UAE Central Bank – Regulation Concerning Procedures For Anti-Money Laundering

Article (1)

Money laundering refers to any transaction aimed at concealing and/or changing the identity of illegally obtained money, so that it appears to have originated from legitimate sources, where in fact it has not.

Article (2)

Scope of these procedures:-

These procedures shall apply to all banks, moneychangers, finance companies and other financial institutions operating in the country, as well as their Board Members and employees. These procedures also apply to the branches and subsidiaries of the UAE incorporated financial institutions operating within foreign jurisdictions which do not apply any such procedures or which apply less procedures.

Article (3)

Bank Accounts and the Required Documents:-

  • When opening an account, the bank should ensure obtaining all information and necessary documents which include: the full name of the account holder, the current address and place of work as well as the physical checking of the passport and keeping a copy thereof initialed by the account opening officer under a “true copy of the original”.
    • The bank should obtain all information and documents with regard to juridical persons, particularly a copy of the trade license, whose renewal date should be registered, in order to maintain a copy of the valid license in the bank files at all times. The bank should also obtain the name and address of the account holder, as well as the names and addresses of the partners. With regard to public shareholding companies, the bank should maintain the names and addresses of shareholders whose shareholdings exceed 5%.
  • With regard to cooperative societies or charitable, social or professional societies, the bank should not open any accounts except for those societies which submit an original certificate, signed by H.E. Minister of Labor and Social Affairs, confirming their identities and allowing them to open bank accounts.
  • All subsequent changes in the information provided on account holders should be updated regularly.
  • The same procedures in 3.1 and 3.2 above shall apply to other financial institutions, which receive money from their customers to manage in investment accounts or in pooled investment accounts.

Article (4)

It is strictly prohibited to open accounts with assumed names or numbers. The bank should always rely on the account holder’s name as in the passport (short form may be used) or the trade license in case of juridical persons.

Article (5)

  • With regard to non-account holders, who wish to pay by cash for transfers/drafts, banks and moneychangers should carefully and systematically verify the identity of any of such customers in all cases where the value of a transaction reaches AED Two (2) thousand or equivalent in other currencies or more for Moneychangers, and AED Forty (40) thousand or equivalent in others currencies or more for banks.
    • In this context, the identification normally includes customer details such as the name and full address of the beneficiary, the physical checking of the customer’s actual identification card. All details should be entered into the attached forms No. (CB9/2001/1 for Moneychangers) and No. (CB9/2000/1 for banks) to be initialed by the customer and the bank’s or financial institution’s officer-in-charge of handling the transaction.
  • In case of receiving a transfer/draft to be paid in cash or in the form of travellers’ cheques to non-account holders, or in case the transfer/draft is received through a moneychanger and its amount is AED Forty (40) thousand or equivalent in other currencies or more, the attached form No. (CB9/2000/2) should be filled-in and placed in a special file.
  • Where cash funds or travellers’ cheques are to be deposited into an existing account by a person/(s) whose names do not appear on the mandate for that account, or are not the usual employees or messengers of the account holder, particular attention and prudence are required.
  • If it appears that the transaction is carried-out on behalf of another person, vigilance is required, i.e. it becomes necessary to identify that person and record his details.

Article (6)

In case of a suspected money laundering transaction, the identity of the customer must be verified at any rate and in the same way as described above, regardless of the fact whether the concerned amount is AED Forty (40) thousand or less.

Article (7)

Particular precaution must also be taken with regard to renting safe deposit boxes. Details of customers who rent boxes measuring more than 70cm x 70cm x 70cm should be maintained. In case of non-resident customers, the Central Bank should be provided with copies of the forms containing details about each one of them.

In case of renting more than one box, the aggregate volume should be treated as the volume of one box.

Article (8)

Possible Money Laundering via Cash Transactions:-

  • Unusually large cash deposits made by an individual or a company whose ostensible business activities would mainly be conducted by cheques or other instruments.
  • Substantial increase in cash deposits by any customer or financial institution without an apparent cause, especially if such deposits are subsequently transferred within a short period out of the account to a destination not normally associated with the customer.
  • Customers who deposit cash in numerous stages so that the amount of each deposit is below the amount prescribed as an indicator, but the total of which is equal to or exceed the amount prescribed as an indicator.
  • Company accounts whose transactions, both deposits and withdrawals, are mainly conducted in cash rather than in negotiable instruments (e.g. cheques, letters of credits, drafts, etc.), without an apparent reason.
  • Customers who constantly pay-in or deposit cash to cover requests for bankers drafts or money transfers or other negotiable instruments, without an apparent reason.
  • Customers who seek to exchange large quantities of low denomination banknotes for those of high denomination banknotes with no obvious reasons. In such case, if the amount exchanged is AED Forty (40) thousand or equivalent in other currencies or more, the attached form No. (CB9/2000/3) should be filled-in and placed in a special file.
  • Customers who transfer large sums of money outside the country with instructions for payment in cash, and sums transferred from outside the country in favour of non-resident customers with instructions for payment in cash
  • Unusually large cash deposits using “ATMs” or “cash deposit machines” to avoid direct contact with the employees of the bank or the other financial institution, if such deposits are not consistent with the business/normal income of the concerned customer.

