There is increased pressure in the UAE for regulated (finance) and non-regulated industries (especially real estate, auditing firms, trading companies) to comply with Anti-Money Laundering (AML) and Ultimate Beneficial Owner (UBO) regulations. As per the guidance, companies are obliged to develop internal policies, controls, and procedures that are commensurate with the nature and size of their business to manage money laundering and financing of terrorism risks.
AML laws, regulations and procedures are aimed at preventing money launderers from disguising illegally obtained funds as legitimate income. Regulations have been changing rapidly in recent years to prevent human trafficking, terrorism, and other criminal activities by keeping dirty money out of circulation.
In addition, the UAE Ministry of Economy has authorised licensing authorities across the country and in free zones to begin implementing administrative penalties and fines against any company that fails to submit ultimate beneficial ownership (UBO) information. Any institution within the scope of Anti-Money Laundering and Anti-Terrorist Financing regulations needs to disclose the UBO’s identity for any of their business transactions (including customers, suppliers, agents, etc).
Under the UBO Regulations, brought in last year by Cabinet Resolution No. 58/2020, all companies licensed and registered in the UAE – except those that are wholly owned by a local or federal government body– are required to maintain registers with information about ultimate beneficial owners (UBOs), shareholders and any nominee board members.
Typically, according to the UAE authorities regulations, a UBO is an individual or corporate entity who fits one or more of the following criteria:
- Maintains a minimum interest of 25% capital of the organisation.
- Has at least 25% voting rights at the general shareholders' meeting.
- Receives a minimum of 25% of the company's capital as beneficiary.
Failure to comply with AML laws, UBO regulations and breaches of financial sanctions can have serious consequences in the UAE resulting in punitive fines, criminal proceedings, damaged reputation, and sanctioning. The Central Bank of the UAE (CBUAE) has imposed recently financial sanctions on six exchange houses operating in the country and fined a total of Dh17.311 million for failures to achieve appropriate levels of compliance regarding their AML & Sanctions Compliance Frameworks.
Article 17 of UBO Regulations in the UAE states that administrative penalties will be imposed upon such mainland and Free Zone companies that are in breach of the UBO Regulations or do not submit their UBO information to corporate regulators.
So, what should you do to avoid reputational and financial losses?
- Get a full understanding of your customers and suppliers (individual and corporate entities).
- Conduct compliance checks on the subject entity to identify red flags related to sanctions, politically exposed persons and adverse media.
- Conduct further investigation to get a comprehensive and 360-degreeassessment on the corporate entity, including key stakeholders such as shareholders, directors, senior management and UBOs.
- Conduct additional due diligence checks on the key stakeholders to be fully protected.
- Demonstrate to the UAE authorities (including the Central Bank) that you have implemented internal controls and processes by sharing all supportive documents.
Benefits of complying with the regulations
- Good relations with the UAE authorities.
- Access to government tenders and contracts.
- Avoid financial and reputational losses.
- Better understanding of customers and suppliers – manage risk related to credit worthiness and compliance questions.
How Cedar Rose can help
- Cedar Rose Comply offers compliance checks on companies and individuals to uncover sanctions, PEPs (Politically Exposed Persons), and adverse media within seconds, via web, API, or batch search. It is a great tool to detect, assess and minimize potential risks and can help avoid associated reputational and financial damages. One of Cedar Rose Comply’s biggest advantages over its competitors is that it is available both as a stand-alone product and as part of an affordable package with other services.
- Cedar Rose offers two solutions to access UBO information at local, regional and international levels.
- UBO Lookup: Take advantage of Cedar Rose's database of 168+ million corporate entities worldwide. Access information on corporate hierarchy structure and relationships.
- UBO Discovery: Cedar Rose is a corporate information research and analysis expert. Specialist of the Middle East Africa region, Cedar Rose conducts fresh investigations to identify and verify UBO information and determine corporate hierarchy structure, across multiple layers of ownerships.
To find out more call +971 4 374 5758 or visit www.cedar-rose.com.