Combatting Financial Crime in the UAE

Addressing key observations in the

UAE FATF Mutual Evaluation Report
June 2020
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

Overview
Given the UAE’s continued ambition of becoming a leading to improve the effectiveness of its financial crime controls and
global financial and business hub and permanent member of the consolidate its position as a global financial and business hub.
Financial Action Task Force (FATF), the observations as published
in the Mutual Evaluation Report of the UAE 2020 need to be This will require prompt decision making and actions taken, given
addressed on priority to support this ambition. there is a five year limitation for addressing the recommendations
of the report.2 FATF will reevaluate on an ongoing basis, as the UAE
FATF sets global standards and promotes effective implementation remedies the findings in the Mutual Evaluation report. By way of
of legal, regulatory and operational measures for combating example, the Kingdom of Saudi Arabia achieved a positive re-rating
money laundering, terrorist financing and other related threats to in little more than 24 months from the completion of the country’s
the integrity of the financial system. FATF is currently conducting MER in November 2017.3
a fourth round of Mutual Evaluations for its members against
recommendations adopted in 2012. The Mutual Evaluation of the
UAE was conducted in July 2019 and the UAE Mutual Evaluation
Focus areas for the UAE
Report (MER) issued in April 2020 provides a summary of the
Financial Institutions and Sanctions
anti-money laundering (AML)/counter terrorist financing (CFT)
measures in place in the UAE at the time of the on-site visit.
Immediate Outcome (IO.1) states that money laundering and
The report analyses the level of compliance with the FATF 40
terrorist financing risks should be understood and, where
Recommendations and the level of effectiveness of its AML/CFT
appropriate, actions should be coordinated domestically to combat
system. It also makes recommendations on how the system could
money laundering and the financing of terrorism and proliferation.
be strengthened.
IO.10 states that terrorists, their organisations and financiers
should be prevented from raising, moving and using funds, and
The joint FATF-MENAFATF assessment of the UAE concluded that
from abusing the Non-Profit Organisations sector. Furthermore,
in the past few years, the UAE has made significant improvements
IO.11 states that persons and entities involved in the proliferation
to its AML/CFT system including developing the National Risk
of weapons of mass destruction should be prevented from raising,
Assessment (NRA), addressing technical deficiencies in legislation
moving and using funds, consistent with the relevant United
and regulation, strengthening co-ordination mechanisms across
Nations Security Council Resolutions (UNSCRs).
the Emirates, strengthening the Financial Intelligence Unit (FIU) and
assigning supervisors for previously non-covered sectors. Many of
In general, financial institutions (FIs) are applying a range of
these enhancements to the system are recent, and while they have
preventative measures. Banks in the UAE have a good level of
a positive impact on the UAE’s technical compliance, their impact
understanding of ML/FT risks and obligations, while other FIs
on the effectiveness of the system was not fully evident at the time
(securities, insurance and MVTS) displayed a reasonably good
of the on-site visit.
understanding of risks and controls. Furthermore, FIs should apply
enhanced due diligence measures that are proportionate and
The assessment highlights that improvements are required in
reflective of the risks of its customers.
10 out of 11 ‘Immediate Outcomes’ or IOs (refer to Appendix)
evaluated towards effectiveness of controls for preventing
UAE financial institutions should be prepared for the new risks
money laundering (ML), financing of terrorism (FT) and trade
they will face during an economic downturn such as that caused by
in weapons of mass destruction.1 While the UAE has made
lower oil prices and a pandemic. These include:
progress, the MER states that the UAE will need to refine its
understanding of ML/FT risks, enhance ML investigations and
• Cybercrime as a result of increased demand for information and
prosecutions, and international cooperation. It also needs to focus
supplies through online channels.
on better supervision, preventing the abuse of legal persons and
arrangements, and ensure that assets linked to the financing of
• Criminal attempts to exploit the operational weaknesses
terrorism and weapons of mass destruction are frozen
that arise from home working (e.g. more limited operational
without delay.
resources, slower systems) and the increased activity in markets
e.g. fund redemptions, changes to payment volumes, foreign
This document presents an overview of the focus areas for the
exchange transactions.
UAE in the immediate term and makes recommendations that
would help to enhance the overall effectiveness of the framework
for mitigating the misuse of the system by financial criminals. By
addressing the points outlined in this paper, the UAE will be able

