Anti-Money Laundering Law UAE

Money laundering can have severe negative impacts on the economy. It can be national as well as global businesses impact, and society as a whole. It leads to the reduction of efficiency and promotes corruption and crime.

The AML (Anti-Money Laundering) system implemented by the UAE government is in place to eradicate terrorist financing and illegal money. But despite repetitive measures, money laundering continues to be a rampant criminal activity in the UAE, forcing the government to implement even stringent laws in action to combat it.

Over the course of history, the UAE has regulated several legal actions to minimize money laundering and punish people who engage themselves in this criminal activity.

But before getting to know the laws that have been put in place to take care of this growing crime, it is important to understand the negative implications of money laundering on our society.

How does Money Laundering affect the economy of a nation?

Money laundering has a ripple effect on a nation’s economy. One thing leads to another, and before one realizes it, the entire economy gets into shambles, leading to devastating outcomes for the citizens.

Here is how money laundering destroys the pivotal aspects of a nation’s economy

Growth Rates

Foreign investors play a major role in the financial stability of a country. However, it becomes extremely difficult to invite the attention of foreign investors in countries where money laundering is rampant.

Black money causes prices to become unstable in the financial system. As a result, the credibility of the country’s economy takes a hard hit in the world scenario. If legal money doesn’t enter the country, it will lead to a decrease in investment rates, which will, in turn, be an obstacle to the growth rate.

Tax Revenues

Citizens of a nation pay taxes on legal money. So, when there is illegal money floating in the market, people can use it to get rich and not worry about having to be a tax on it. Since tax comprises a major portion of public revenue, it will invariably affect the budget.

With less income from the public, there will be less public expenditure despite the high demand. The reduction in tax revenues will continue to have a snowball effect. With low tax revenue, the government has to either adopt an emissions policy or relegate to burrowing. Unfortunately, neither of these options is positive for the national economy.

Financial Organizations

Money laundering taints the reputation of financial organizations in the sense that when there is an illegal disposition of money, it propels the government to conduct a strict audit on these financial organizations.

As such, the liabilities and assets of such organizations come under the risk of devaluation. The sudden attention that these institutions grab from public authorities can endanger their longevity.

Income Dispensation

The severe blow incurred by sources of income due to money laundering can abruptly affect the functioning of financial systems. Before anyone realizes it, the social consequences resulting from it are seen.

Due to uneven distribution of income, there is social degeneration that is primarily fuelled by money laundering individuals and groups getting richer illegally. Although the social damage caused is difficult to measure, but it can’t be denied that an uneven distribution of income leads to the more money-related crime taking place.

Money Demand

When money is illegally generated by money laundered, cash outflows and inflows become convenient for them. As a result, consumption rates, especially luxury items, increase rapidly.

In due time, it would also make its impact on employment rates, inflation, foreign payments deficit, and import and export. All these would negatively affect the monetary policy of the nation.

Efforts by the UAE Government to Curb Money Laundering

The CBUAE (Central Bank of the United Arab Emirates) has made extensive efforts to eradicate money laundering activities from the country.

Most notably, in August 2020, it created a dedicated department to take care of AML/CFT (Anti-Money Laundering and Combatting the Financing of Terrorism), which was previously under the jurisdiction of the Banking Supervision Department.

The three major objectives of AML/CFT are as follows:

  • Inspecting LFIs (Licensed Financial Institutions).
  • Confirming adherence to the regulator and legal framework established by the AML/CFT department of the UAE.
  • Identifying the emerging risks, vulnerabilities, and threats posed to the financial sector of the UAE.

The CBUAE collaborates with the national committee of UAE’s AML/CFT to ensure the national action plan is implemented to full force.

The Anti-Money Laundering Law

The Federal Decree No. 20 of 2018 was prepared to give a legal and legislative framework for the jurisdiction to comply with international standards on issues of money laundering and terrorism finance.

It is aimed at combating money-laundering practices and countering the financing of terrorist activities and other related suspicious organizations. In addition, it also provides a structure for the authorities who deal with the crimes of the said department.

As per the Decree-Law, a perpetrator is someone who possesses knowledge that a specific source of money has been derived from a misdemeanor or felony and commits one of the following crimes:

  • Transporting or transferring criminal proceedings with the intention of disguising or concealing and hiding its illicit origin.
  • Disguising or concealing the origin, movement, disposition, and true nature of the proceeds.
  • Possessing, using, or acquiring proceeds
  • Helping the perpetrator of the offense to evade punishment.

Depending on the nature of the crime, the punishment can involve a fine of AED 50,000 to 5 million alongside imprisonment of one to ten years. In addition, there might be a ban issued on business activities. Other consequences involve the cancellation of licenses and government restrictions.

Anti-Money Laundering Courts

Another move made by the government of the UAE to take down money launderers was the setting up of money laundering courts. The Minister of Justice issued an order to set up these specialized courts in November 2020 with the structure of each court having an appeal, major, and minor circuit for hearing such crimes.

Final Thoughts

Money laundering is a serious criminal offense and can lead to critical legal actions against you. For a layman, things can seem a bit complicated as is the case with most of the legal proceedings.

If you ever find yourself caught in the doldrums of money laundering in a negative manner, your first plan of action is to seek professional legal advice from a certified law firm. Their guide would help you get out of the dizzy situation that you may have found yourself in.

The UAE government is working extremely hard to curb this criminal activity and provide its citizens with a safe, better place.  So, please ensure that you are not engaging yourself with any illegal activity that may involve forging or laundering money. Stay on the right side of the law and keep yourself safe.

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