Emerging as a robust tactic, AML registration in UAE has significantly helped in building an effective anti-money laundering and counter-terrorist financing regime. When managing a high-risk country relationship in the UAE, due diligence is imperative in verifying the authenticity and legitimacy of potential customers. Along with this, it also requires cross-checking the details provided by customers and legal entities for accuracy and security purposes.
UAE’s Landscape and AML Due Diligence
Committed to taking the steps in combating AML, the UAE has cultivated a strong regulation network, by making anti-money laundering registration in the UAE a must. To elevate its AML and CFT regime closer to international standards, UAE has mandated all Financial Institutions, and DNFBPs to be compliant with AML laws. The compliance process involves conducting enhanced due diligence when dealing with countries that have a high-risk quotient and enhanced involvement in money laundering or financing terrorism.
Checklist for Enhanced Due Diligence when dealing with High-Risk Countries
- Procure additional ID verification documents.
- The nature of businesses and the intent of the transaction need to be documented.
- Verify both the source of funds and wealth.
- Make sure that the first payment comes from the customer’s personal bank account.
- Conduct thorough background checks which include internet searches, sanctions checks, criminal history assessments and more.
- You need to obtain the approval of top management before onboarding the customer.
- Perform frequent monitoring for ongoing due diligence of the information and transactions.
Risks Faced In Case of Failure to Comply with AML Regulations
In case a reporting entity like Financial Institution, DNFBP or VASP fails to carry out thorough due diligence when managing relationships with high-risk countries, they expose themselves to:
- Reputational Damage
- All the evils from money laundering, corruption, terrorist financing, etc.
- Legal penalties can cause a giant hole in the pockets.
Top Practices to manage relationship with High-Risk countries in UAE
Here are a few practices that are a must when conducting due diligence for high-risk countries,
Robust Data Collection
To validate the authenticity of the customer, it is always compulsory to collect data, which can be done via a KYC form. The information procured for the purpose of AML due diligence must include all necessary details like address proof, ID, occupation, government-issued identification number, etc. In addition to this, the wealth profile of the customer needs to be verified, i.e. the source of funds, income and approximate net worth.
Mandatory Verification
All the data that has been collected must be put under scrutiny by conducting verification under AML due diligence for high-risk countries. It is always best to verify all the details from the government agency’s site. All government IDs such as passports, tax receipts, etc can be verified from the government portals by checking the unique number that has been allocated to them.
Screening of Name
This step is a must when dealing with customers from high-risk countries, as it is literally done to check if the customer belongs to any high-risk profile lists, both national and international sanctions lists. By carrying out the process of name screening, reporting entities can check that the customer is not a criminal, terrorist, politically exposed person, or a sanctioned individual.
Risk Profiling
To determine the risk level of potential customers, it is compulsory to perform risk profiling, which is done by taking various factors into account. This can include the assessment of the nature of the business relationship or transaction, political exposure, net worth, transaction with a customer from a blacklisted or greylisted country, complexity of business structure, along with others.
Ongoing Monitoring
After necessary decisions about risk classification have been made, the practice for countering AML regimes cannot be overlooked by continuing with the regular monitoring of a customer’s risk profile. Monitoring essentially means that the customer’s behaviour and the accounts and transactions must be compatible with the routine activities, leaving no room for any possible red flags.
By making AML Due Diligence the primary responsibility of all Financial Institutions, DNFBPs, and VASPs, the UAE has taken significant strides in combating money-laundering and terrorist financing activities. Additionally, the country has mandated the formation of relationships with customers from high-risk countries only after conducting thorough verifications.
Connect with A&A Associate, as our expert consultants can guide you through the intricate process of AML Due Diligence. Call at +971564086728