Reuters: UAE doing too little to stem money laundering and terrorist finance: watchdog
1

FATF: Consolidated Processes and Procedures for Mutual Evaluations and Follow-Up
2

FATF: Kingdom of Saudi Arabia - 1st Enhanced Follow-up Report & Technical Compliance Re-Rating
3

2
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

• As government guaranteed credit schemes are expected to an effective and efficient response to financial crime prevention
increase to counter the economic downturn, there will be and detection.
fraudulent applications for government backed loans without
the intention of repayment and misusing the scheme to launder Further, the relatively new United Nations Security Council
money e.g. the beneficiary declaring bankruptcy once the Resolutions (UNSCR) decision and accompanying new mechanism
repayments are due. of automatic transposition and notification for Targeted Financial
Sanctions (TFS) puts in place a much improved TFS framework. The
There are benefits to collating, standardising and making available UAE is implementing terrorist financing and proliferation-related
contextual datasets, which can be used by financial institutions to TFS, however, neither the new obligations nor the mechanism are
fulfil key Know Your Customer (KYC) and Customer Due Diligence widely understood or implemented, particularly by the private
(CDD) requirements. At present, the KYC data is fragmented with sector in the UAE. In addition, awareness of the Local List (UNSCR
different financial institutions holding information on the same 1373) is especially low amongst the private sector, including
customer which may overlap, but which may also be inconsistent financial institutions.
and incomplete. This can allow criminals to abuse the
financial system. In order to address this gap, the UAE authorities need to fully
implement TFS for terrorist financing and proliferation financing
Availability of centralised corporate information through a across the industry, especially the private sector, without further
beneficial ownership registry to the regulated sector would delay. They must also reach out to the public and private sector
enable it to overcome one of the most challenging areas of the entities on the onshore and the financial free zones (FFZs) to make
KYC process. The launch of KYC utilities coupled with digital them aware of their obligations with respect to the TFS and the
identification at the individual and corporate level can reduce import/export’s committee’s
knowledge gaps between financial institutions that can be new mechanism.
exploited by criminals and improve the efficiency and effectiveness
of the KYC and CDD process. The solution aims to reduce the Money Exchange Houses (MEH)
manual creation of customer information records resulting in
lower administrative burden on both FIs and customers. FIs will The UAE is a cash-intensive economy, enabled through its money
have access to accurate and up to date customer identity while exchange houses, small traders, tourism based retail and real
reducing time required to onboard customers and improving their estate transactions, exposing the country to inherent ML/FT risks
overall customer experience. Automation will enable FIs to perform related
checks on data extracted from documents using Optical Character to cash transactions.
Recognition (OCR). The standardisation and simplification of
onboarding processes is also a key enabler to encourage FinTech Money exchange houses were included in the highest sectoral
companies to enter the market and disrupt legacy financial service vulnerabilities in the UAE’s National Risk Assessment (NRA),
providers with the ultimate aim being to position the UAE as one of during the MER, the MEH sector displayed a reasonably good
the leading digital and financial service markets internationally. understanding of risks and preventative measures. However, the
MEH sector is highly fragmented with more than 130 licensed
exchange houses operating in the country. Most of these are small
Deloitte has conducted enterprise-wide Financial Crime companies with niche customer bases and insufficient revenues to
Risk Assessments for FIs in the region to help them test the justify investments into robust financial crime controls such as real
effectiveness of their financial crime controls and better time screening and transaction monitoring systems.
understand the inherent and residual risks associated with
their products and channels. Furthermore, Deloitte has worked Effective supervision and inspection of the MEHs can help
with leading financial institutions in the region to update their ensure that they have implemented financial crime controls
policies and remediate their customer databases which helped commensurate with their business, customer and transactions
fix gaps in their AML/CFT and Sanctions frameworks as per the profile. The Central Bank, which licenses the MEHs, may consider
mandate of the respective regulators. mandating submission of their annual compliance reports
evidencing the effectiveness of their financial crime controls.
Such exercises can be conducted by the internal audit function
Organisational barriers between the AML, Cyber and Fraud or independent third parties based on the risk classification of
teams at FIs should not put restrictions on sharing information each MEH, further, small MEHs may consider outsourcing real time
on the financial criminals. Globally, Deloitte is working with screening and transaction monitoring to their Banks or large MEHs.
industry players to design and develop industry-wide data sharing
platforms and enhance data fusion across organisations to enable

