Money laundering Legal advice

Money laundering can deeply impact a company’s reputation. It is an activity used by individuals or criminal gangs to hide the origin of their income. Therefore, around the world, various policies have been implemented to deal with this situation and avoid criminal financing.
In this article, we will show what the UAE government is doing to prevent money laundering. There are measures that entrepreneurs must follow to verify their capital and take care of their reputation. Investors and entrepreneurs must comply with these legal obligations to ensure that their funds have legitimate origins.

1. What is money laundering?
2. Stages of money laundering
3. Money laundering in International Law
4. How does the UAE prevent this crime? Learn about the Anti-Money Laundering (AML)
5. Are there other special measures in the UAE against this crime?
6. Company prestige and money laundering
7. How can I comply with the Anti-Money Laundering Law?

1. What is money laundering?

Money laundering is a serious crime worldwide. Individuals and companies that knowingly make transactions with illegally obtained money will receive legal sanctions. Moreover, individuals who attempt to justify the origin of these illicit funds with other economical activities will also receive jail time.

In the region, this practice has been linked to terrorist activities, making it a sensitive issue. That is why the UAE created in 2018 special laws to prevent laundering in the emirates. Furthermore, the UAE created special courts, laws, and regulations to prevent crimes of this kind within its borders.

In the UAE, companies need to comply with the obligations imposed by the authorities to justify their profits. Therefore, company representatives must be aware of all existing policies to prevent this crime.

Furthermore, the UAE authorities have a special vigilance over some economic sectors. Companies that belong to these types of industries must meet special requirements to verify their income. These kinds of businesses have a higher risk of dealing with money laundering.

That is why individuals should look for advice to prevent sanctions from investigations related to this crime.

2. Stages of money laundering

Money laundering is an activity carried out in stages. Moreover, if a person with illegally obtained capital tries to justify his income, the authorities monitor each of the transactions made with this money. In a nutshell, we can summarize this process in three stages:

1.1 Stage one

First, people receive the funds generated by different illicit activities. Once they own these funds, criminals try to put the money into the banking system. Afterwards, they can use the money and hide it in other bank accounts.

1.2 Stage two

Criminals then try to split the money into various accounts or investments. Thus, money is more difficult to trace for the authorities, who will lose sight of the destination of the resources. Criminals will try to make as many transactions as possible to justify the origin of their laundered money.

1.3 Stage three

Last, resources obtained through different transactions are integrated. This allows the criminals to count on the money again, which now comes from legally approved activities. In fact, this integration is done by purchasing real estate, stock exchange shares, or fake commercial businesses.

3. Money laundering in International Law

Money laundering occurs inside and outside the UAE. Organized crime often carries out financial activities in various countries to try to confuse or evade the authorities. Therefore, international law proposes different strategies to prevent this crime.

  • Swiss banks hold the largest equity funds in the world. That is why many people (including criminals) have taken their money to the banks of this country because of its low taxes. This has forced these financial institutions to eliminate bank secrecy to ensure transparency to governmental authorities.
  • The Berne Declaration, signed in 1976, creates mechanisms for banks to share information with authorities to investigate illegal activities. At the same time, it reduces the possibilities for criminals who want to transfer their funds to other countries to launder money.
  • In 1980, the States of the current European Union created mechanisms to prevent laundering. The Council of Ministers promoted a strategy to monitor the management of funds between countries.
  • Finally, in Arab countries, the Syrian and Lebanese Laws condemn this crime. Besides, these laws constitute a precedent that recognizes money laundering as a violation of Islamic law. Therefore, this legislation criminalizes activities for which economic gains are considered illegal.

4. How does the UAE prevent this crime? Learn about the Anti-Money Laundering (AML)

The UAE authorities created special laws to prevent said practice in the country. Money laundering is a crime that endangers the economic and political stability of the emirates. Consequently, the government decreed in 2018 the Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organizations.

This law establishes parameters for the regulation of financial activities within the UAE. Thanks to this legislation, the authorities can keep track of the activities of banks and companies. Moreover, the UAE’s central bank can monitor financial transactions and identify potential money-laundering situations.

4.1 Banks

The UAE central bank set up bodies to prevent money laundering in the country. The Financial Intelligence Unit (FIU) is in charge of supervising the financial activities in the country’s banks. This institution has the responsibility to find suspicious transactions that may be related to this practice.

Moreover, to conduct more effective investigations, the UAE authorities created Fawri Trick. It is an intelligent platform to detect banking illicit activities more quickly and efficiently. With the use of information from different banks in the UAE, it is possible to identify money laundering attempts.

