort, with even a small percentage of strike successes translating into high actual numbers.

On the Standard Chartered Group’s own ongoing efforts to combat launderers, he said: “We continue to report suspicious transactions to the Central Bank on a monthly basis – which is not inconsistent with our practices elsewhere – and there has not been any significant change” in recent months from the earlier pattern.

He also accepted that the concentrated focus on laundering post-September 11 has an inherent cost involved. “But better a financial cost than a social one,” he countered.