3
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

Investigation and Prosecution

Deloitte is currently working alongside law enforcement in
the USA to combat third party money laundering offences. In
IO.2 states that international co-operation delivers appropriate
this joint program, an example of public private partnership,
information, financial intelligence and evidence, and facilitates
a range of investigation resources from Deloitte are utilised
action against criminals and their assets. IO.7 states that money
including advanced analytics, commercially-enabled intelligence,
laundering offences and activities should be investigated and
expert witness testimony and forensic accounting staff. The
offenders should be prosecuted and subjected to effective,
engagement has led to the seizure of over $450 million of
proportionate and dissuasive sanctions. Furthermore, IO.8 states
criminal proceeds proving the remarkable potential
that proceeds and instrumentalities of crime should
of this model.
be confiscated.

The UAE routinely seizes proceeds of domestic crime. While these

prosecutions address some of the UAE’s predicate offence risks All Public Prosecution (PP) offices, especially Dubai PP, given its risk
(forgery and fraud), there is an absence of consistent investigations exposure, can prioritise the pursuit of money laundering charges,
and prosecutions of ML related to other high-risk predicate including complex or standalone prosecutions in cases of foreign
crimes such as drug trafficking, professional third-party ML, and predicate offences. The National Committee should establish a
those involving higher-risk sectors such as money value transfer dialogue with judges to communicate the aims of the national
services and dealers in precious metals or stones. Furthermore, AML/CFT strategy and use evolving risk analysis. In addition, the
the UAE was not able to demonstrate that there is a systematic UAE can make greater use of formal international legal assistance
or consistent confiscation process following formal international processes (mutual legal assistance, extradition, asset freezing and
requests involving the proceeds of foreign predicate offences. This confiscation) to catch foreign criminals who commit crime in the
is a key risk, as the UAE’s status as both a major global financial UAE or in using its financial system.
center and an international trade/transportation hub makes
it vulnerable to becoming a transit point for illicit funds from
The potential value of Public-Private Partnership (PPP) is
abroad. Although there are various opportunities to detect money
illustrated by the early experiences of the United Kingdom’s
laundering, the UAE Law Enforcement Agencies (LEAs) do not
Joint Money Laundering Intelligence Taskforce (JMLIT) which,
appear to routinely identify and target ML cases in line with the
since its inception, has supported over 600 law enforcement
UAE’s risk profile.
investigations, contributed to over 150 arrests and the seizure
or restraint of over £34 million.4 Regulators have a critical role
The UAE FIU can take a leading role in conducting the initial
to play in the development of PPPs. PPPs generally run on a
investigation based on data analytics and collation of information
basis of voluntary participation and the support of the regulator
from FIs on cases of interest. Advanced analytics, statistical
is vital in ensuring engagement. FATF describes JMLIT as “an
modelling and visualisation techniques can drive more effective
innovative model for public/private information sharing that has
detection and reporting of suspicious activities across the UAE,
generated very positive results since its inception in 2015 and is
AI and machine learning could help identify red flags and unusual
considered to be an example of best practice.”5 Deloitte, with
patterns based on historical behavior. Access to wider data
its experienced leaders who led JMLIT, can help the UAE develop
sets such as open source data can be transformative; collating,
a robust PPP program to fight financial crime strengthening the
standardising and utilising contextual datasets. This will enable
collaboration between the public and private sectors.
Law Enforcement Agencies to conduct faster and superior
investigations, which may lead to the capture of culprits and
confiscation of their assets. In today’s financial system, where it is
Furthermore, the UAE may seek to deepen private sector
easy to transmit money across borders and accounts in a matter
outreach on these issues through a structured PPP program. A
of seconds, time is crucial for the LEAs to identify the culprits, their
PPP is a collaboration between the financial institutions (FI), the
illicit scheme, and develop a robust case with sufficient evidence to
law enforcement agencies, the FIU, public prosecution, policy
get a favorable and decisive judgement in a court of law.
makers and the regulatory community to tackle financial crime.
It can help develop an effective intelligence-led financial crime
model in the UAE. The development of a PPP is predicated on the
recognition that there is a clear overlap between the interests of all
stakeholders in combatting financial crime, and that by developing
frameworks that better enable more intelligence and insight to
flow between parties, it is possible to more effectively disrupt
malign actors and effectively prevent further criminal incursions
into the financial system. FATF broadly supports the development
4
Established in 2014 and launched as an operational pilot in 2015, the JMLIT has provided a mechanism for law enforcement and the financial sector to share information and work more closely together to
detect, prevent and disrupt money laundering and wider economic crime. The JMLIT is located in the National Economic Crime Centre.
5
FATF: Mutual Evaluation of the United Kingdom

