UAE AML: Nine Requirements for Accountants and Auditors

Introduction

UAE AML is a crucial aspect that accountants and auditors must address with precision and diligence. As financial professionals, accountants and auditors in the UAE have a significant responsibility to ensure that their practices align with the country’s stringent Anti-Money Laundering (AML) regulations. In this article, we will explore the nine essential requirements for accountants and auditors in the UAE to maintain AML compliance effectively.

At WellTax, we are committed to providing our clients with expert guidance on AML compliance to safeguard their operations and uphold the highest standards of integrity.

Understanding the AML Legal Framework

The foundation of UAE AML lies in understanding the country’s legal framework governing Anti-Money Laundering and Combating the Financing of Terrorism (CFT). Over the years, the UAE has strengthened its legal provisions to combat money laundering and terrorist financing. The key regulations that guide accountants and auditors in this regard include:

• Federal Decree Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations.
• Cabinet Decision No. (10) of 2019, which provides the Implementing Regulation of the aforementioned Decree Law.
• Federal Decree Law No. (26) of 2021, amending certain provisions of the 2018 law.
• Supplemental guidance for auditors issued by the UAE Ministry of Economy.

These regulations outline the responsibilities and obligations of Designated Non-Financial Businesses and Professions (DNFBPs), including accounting and auditing firms, in combating financial crimes.

AML and CFT represents a very important step at WellTax when onboarding new clients as we ensure that all the requirements are diligently fulfilled before a new business relationship can begin.

The Role of Accountants and Auditors with UAE AML

Accountants and auditors play a pivotal role in the fight against money laundering. By virtue of their position, they have access to sensitive financial information and are often the first to detect irregularities. Money laundering involves disguising illegal funds to make them appear legitimate, and it is the duty of accountants and auditors to identify and report suspicious activities.

Key Vulnerabilities:

• Information Concealment: Clients might intentionally hide the origin or purpose of funds.
• Geographical Risks: Transactions involving high-risk geographies require extra scrutiny.
• Irregular Transactions: Unusual activities, such as large cash deposits or transactions with high-risk jurisdictions, are red flags.
• PEP Involvement: Clients may obscure their connections with Politically Exposed Persons (PEPs).
• Complex Business Structures: Criminals may use intricate company structures to conceal the source of their funds.
• Third-Party Involvement: The use of intermediaries can complicate the tracing of funds.

At WellTax, we emphasize the importance of vigilance and proactive measures to mitigate these risks, ensuring that our clients remain compliant and protected against inadvertent involvement in financial crimes.

The Nine AML Requirements for Accountants and Auditors

1. Appointing an AML Compliance Officer

One of the most critical AML requirements is the appointment of an AML Compliance Officer. This dedicated role is essential for overseeing the implementation of AML/CFT policies and ensuring that the organization adheres to regulatory standards.

Key Responsibilities of an AML Compliance Officer:

• Reviewing and updating the AML compliance program.
• Managing the Know Your Customer (KYC) and Customer Due Diligence (CDD) processes.
• Identifying and reporting suspicious activities to the Financial Intelligence Unit (FIU).
• Conducting Enterprise-Wide Risk Assessments (EWRA).
• Conducting sanctions screening and ensuring adherence to sanctions laws.
• Training employees on AML regulations.
• Communicating changes in UAE AML laws to senior management.

2. Implementing AML/CFT Policies and Procedures

Accountants and auditors must establish and maintain robust AML/CFT policies and procedures. These internal controls are essential for preventing financial crimes and ensuring compliance with UAE regulations.

Key Actions:

• Regularly review and update AML/CFT policies.
• Ensure that clients have implemented appropriate AML measures.
• Align policies with the client’s risk tolerance.

3. Executing Customer Due Diligence (CDD)

Customer Due Diligence (CDD) is a fundamental component of UAE AML. It involves verifying the identity of clients, assessing potential risks, and monitoring transactions.

CDD Process Includes:

• Assessing the nature of the client’s business.
• Verifying client identities using official documents.
• Determining the Ultimate Beneficial Owner (UBO).
• Screening clients against sanctions lists and identifying PEPs.
• Ensuring the legitimacy of client information.
• Scrutinizing transactions for red flags.
• Verifying the source of funds.

WellTax implements thorough CDD procedures to ensure that our clients remain compliant and reduce the risk of financial crimes.

4. Conducting Enterprise-Wide Risk Assessments (EWRA)

Enterprise-Wide Risk Assessment (EWRA) is a critical process for identifying and mitigating risks within an organization. Accountants and auditors play a vital role in this process due to their expertise in financial analysis and compliance.

Benefits of EWRA:

• Identifies potential money laundering and terrorist financing risks.
• Highlights residual risks after accounting for existing controls.
• Strengthens due diligence processes.
• Ensures continuous compliance through regular updates.