Article (9)

Possible Money Laundering via Customers Accounts:-

  • Customers who maintain a number of trustee or customers’ accounts not required by the type of business they conduct, particularly if there were transactions which contain names of unknown persons.
  • Customers who have numerous accounts and pay-in amounts of cash to each of these accounts, whereby the total of credits is a large amount, except for institutions which maintain these accounts for banking relationships with banks which extend to them facilities from time to time.
  • Any individual or company whose account shows virtually no normal personal banking or business-related activities, but is used to receive or disburse large sums which have no obvious purpose or for a purpose not related to the account holder and/or his business (e.g. a substantial turn-over in the account).
  • Customers who have accounts with several financial institutions within the same locality and who transfer the balances of those accounts to one account, then transfer the consolidated amount to a person abroad.
  • Paying-in large third party cheques endorsed in favour of the account holder, when there does not seem to be relevance to the account holder and his nature of business.
  • Large cash withdrawals from a previously dormant/inactive account, or from an account which has just received unexpected large sums of money from abroad.
  • A large number of individuals who deposit monies into the same account without an adequate explanation.
  • Unusual large deposits in the accounts of a jewelry shop whose accounts have never witnessed such deposits, particularly if a large part of these deposits is in cash.
  • All banks, moneychangers and other financial institutions should particularly examine money transfers originating from, or destined to countries which do not apply the FATF Recommendations or do not ensure that its financial institutions implement those Recommendations.

Article (10)

Possible Money Laundering via Investment-Related Transactions:-

  • Purchasing of securities to be held by the financial institutions in safe custody, where this does not appear appropriate given the customer’s apparent standing.
  • Loan transactions against pledge of deposits of a subsidiary or subsidiaries with financial institutions outside the country, especially if these were in countries known for the production or processing of drugs or are large markets for drugs, as per the list issued by the Central Bank from time to time.
  • Individuals or commercial institutions who bring in large sums of money to invest in foreign currencies or securities, where the size of the transactions is not consistent with the income of the concerned individuals or commercial institutions.
  • Buying or selling of securities with no discernible purpose or in circumstances which appear unusual.

Article (11)

Possible Money Laundering via International Banking and Financial Transactions:-

  • Customers introduced by a branch outside the country, an affiliate or another bank based in one of the countries in which drugs are produced or processed.
  • Building up of large balances, not consistent with the known turnover of the customer’s business, and the subsequent transfer to account(s) held abroad.
  • Frequent requests for travellers’ cheques, foreign current drafts or other negotiable instruments for amounts, exceeding the limit prescribed as indicator for no obvious reasons.
  • Frequent paying-in of travellers’ cheques or foreign currency drafts, exceeding the limit prescribed as indicator for no obvious reasons, particularly if originating from abroad.

Article (12)

Use of letters of credit and other methods of trade finance to move money between countries, where such trade is not consistent with the customer’s usual business. In this connection, banks should strictly adhere to the following:-

  • To exercise prudence in case the beneficiaries of the letters of credit or the shipping companies are owned by the bank customer who opens these letters.
  • Amounts on letters of credit submitted by the customer to the bank and to the Customs/Port/Airport authorities should match the original.
  • Checking of documents should be on selective and regular basis with the shipping companies and Customs/Port/Airport authorities.
  • Also, the size of the facilities should be in line with the securities on hand, nature of business and net worth of the customer.

Article (13)

Possible Money Laundering via Secured and Unsecured Loans:-

  • Customers who repay classified/problem loans before the expected time and for larger amounts than anticipated.
  • Customers who request loans against assets held by the financial institution or a third party, where the origin of those assets is not known, or that the assets are inconsistent with the customer’s standing.
  • A customer/customers who request a financial institution to lend them or arrange loans for them with a third party, where the source of the customer/customers financial contribution in such loans is unknown.

