By Dr. Linda Eagle, Founder & President The Edcomm Group Banker’s Academy
Money laundering is a major problem for financial institutions around the world. Despite efforts at deterrence, cases of money laundering continue to climb, causing great risk to banks and their customers. Although money laundering is much less of an issue in the United Arab Emirates (UAE) than in many other countries, the Central Bank of the UAE (CBUAE) has implemented laws to prevent money laundering activities and terrorist financing, such as the Federal Law on Combating Terrorism Offenses and the Federal Law Regarding Criminalization of Money Laundering.
In response to the rising amount of money laundering cases in the Middle East, UAE banks have begun to reevaluate their AML policies and procedures to ensure that they are compliant with the laws and regulations of the CBUAE. According to Article 17 of CBUAE Circular No. 24/2000, the bank’s Compliance Officer is responsible for providing AML training to all staff members who are responsible for handling cash or overseeing accounts. But while regulatory documents and laws may insist that the training is necessary or designate responsibility to a bank’s compliance official, it often does not contain instructions for what the training should cover or how to implement it.
To meet the requirements of the CBUAE, UAE banks can take constant and consistent measures to guard their funds and the funds of their customers against money laundering and terrorist financing by implementing AML training. UAE banks can best protect themselves and their customers from the potential risk of money laundering by becoming familiar with CBUAE legislature, recognizing the signs of money laundering in the UAE and implementing a certified AML training program.
UAE AML Laws
The UAE and the CBUAE have issued and implemented laws in order to control the threat posed by money laundering and terrorist financing. In order to prevent money laundering from occurring at their institution, UAE banks must be familiar with these laws. The following laws each address a different area of AML and protect the UAE from the risk of money laundering and terrorist financing.
- The Federal Law Concerning Promulgating Penal Code – summarizes a penalty for any perpetrator who is not aware the property that they have obtained originated from unlawful or criminal means.
- Federal Law Regarding Criminalization of Money Laundering – gives further definition to the crime of money laundering and provides the means to freeze criminal assets, such as bank accounts, that are related to money laundering.
- Federal Law on Combating Terrorism Offenses – defines elements and actions of terrorism offenses and penalties for violations. The Law also allows all proceeds that have resulted in a criminal offense to be confiscated.
Money Laundering in the UAE
Over the past decade, governments and central banks throughout the world have increased the pressure on banks and other financial institutions to place tighter control on their financial systems. Because of the UAE’s position as a major financial hub in the Middle East, this causes extreme vulnerability of UAE financial institutions to money laundering crimes. In 2009 alone, the UAE experienced a staggering 1,729 cases of money laundering.
Aside from the rise of money laundering cases, four businessmen were accused of perpetrating the largest-ever money laundering scam in Dubai. The men were accused of laundering $150 million over a three-year period beginning in 2006.  Although the businessmen were proven innocent of the crime, each defendant was sentenced to serve two months in prison for forging and using unofficial documents.
While the case against the businessmen has since been resolved, the UAE still carries the weight of hosting such a heavy money laundering scam. In order to prevent terrorist financing and money laundering, UAE banks must take measures to identify and analyze risk and to issue warnings about customers who are engaged in or may be engaged in AML scams and activities.
As the industry evolves, UAE banks should implement an AML training system to greatly reduce the amount of risk and to help employees understand how such training prevents risk. It is important, therefore, for banks in the UAE to use a variety of risk management practices and tools.
As money laundering continues to become prominent in the UAE, informal banking that is functioning without training still remains unregulated. Rather than taking an advanced strategic approach to training, banks have focused on tools, such as risk mitigation and risk elimination. These tools prove to be evasive and not nearly as effective as a certified, customized training program from an accredited training provider.
The Bank Secrecy Act (BSA)
Any UAE banks working with the United States in any capacity must also be trained on the US Bank Secrecy Act (BSA) to supplement any other AML training. The BSA was enacted to help detect and prevent money laundering. The purpose of the BSA is to identify money laundering and terrorist financing and improved detection of financial crimes. As part of the BSA, all financial institutions are required to fulfill certain requirements such as reporting large currency transactions which exceed $10,000, reporting suspicious activity and implementing a BSA/AML compliance program.
Basel II provides recommendations on banking laws and regulations, created to establish an international standard that can be used when creating regulations. Basel II generates the ability to measure and monitor risk and is a key tool for the safety of UAE banks. It is also vital in ensuring the competitiveness of UAE banks as Basel II becomes fully implemented and practiced at financial institutions across the world. As we enter a transitional period within the banking industry, there is a crucial need for more skilled professionals in risk management in the UAE.
Training programs that focus on these important AML laws can help educate staff on the dangers and risks of money laundering, not just to their bank, but to the UAE as a nation. While concerned employees may feel that individual training may not be effective, putting an end to money laundering starts with an effective training program. It’s important for employees to know that one person can always make a difference.
It is the responsibility of all banks operating in the UAE to ensure that every employee is properly trained in Anti Money Laundering. The CBUAE is required to guide banks in their methods of training to fight money laundering, however it is the responsibility of the bank to implement and monitor the training. AML training must be mandated by bank management in order to manage risk as cases of money laundering continue to rise and pose a threat to banks across the UAE.
Dr. Linda Eagle is Founder & President of The Edcomm Group Banker’s Academy (www.bankersacademy.com)—a 24-year-old education and consulting firm dedicated to serving Banks, Credit Unions, Money Services Businesses (MSBs) and all areas of the Global Financial Community with thousands of off-the-shelf and customized training programs in areas such as BSA/AML, Regulatory Compliance, Teller Training, Systems Training, Sales and Service Training, and many more. Visit www.jobtraining.bankersacademy.com for information on teller training for individuals.
The Edcomm Group Banker’s Academy (www.bankersacademy.com) is headquartered in New York, NY. For more information, email email@example.com or call +1.212.631.9400.
The Central Bank of the UAE (CBUAE), “Circular No. 24/2000, Article 17,” November 14, 2000.
 Elisa Baxter. “Money Laundering Cases Rise in 2009,” [http://www.arabianbusiness.com/581197-money-laundering-cases-rise-in-2009], February 2010.
 Bassam Za’za “Verdict Passed in Historic Money Laundering Case in Dubai,” [http://gulfnews.com/news/gulf/uae/crime/verdict-passed-in-historic-money-laundering-case-in-dubai-1.599903], March 2010.
 Bassam Za’za. “Verdict Passed in Historic Money Laundering Case in Dubai,” March 2010.
 Central Intelligence Agency. “The World Factbook” [https://www.cia.gov/library/publications/the-world-factbook/geos/ae.html], March 2010.
 “Study Shows UAE Banks Need to Utilise an Improved Range of Risk Management Tools” [http://www.ameinfo.com/223037.html], February 2010.