4
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

of PPPs, and a number of jurisdictions have already developed of cash, bearer negotiable instruments, and precious metals and
their own versions of the model.6 PPP is a capability that can stones. Furthermore, increased intelligence and awareness of the
help enhance performance across most Immediate Outcomes risks associated with cross-border cash, precious metals/stones
through facilitating collaboration and enhancing the use of financial smuggling and trade based money laundering, will ensure that UAE
intelligence, and must be considered by the UAE to strengthen its can better seek and provide cooperation at a level commensurate
national financial crime prevention program. with its ML/FT risk profile.

Designated Non-Financial Businesses and Professions

(DNFBPs) Deloitte recently helped a ministry in a GCC member state
in developing and implementing a fit-for-purpose AML/CFT
IO.3 states that supervisors should appropriately supervise, supervision framework covering requirements for effective
monitor and regulate financial institutions, DNFBPs and Virtual supervision and monitoring for the DNFBPs, including TCSPs,
Assets Service Providers (VASPs) for compliance with AML/CFT DPMS and accounting firms. The engagement included
requirements commensurate with their risks. IO.4 states the FIs, conducting sectoral risk assessments, designing the supervision
DNFBPs and VASPs should adequately apply AML/CFT preventive framework with appropriate rules based on local laws &
measures commensurate with their risks, and report regulations, international guidelines and leading industry
suspicious transactions. practices, and developing standard operating procedures for
the on-site and off-site inspections along with the application of
The Dubai Financial Services Authority (DFSA) and the Financial corrective measures and penalties for the DNFBPs.
Services Regulatory Authority (FSRA) have comprehensive
measures for monitoring DNFBPs licensed by them to ensure
compliance with their regulations. Outside of these two financial DPMS’ need to improve their understanding of financial crime risks
free zones, DNFBP supervisors were only recently established. and implement good governance standards with an effective third
Hence, only limited activity has occurred, that too in select sectors, line of defence with direct reporting to the Board. This will mitigate
in terms of supervision of DNFBPs beyond initial registration. the financial crime risks posed by the DPMS.
Though there are plans for a supervisory regime to be in place for
most sectors by 2021, the UAE has not been able to demonstrate Real Estate (RE) Firms
effective supervision of DNFBPs outside the FFZs at the time of the
MER, with the exception of market entry controls in the commercial Purchases in the UAE retail real estate sector are often cash based,
free zones. a large proportion of which are through foreign investors, whose
sources of funds are sometimes from jurisdictions with high AML/
The requirements under the 2018 AML Law and the 2019 AML CFT risks.8 With limited due diligence there is a risk that criminals
by-law are very recent and there is limited understanding amongst or sanctioned entities9 use the UAE RE to launder the proceeds of
most DNFBPs of their obligations. In addition, these requirements their crime.
are not yet implemented comprehensively and consistently. This
is concerning given the risk and materiality of certain segments Mandating RE transactions to have a digital trail through the
of DNFBPs in the UAE e.g. dealers in precious metals and stones banking system will enable required due diligence on the
(DPMS), real estate firms and Trust and Company Service purchasing parties and their sources of funds. Furthermore, real
Providers (TCSPs). state stakeholders including the land registration bodies, Real
Estate Regulatory Agency (RERA) and real estate firms can be
Dealers in Precious Metals and Stones (DPMS) trained to ensure the sector is aware of its risks and accordingly
implements effective financial crime controls.
The UAE is a party to the Kimberley Process and accordingly is
obliged to report movements of rough diamonds. However, there Trust and Company Service Providers (TCSP)
have been instances where precious metals and stones were used
to launder criminal proceeds. While penalties have been applied The UAE MER highlights that the use of TCSPs and legal consultants
for falsifying information or declarations, there appears to be an to establish legal persons and arrangements in the UAE presents
absence of consistent approach to investigating such international a vulnerability. During the onsite assessment, it was clear to the
organized crime.7 FATF assessment team that the UAE authorities were unaware
of the number of TCSPs that may be operating across the
The UAE may consider conducting assessments of financial crime country. However, given the recent introduction of regulation and
risks and building customs intelligence capability, including profiling appointment of supervisors for all DNFBPs, the position is likely to
and detection of resources, focused on cross-border movements become clearer in the near future.