Article (14)

Possible Money Laundering via Electronic Banking Services:-

  • The bank/financial institution, which provides to its customers electronic transfer systems, should connect a programme on such systems to flag/highlight all unusual transactions, so as to enable the concerned financial institution to report such transactions.
  • When an account receives numerous small fund transfers electronically, and then the account holder carries out large transfers in the same way to another country.
  • Customers who make regular and large payments using different means, including electronic payments, that cannot be clearly identified as bonafide transactions, or receive regular and large payments from countries which as identified by the Central Bank as large drug markets.
  • Transfers from abroad, which are received in the name of a customer of the bank or any financial institution electronically, and then are transferred abroad in the same way without passing through an account (i.e., they are not deposited then withdrawn from the account), are not allowed. That is, these should be registered in the account and should appear in the account statement.

Article (15)

Miscellaneous:-

  • Banks should request their insurance company customers that in case an individual purchases a life insurance endowment policy or part thereof in case, he should be asked to fill in the attached form No. (CB9/2000/4), to submit it with the deposits of the concerned insurance company. The bank should, in case of suspicion, fill in a Suspicious Transaction Report (Form No.: CB9/2000/6) and send it to the Anti-Money Laundering and Suspicious Cases Unit – Central Bank.
  • In case of suspicious large sums of cash seized/confiscated at border points or arrival points of postal parcel or shipped goods or during police raids, the Central Bank shall, through the Unit mentioned in (16.1) below, shall coordinate with the concerned authorities.
  • Banks should not accept discounting unknown third party cheques emanating from outside the country, except for banks cheques, even if these can be cleared at correspondent banks, because some countries apply a recourse system through which such transaction can be revoked even after seven years of its completion, i.e. a reverse money laundering case would occur. Banks should also advise their merchants customers not to accept such cheques, even on the basis to be presented for collection.
  • When banks accept securities and foreign investment instruments to deposit their value in a customer’s account, or to pledge as security for a loan, they should directly verify with the issuer that these are genuine and not forged. Banks should also inquire about the source of the purchase funds if the securities are not forged. If they were found to be forged or that the source of the funds used in their purchase was illegal, then they should be handed in to the Central Bank, after informing the customer.
  • Despite the fact that the responsibility of verifying the soundness of the source of transferred funds from abroad falls on banks abroad as the actual laundering operation would have occurred in the transferring bank, however, the cooperation principle necessitates that banks, moneychangers and other financial institutions should exercise prudence and inform the Central Bank in case of suspicion. These parties should also obtain prior approval from the Central Bank, before taking any of the following steps:-
    • Refusing to receive the transfer and returning it,
    • Freezing the transferred amount or not carrying-out beneficiary’s instructions,
    • Closing down the customer’s account to which the transfer is made.
  • In case the Central Bank issues a decision to freeze any amount, it should be for a period not exceeding (7) working days with interest at the prevailing market rate. Furthermore, the concerned account holder should be notified immediately with regard to the decision and should be requested to provide the bank, where the account is maintained, with the necessary documents to prove the soundness of the concerned transaction. These steps are considered important in order to avoid the customer the administrative costs and the legal problems he may face, to which he might join-in the other parties, or to give him reason to make claims if the funds were found to have originated from legal sources.

    When the said freezing period expires, the Central Bank would take a decision to lift the freeze, even if no response is obtained from the supervisory authority in the transfer country.

  • Moneychangers should not open current accounts with banks and other financial institutions outside the country except after obtaining approval from the Central Bank.

Article (16)

Reporting Unusual Transactions:-

  • All banks, moneychangers and other financial institutions, as well as their Board Members, managers and employees are obliged, personally, to report any unusual transaction aiming at money laundering (keeping in view the examples cited in the previous sections) to:
    • The Manager-in-charge
    • Anti-Money Laundering and Suspicious Cases Unit
    • Abu Dhabi Tel.: (666 9437)
    • Abu Dhabi Fax : (666 9427)
    • Dubai and other Emirates Tel.: (800 2233)
    • Dubai and other Emirates Fax: (800 2223)
    • Or any other numbers to be advised by the Central Bank in the future.
  • In order to facilitate the verification process of suspected transactions that are aiming at money laundering, and which are carried out via banks or moneychangers, in particular, and other financial institutions, such institutions should report such cases to the Central Bank to: Anti-Money Laundering and Suspicious Cases Unit, as indicated above, and to fill in the attached form No. (CB9/2000/6).
  • Banks, moneychangers and other financial institutions should:
    • Name an employee to be designated as a “Compliance” officer at the concerned financial institution, to be responsible, among other issues, for contacting the Central Bank to report money-laundering and suspected cases, and sending reports and maintaining some reports properly, in addition to training staff as well as receiving calls/contacts in this connection.
    • Ensure always that their internal control systems operate efficiently and cover appropriately the implementation of this Regulation for Anti-Money Laundering Procedures.
  • In order to facilitate further inquiries by the competent authorities, any unusual transaction has to be handled with utmost discretion. The concerned institution or its employees must never contact the customer to inform him of what is going on.
  • Failure to Report:-
    • Banks which fail to report unusual and suspicious transactions shall be penalized in accordance with the prevailing laws and regulations.
  • Penal Punishment:-
    • Where it becomes aware of any money laundering activities, the Central Bank, after conducting thorough verification, shall submit a report to the competent law enforcement authorities.