4.2 Foreign exchange

The UAE central bank also has authority over foreign currency transactions. In this regard, this government body can regulate the exchange of international currencies if there is suspicion of criminal activities.

Exchange houses have to meet rigorous criteria to verify their financial activities. This process may seem complex for the owners of these institutions since it requires various documents and steps. If you need help, our team can help you protect the reputation of your exchange so that you keep working smoothly.

4.3 Brokerage houses

Stockbrokers must also comply with strict rules to verify the legality of their activities. Even if those responsible for these types of investments do not carry out money laundering activities, they may be fined if they do not comply with the mechanisms to prevent laundering.

The anti-money laundering law allows those companies that do not meet the requirements to revoke the license. That is why it is not just enough to be a legal organization: Companies must demonstrate transparency. To do this, they must implement information exchange mechanisms with the necessary legal advice to comply with the requirements of the law.

4.4 Real estate

The purchase of real estate is one of the most common activities for those who wish to lay their capital. Therefore, the UAE authorities recognize that this sector is special for those people who try to launder money. Therefore, real estate agents must provide documents and possess a license that allows them to practice in the country.

Real estate agents may not perceive that their clients are trying to launder money. That is why area workers need to identify possible suspicious signs of their buyers. If they perceive any abnormalities, they should immediately report to the UAE authorities to avoid being affected by the investigation.

5. Are there other special measures in the UAE against this crime?

To demonstrate the transparency of the economic system, the UAE government has several instances to prevent money laundering. Thus, local authorities try to improve the reputation of the emirates’ financial market. That is why there are now special courts and committees dedicated to investigating and criminalizing this practice.

5.1 Federal courts

These institutions are responsible for creating special courts for different cases in which money laundering is suspected. Within these courts, hearings and judgments are given that allow the legitimacy of an individual’s capital to be evaluated.

5.2 Local courts

Within the various emirates, there are courts dedicated to investigating illicit transactions. These local courts are responsible for finding possible crimes such as tax evasion and money laundering in each emirate.

5.3 Executive office

To show transparency with foreign governments and the global financial system, the UAE created a special executive office. This institution is responsible for investigating possible crimes related to money laundering and sharing information with competent authorities. Additionally, this organization tries to comply with international standards against organized crime.

5.4 NAMLCFTC

The UAE government found a link between money laundering and terrorist activities in the Middle East. Therefore, to prevent the financing of these criminal organizations, the authorities created a special committee to deal with this situation.

The National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organizations monitors financial activities at the national level. This committee is responsible for monitoring whether there are economic transactions aimed at providing resources to terrorist organizations in the territory.

6. Company prestige and money laundering

Some companies engage in money laundering by not knowing the source of their customers’ income. However, despite not being directly linked to the crime, a company can be affected in the investigation against the crime. Therefore, those responsible for these companies must consider the risk related to their economic activities.

6.1 How to protect my business?

The UAE government recommends individuals and companies create risk and transparency policies. Thus, these strategies will allow companies to get rid of responsibilities in anti-money laundering investigations. Moreover, authorities can sanction a company that does not have protocols to prevent this crime.

As investors or entrepreneurs, people should always be careful about the origin of the capital of their partners or customers. To do this, they must implement all the necessary measures to ensure that this money comes from legitimate economic activities. Undoubtedly, a criminal investigation can affect the reputation and future of the company if it does not take the necessary measures.

Real estate agents, exchange houses, banks, and other financial institutions must take action to comply with the law. Therefore, it is necessary that, if you belong to this type of company, you look for the legal advice you need for your business. At Connect Legal we have a legal team ready to attend to your needs and protect the reputation of your company.

7. How can I comply with the Anti-Money Laundering Law?

Money laundering is a serious matter for the UAE authorities. Therefore, the companies mentioned above must comply with requirements that help verify the legality of their transactions. Those responsible for these companies must have the necessary legal advice to avoid sanctions or penalties.

Globally, governments and banks collaborate to prevent money laundering within their territory. The UAE is no exception, which is why the local government works with the international financial system to prevent these crimes from affecting the country’s reputation.

Do you have questions about how to protect your business’ reputation? If you need help and want to protect your company from money laundering, Send your questions to contact@connectlegal.ae and our team will reach out to assist you. You can visit our webpage for more info.
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Danielle

Danielle
Danielle is Head of Operations at Connect Resources. She also advises & manages the legal work of the company having studied Law at John Moore’s University in Liverpool, United Kingdom. Danielle oversees the processes of the company’s various departments and ensures an overall smooth interconnectedness and operation between each in order for the company to function at its highest potential.

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