The IMF report has noted that the UAE has made notable and commendable strides in responding to the ever increasing challenges fronted by the well-orchestrated and resource-rich international crime syndicates. However they have identified a number of areas where the UAE central bank has fallen short of meeting requirements and expectations as can be seen in their detailed assessment report on the UAE’s Anti-Money Laundering and Combating the Financing of Terrorism. The UAE has been described by the IMF as a society where the carrying of large amounts of cash and purchasing goods and property with cash is a common phenomenon. These large scale cash activities usually provide an effective hideaway to criminalized activities such as Money laundering and Terrorism financing. The ML and terrorist financing (TF) vulnerabilities exist in the UAE due to the reliance on cash based transaction settlements in the economy as well as the expansion into offshore businesses, the use of international business companies, and the increasing amount of direct foreign investment from many countries. Among the notable findings in the report are the challenges brought about by the Hawala money transfer system in the UAE, lack of adequate customer due diligence measures and inadequate suspicious transaction reporting among financial institutions in the UAE. These are discussed below.
Customer Due Diligence Failures as a preventive measure regards money laundering and terrorism financing.
According to the IMF’s 2008 UAE ML and FT report (2008), the UAE lacks a precise duty on the part of financial institutions, to identify the primary and beneficial ownership as well as the control of the majority of companies with whom they have business dealings, in the UAE. The IMF report further states that there lacks a legal requirement within the regulations to obtain information at the outset on the purpose and intended nature of the business relationship. Because of these, the ability of the UAE government institutions to deter money laundering and financing terrorism activities is hampered. Financial institutions should undertake heightened CDD on customers that have been classified as high-risk customers. This will enhance the probability of detecting instances of money laundering and terrorism financing activities. It is however important to note that there is a delicate relationship between upholding customer privacy and ensuring accountability regards enforcing stipulated legislation, laws and regulations within the banking sector. The requirements to carry out CDD should be an ongoing process even in 2014 and the years to come since the circumstances may change regarding operations of natural as well as legal persons. Thus the findings on CDD from the IMF report on ML and FT in the UAE are still relevant and need to be considered and recommendations implemented to the latter in attempts to combat international money laundering and terrorism financing. ...