Article (17)

Staff Training:-

The Compliance Officer in each bank, moneychanger or any other financial institution should provide training to staff responsible for receiving cash or overseeing accounts and their reports, on all matters pertaining to money laundering. The training should be in line with the responsibilities undertaken by the employees who should always exercise utmost prudence.

The Central Bank shall direct banks with regard to methods of training to be applied, as well as holding workshops to train on methods of combating money laundering. All financial institutions should send their concerned staff to benefit from such programmes.

Article (18)

    Records and Files Keeping Systems:-

  • Records Keeping

    The objective for records keeping is to ensure that banks and other financial institutions are able to provide the basic information on the account holder and to reconstruct the individual transactions undertaken, at the request of the relevant authorities. It is crucially important that a database is available and all transactions are individualized and booked in the customer’s account. It is also necessary that copies of these transactions are provided to the concerned authorities.

  • Files Keeping

    The bank or the other concerned financial institution should set up a files keeping system, and to instruct the respective staff to maintain correspondence, statements and contract notes on transactions in special files, in such a way to enable the bank/financial institution to respond to the relevant authorities’ requests in a timely manner. In addition, the database must also contain a list of the persons who have concluded cash transactions in the amount of or more than the limit prescribed as an “indicator”.

Article (19)

Information:-
The information to be kept in the systems relates to the following:-

  • A copy of the passport in the case of transactions by individuals initialed by the concerned

    employee under “a true copy of the original”.

  • A copy of the trade license in the case of transactions by institutions initialed by the concerned

    employee under “a true copy of the original”.

  • The volume of funds flowing through the account (turn-over in the of account)
  • The origin of funds, i.e., from which banks or other financial institutions, incase of transfers.
  • The form of funds deposited or withdrawn (cash/cheques, etc.)
  • The identity of the persons making the transactions, in case they were other than the account
    • holder(s) or beneficial owners.
  • The destination of funds in case of transfers from the account.
  • The type of instructions and authority regarding operating the account.

Article (20)

Timing:-

While the Central Bank is aware that banks, moneychangers and other financial institutions are not police detectives, the “timing” factor remains crucial if the concerned financial institution is able to retrieve the relevant information, which reflects positively on the reputation of the concerned financial institution.

Article (21)

Period of Keeping Documents, Forms, Records/Files:-

In cases to which these procedures apply, records should be kept and made available to Central Bank examiners and for investigation for a minimum of 5 years. This includes account-opening documents which should be kept for 5 years after the closing of the account (Code of Commercial Practice: Article 32)

Documents may be retained in original or stored on microfilm or in the computer. Where the account is open and operating, and the investigations relating to unusual transactions are going on, the records must be retained until the Central Bank examiners or the investigating authorities declare the investigation completed and closed.

Article (22)

All banks, moneychangers and other financial institutions operating in the country should adopt only these procedures and should immediately stop the practice of applying any internal procedures or compliance with regulations of any foreign country in this regard. All banks, moneychangers and other UAE incorporated financial institutions should notify the Central Bank of instances where their branches or subsidiaries, located abroad are prohibited from implementing any Anti-Money Laundering Procedures.

Article (23)

These procedures become effective as from 01/12/2000. Therefore, please make arrangements and take necessary steps from now.

Article (24)

Interpretation of the Regulations:-

The Governor is the sole interpreter of this regulation, and his interpretations shall be final.

Article (25)

Publication of this Regulation:-

This regulation shall be notified to the concerned to implement its provisions, and shall be published in the Official Gazette in both Arabic and English.

Any circulars, notices, decisions or directives that are in conflict with this regulation shall become cancelled.