6
FATF: Private Sector Information Sharing
7
BBC: In 2012, an organized crime group laundered British drug money by selling 3.6 tonnes of gold to the Kaloti refinery in Dubai.
8
Khaleej Times: Cash-based transactions continue to dominate Dubai realty
9
Specially Designated Nationals and Blocked Persons’ (SDNs)

5
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

Nevertheless, the UAE authorities must ensure that the desired outcomes. This would create a virtuous circle that would
supervision framework for TCSPs is consistent with the DNFBP help the industry to refine their monitoring systems and controls,
regimes across the relevant ministries and other authorities. and reduce the number of low-quality STRs. To ensure the
Adoption of UN standards to categorise all TCSPs can provide the feedback loop is enhanced, it is vital that the FIU is adequately
required consistency. resourced and empowered by modern techniques and tools.
Enhanced and more frequent trainings can be provided to the
Overall, the authorities can look to mandate that the DNFBPs, investigators, drawing on international best practices.
especially DPMS, real estate firms, TCSPs and law firms get their
AML/CFT frameworks reviewed either through their Internal Audit Adopting a data led analytics approach coupled with the use of
function or independent third-parties based on their respective machine learning and AI may help the FIU and the industry in
risk ratings. A risk based approach must also be adopted while increasing the volume of intelligence and insights available, and
onboarding their clients and on an ongoing basis. Where high AML adopt an intelligence-led risk-based approach to deploy their
risks are identified with clients, they must have defined processes resources where most needed. This will help generate more
to conduct enhanced due diligence, these controls need to be meaningful STRs focused on priority areas that have a higher
aligned to relevant local regulations and international standards. likelihood of being reviewed and actioned by law enforcement and
DNFBP supervisors may also conduct full-scope examinations, thus prevent more
directly or in tandem with the industry stakeholders with capability financial crime.
to conduct such examinations, in order to ensure controls
implemented by the DNFBPs are working as expected and that The effectiveness of the STR framework could also be enhanced
they are identifying and filing the required STRs to the FIU. by a model that allows stakeholders to work in collaboration
more easily, on suspicions aligned to agreed national priorities.
Suspicious Transaction Reports (STRs) This would expedite the creation of a comprehensive intelligence
picture which would inform and drive the response of all
IO.4 states that financial institutions, DNFBPs and Virtual Assets stakeholders against key threats.
Service Providers (VASPs) should adequately apply AML/CFT
preventive measures commensurate with their risks, and report Another approach UAE may consider to improve effectiveness
suspicious transactions to the FIU. Furthermore, IO.6 states that of its STR regime, is a STR ‘request’ model. In this model, the
financial intelligence and all other relevant information should be institution files a summary of suspicion to the FIU who could then
appropriately used by competent authorities for money laundering request a fuller investigation if the case is of interest, this ensures
and terrorist financing investigations. that the investigative efforts are focused on areas of genuine
interest to law enforcement. A number of jurisdictions have
The UAE FIU introduced the go AML STR reporting system in June been working on this with an increasingly effective and efficient
2019. The platform connects financial entities and DNFBPs with the approach to the identification of suspicious activities.
FIU to report suspicious transactions.10 As this system was recently
implemented, the results of these enhancements were not tangible
during the on-site visit. Deloitte has worked with the FIUs in several countries advising
them on the adoption of modern investigation techniques and
One of the concerns identified in the UAE MER was the low level of tools as well as in implementing robust workflows to ensure
STR reporting by the DNFBPs, which limits the financial intelligence adequate level of competence. This has helped the FIUs not
available at the national level. Secondly, there remain concerns only in deploying its resources efficiently but improve the
about the quality of STRs filed across sectors (even amongst banks, investigation outcomes and support law
which submit around 85% of STRs filed). Analysing poor-quality enforcement effectively.
reports diverts already limited FIU resources and is ineffective
in driving law enforcement outcomes. Thirdly, while the number
of STRs have risen exponentially over the years, the quality of Free Zones
financial intelligence available to the investigators has not kept pace
and is not up to the standard at times. IO.5 states that legal persons and arrangements should not be
misused for money laundering or terrorist financing purposes, and
Good quality STRs may be accomplished through enhanced information on their beneficial ownership should be available to
guidance, awareness and training of the private sector, particularly competent authorities without impediments.
the DNFBPs, to improve their awareness, investigation skills and
ensure timely reporting of STRs. Improving the feedback loop There are two financial free zones (FFZs) and 29 commercial free
between the FIU and the regulated sector is also key to generating zones (CFZs) in the UAE. Challenges remain in the monitoring and