5. Implementing Regulatory Reporting

Regulatory reporting is essential for ensuring legal compliance by requiring the timely and accurate submission of reports on suspicious activities to Financial Intelligence Units (FIUs).

Indicators of suspicious transactions:

• Complex corporate structures with unclear ownership.
• Involvement with high-risk geographic areas.
• Excessive use of cash transactions.
• Unusual transaction patterns.
• Attempts to avoid scrutiny.
• Unexplained sources of funds.

Timely regulatory reporting is crucial as it provides valuable evidence for law enforcement during financial crime investigations, protects the reputation of financial institutions, and helps avoid penalties for non-compliance.

6. goAML Registration

For accountants and auditors in the UAE, registering with the goAML portal is mandatory. The goAML system, managed by the FIU, facilitates the reporting of suspicious transactions and activities, which can arise when conducting a review of UAE AML.

Importance of goAML Registration:

• Provides a secure platform for reporting suspicious activities.
• Ensures compliance with AML regulations.
• Grants access to vital information on financial crimes.

At WellTax, our staff is well trained in the use of goAML and knows how to ensure that our clients meet all AML requirements to avoid being reported through goAML.

7. Carrying Out Independent AML Audit

An independent AML audit involves a comprehensive examination of an organization’s AML policies, procedures, and practices by an external party.

Activities of an AML Audit:

• Assess the adequacy and effectiveness of AML policies.
• Review customer due diligence processes.
• Evaluate the transaction monitoring and reporting systems.
• Examine AML/CFT training and awareness initiatives.

Regular independent audits, typically conducted annually or bi-annually, are vital for identifying weaknesses in the AML framework, providing actionable recommendations, strengthening compliance measures, and demonstrating a commitment to ethical business conduct.

8. Providing AML/CFT Training

As mandated by UAE regulations, accountants and auditors must undergo regular AML/CFT training. This training ensures that all staff members are aware of the latest AML requirements and know how to implement them effectively.

Training Focus Areas:

• Understanding AML laws and regulations.
• Identifying and reporting suspicious activities.
• Enhancing awareness of evolving financial crime risks.

WellTax offers tailored training programs to its employees through external providers to equip them with the knowledge and skills necessary to maintain AML compliance for our clients.

9. Ensuring Record-Keeping

Record-keeping is a fundamental component of an effective AML/CFT program, as it allows for the tracking and documentation of financial transactions, ensuring transparency and accountability. In the UAE, AML regulations require that all financial records be retained for a minimum of five years, with a six-year requirement in the Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC). Proper record-keeping is essential for maintaining compliance, facilitating audits, and providing evidence in the event of financial crime investigations.

At WellTax, we proud ourselves in maintaining meticulous records and ensuring timely regulatory reporting to avoid penalties and safeguard our clients’ reputation.

Challenges Faced by Accountants and Auditors in Fulfilling Their AML Compliance Obligations

Accountants and auditors encounter numerous challenges when conducting UAE AML. These challenges include:

• Lack of Cooperation and Information Sharing: Clients may be reluctant to share critical data, which reduces the ability of AML professionals to effectively carry out their compliance duties. This lack of cooperation can lead to gaps in the AML process, increasing the risk of financial crimes going undetected.
• Complex Money Laundering Techniques: Criminals often employ sophisticated technics such as using shell companies, offshore accounts, and digital currencies to obscure the origins of illicit funds. These techniques complicate the process of tracing transactions, making it difficult for accountants and auditors to identify and report suspicious activities.
• Increased Governance Burden: The process of identifying beneficial owners and gathering comprehensive customer data is both time-consuming and resource-intensive. This added burden of governance can strain the capacities of accounting and auditing firms, especially those with limited resources.
• Limited Technology Resources: Many organizations, particularly small and medium-sized firms, may lack the necessary technological tools to detect suspicious activities. This limitation, coupled with insufficient resources, including understaffed compliance teams, makes it challenging for these firms to implement robust measures for UAE AML.
• Shortage of Skilled AML Professionals: Finding and retaining skilled AML professionals is a significant challenge. The high demand for these experts often leads to a high turnover rate, making it difficult for firms to maintain consistent compliance practices. Additionally, the costs associated with onboarding new staff and the need for sector-specific expertise further complicate this issue.

Conclusion

UAE AML is a comprehensive process that requires diligence, expertise, and a commitment to compliance. Accountants and auditors are at the forefront of this effort, serving as the first line of defence against money laundering and terrorist financing. By adhering to the nine essential requirements outlined in this article, WellTax can effectively navigate the complexities of AML compliance, protecting its clients, and contributing to the integrity of the financial system.

For further information on UAE AML, please visit our AML page.