10
Gulf News: New system to curb money laundering in UAE

6
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

Conclusion
supervision of free zones outside of DIFC and ADGM. The risk of A negative AML rating can have serious economic consequences,
criminals being able to misuse legal persons in the UAE for ML/ affecting a nation’s credit rating and ability to attract foreign
FT remains high, particularly through concealment of beneficial investments.13 Fighting money laundering and terrorist financing
ownership information via complex structures, which may be is therefore an essential part of creating a business friendly
controlled by unidentified third parties, or the use of informal environment, which is a precondition for economic development.14
nominees. The sheer number of registered entities across a
multitude of CFZs and across several emirates in the UAE poses a In current economic stress, financial crime risks from money
challenge, given their predominantly foreign ownership. laundering, terrorist financing, sanctions non-compliance,
fraud, corruption and tax avoidance may increase with criminals
Due to the geographic proximity to countries destabilized by having sufficient time and avenues to exploit banking channels.
conflict or terrorism, as well as countries subject to UN sanctions, The systemic abuse of legitimate financial channels can lead
the risk of sanctions evasion is apparent in the UAE. to reputational risks coupled with a breakdown in customer
and investor trust. This can bring about further negative
The measures taken to manage financial crime risks vary between macroeconomic consequences if capital flows are disrupted, or
the different free zones, but positive steps have already been liquidity positions of financial institutions are undermined by
taken to standardize the approach. In September 2019, the EU deposit outflows or through the payment of major fines.
recognized the UAE’s efforts in preventing tax avoidance by
removing the UAE from the list that covers jurisdictions that have The UAE has taken significant steps in strengthening its financial
failed to cooperate with the EU on tax matters. The EU cited the crime framework since its last evaluation with the enactment of the
UAE’s adoption of new rules on offshore structures, including the AML laws and by undertaking a National Risk Assessment. It has
introduction of economic substance rules to fight economic crime, demonstrated a high-level commitment to better implement the
as a reason for the removal.11 necessary controls across the industry to fight financial crime in a
coordinated way. Addressing the outstanding areas outlined in this
report will establish the UAE as a leading nation in the fight against
Deloitte has worked with free zone authorities in the UAE in financial crime and help achieve a favorable outcome through
investigating and remediating the registered entity records. positive re-rating in the next review.
This included conducting enhanced due diligence on high risk
entities with the purpose of identifying the Beneficial Owners
and potential matches against SDN and Politically Exposed
Persons Lists.

To better focus on preventing the abuse of legal persons and

arrangements and to improve the controls in the in the free
zones12, the UAE Free Zones sub-committee may adopt uniform
AML/CFT and sanctions compliance standards and ensure their
consistent application across the 29 CFZs, particularly when
onboarding new entities and updating the records of the existing
entities. These standards may include a corporate registry,
common database of beneficial owners, sectoral risk assessments,
third party reviews and thematic inspections by expert examiners.
The sub-committee should also encourage cooperation and
coordination amongst the free zones through shared data
platforms and watch lists.

11
Lexology: UAE removed from EU blacklist thanks to Economic Substance Regulations
12
FATF: Outcomes FATF Plenary, 19-21 February 2020
13
State of Civil Society report 2015: The international antiterrorist financing system’s negative effect on civil society resources
14
FATF: What influence does money laundering have on economic development?

7
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

We are here to help

As a leading global advisory firm, Deloitte has the experience implementing their national financial crime agenda. This includes
and expertise to support the UAE in combatting financial crime. an engagement with the UK Home Office in articulating the
Our experienced local team provides a wide range of specialised financial crime framework for the UK. We have a model that can be
services to our clients and is supported by a strong international deployed at the national level to help in the remediation of gaps
network. We assist governments and public sector bodies in identified in the FATF ME report.

Contacts
Ralph Stobwasser Andrew Morley Nipun Srivastava
Partner Partner Director
Financial Advisory Consulting Financial Advisory
Deloitte Middle East Deloitte Middle East Deloitte Middle East
rstobwasser@deloitte.com anmorley@deloitte.com nipsrivastava@deloitte.com

Rob Wainwright Chris Bostock John Wagner

Partner Director Director
Risk Advisory Financial Advisory Financial Advisory
Deloitte North and South Europe Deloitte North and South Europe Deloitte United States
rwainwright@deloitte.nl cbostock@deloitte.co.uk johnwagner@deloitte.com

8
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

Appendix: Effectiveness & Technical Compliance Ratings

as per the UAE FATF Mutual Evaluation Report
Effectiveness Ratings against 11 Immediate Outcomes
(High – HE, Substantial – SE, Moderate – ME, or Low – LE, level of effectiveness)

IO.1 - Risk, policy IO.2 International IO.4 - Preventive IO.5 - Legal persons IO.6 - Financial
IO.3 - Supervision
and coordination cooperation measures and arrangements intelligence

Moderate Low Moderate Moderate Low Moderate

IO.7 - ML IO.9 - TF IO.10 - TF preventive

IO.11 - PF financial
investigation & IO.8 - Confiscation investigation & measures &
sanctions
prosecution prosecution financial sanctions

Low Moderate Substantial Moderate Low

Technical Compliance Ratings against FATF 40 Recommendations

(C – compliant, LC – largely compliant, PC – partially compliant or NC – non compliant)

R.6 - targeted
R.1 - assessing risk R.2 - national R.4 - confiscation
R.3 - money R.5 - terrorist financial sanctions
& applying risk- cooperation and & provisional
laundering offence financing offence – terrorism &
based approach coordination measures
terrorist financing

PC LC LC LC LC PC

R.7- targeted R.9 – financial

R.8 -non-profit R.10 – Customer R.11 – Record R.12 – Politically
financial sanctions - institution secrecy
organisations due diligence keeping exposed persons
proliferation laws

PC LC C LC LC LC

R.18 – Internal
R.13 – R.14 – Money or
R.15 –New R.17 – Reliance on controls and foreign
Correspondent value transfer R.16 –Wire transfers
technologies third parties branches and
banking services
subsidiaries

C LC LC C LC LC

R.20 – Reporting R.22 - DNFBPs: R.24 – Transparency

R.19 – Higher-risk R.21 – Tipping-off R.23 – DNFBPs:
of suspicious Customer due & BO of legal
countries and confidentiality Other measures
transactions diligence persons

PC C LC LC LC LC

R.30 –
R.25 - Transparency R.26 – Regulation R.28 – Regulation Responsibilities of
R.27 – Powers of R.29 – Financial
& BO of legal and supervision of and supervision of law enforcement
supervision intelligence units
arrangements financial institutions DNFBPs and investigative
authorities

PC C C LC PC C

R.31 – Powers of
law enforcement R.32 – Cash R.34 – Guidance R.36 – International
R.33 – Statistics R.35 – Sanctions
and investigative couriers and feedback instruments
authorities

C C LC LC LC C

R.38 – Mutual legal R.40 – Other forms

R.37 – Mutual legal
assistance: freezing R.39 – Extradition of international
assistance
and confiscation cooperation

LC LC C LC

9
Combatting Financial Crime in the UAE| Addressing key observations in the UAE FATF Mutual Evaluation Report

Glossary

ADGM Abu Dhabi Global Market KYC Know Your Customer

AML Anti-Money Laundering LEA Law Enforcement Agency

CBUAE Central Bank of the UAE MEH Money Exchange House

CFT Counter-Terrorist Financing MENAFATF Middle East and North Africa FATF (Group)

CDD Customer Due Diligence MER Mutual Evaluation Report

CFZ Commercial Free Zone ML/FT Money Laundering and Financing of Terrorism

DIFC Dubai International Financial Centre MVTS Money or Value Transfer Services

DFSA Dubai Financial Services Authority NCA National Crime Agency

DNFBP Designated Non-Financial Business and Professions NPO Non-Profit Organization

DPMS Dealers in Precious Metals and Stones NRA National Risk Assessment

FATF Financial Action Task Force OCC Office of the Comptroller of the Currency

FFZ Financial Free Zone OCR Optical Character Recognition

FI Financial Institution PP Public Prosecutions

FIU Financial Intelligence Unit PPP Public-Private Partnership

FSRA Financial Services Regulatory Authority SDN Specially Designated Nationals & Blocked Persons

FT Financing of Terrorism STR Suspicious Transaction Report

GCC Gulf Cooperation Council TCSP Trust and Company Service Provider

IO Immediate Outcome TFS Targeted Financial Sanctions

JMLIT Joint Money Laundering Intelligence Taskforce UNSCR United Nations Security Council Resolutions

VASP Virtual Asset Service Provider

10
This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend
upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents
of this publication.

Deloitte Professional Services (DIFC) Limited (“DPSL”) would be pleased to advise readers on how to apply the principles set out in this publication to their specific
circumstances. DPSL accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material
in this publication.

Deloitte & Touche (M.E) LLP (“DME”) is the affiliate for the territories of the Middle East and Cyprus of Deloitte NSE LLP (“NSE”), a UK limited liability partnership and
member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”).

Deloitte refers to one or more of DTTL, its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its
member firms are legally separate and independent entities. DTTL, NSE and DME do not provide services to clients.
Please see www.deloitte.com/about to learn more.

Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our network of member firms
in more than 150 countries and territories, serves four out of five Fortune Global 500 ® companies. Learn how Deloitte’s approximately 300,000 people make an
impact that matters at www.deloitte.com.

DME is a leading professional services firm established in the Middle East region with uninterrupted presence since 1926. DME’s presence in the Middle East
region is established through its affiliated independent legal entities, which are licensed to operate and to provide services under the applicable laws and
regulations of the relevant country. DME’s affiliates and related entities cannot oblige each other and/or DME, and when providing services, each affiliate and
related entity engages directly and independently with its own clients and shall only be liable for its own acts or omissions and not those of any other affiliate.

DME provides audit and assurance, consulting, financial advisory, risk advisory and tax services through 26 offices in 14 countries with more than 4000 partners,
directors and staff. It has also received numerous awards in the last few years which include, Middle East Best Continuity and Resilience provider (2016), World Tax
Awards (2017), Best Advisory and Consultancy Firm (2016(, the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in
England and Wales (ICAEW), as well as the best CSR integrated organization.

About Deloitte in the Dubai International Financial Centre

Deloitte Professional Services (DIFC) Limited (“DPSL”) is incorporated in the Dubai International Financial Centre (“DIFC”), with commercial registration number
CL0748 and is registered with the Dubai Financial Services Authority (“DFSA”) as a Designated Non-Financial Business or Profession. DPSL is a sublicensed
affiliated entity of DME. DPSL has a 100% wholly owned subsidiary in the DIFC namely Deloitte Corporate Finance Advisory Limited (DCFAL) which has commercial
registration CL2220. DCFAL is regulated by the DFSA and licensed to provide regulated financial advisory services. DPSL & DCFAL co-inhabit with their principal
place of business and registered offices at Al Fattan Currency House, Building 1, 5th Floor, Dubai International Financial Centre, Dubai, United Arab Emirates. Tel:
+971 (0) 4 506 4700 Fax: +971 (0) 4 327 3637.

© 2020 Deloitte Professional Services (DIFC) Limited. All rights reserved.

Designed by CoRe Creative Services. RITM0463851