UAE National Risk Assessment 2024

The United Arab Emirates (UAE) has unveiled its 2024 National Risk Assessment (NRA), marking a significant stride in its commitment to combating money laundering (ML), terrorist financing (TF), and proliferation financing (PF). This comprehensive assessment not only reinforces the UAE's dedication to global financial standards but also provides a roadmap for enhancing the nation's financial security and integrity.

The key findings of the NRA are summarized below:*

1. ML Key Threats

   Fraud: Fraudulent proceeds are often laundered and facilitated through third parties, including corporate and individual mules, and nominees.

   Smuggling: Significant ML risk due to high-value transactions, Criminals use DPMS to convert illicit funds into valuable assets that can be moved across borders with relative ease.

   Foreign Corruption: Foreign corruption yields illicit gains that are laundered a cross-border financial systems and luxury assets.

   Drugs-Trafficking: Laundering proceeds from drug trafficking, often involving complex networks and sophisticated techniques.

   Counterfeiting and piracy of products: These activities generate significant illicit proceeds that require laundering, often through complex networks and trade-based schemes

   Tax Evasion: Tax evasion generates substantial illicit funds that are often laundered through complex financial networks.

2. Typologies and trends

   Foreign Predicate Offenses: large economy involves high volumes of inward and outward cash flows, with many high-risk ML cases linked to foreign jurisdictions.

   Organized Crime: These groups use complex global networks involving multiple jurisdictions to launder proceeds from crimes such as drug trafficking, fraud, smuggling, and tax evasion.

   Trade-based Money Laundering: TBML is a predominant threat, involving large volumes of financial transactions with international trading partners.

   Third-party Money Laundering: Many cases involve the abuse of the structure of legal entities, where existing companies are approached or set up from scratch to conceal the origins of illegitimate funds.

3. Medium-High & High-Risk Sectors

   Banking Sector: The UAE's banking sector is attractive to criminals due to its size, openness, and extensive cross-border networks.

   Exchange Houses & Hawaladar: Typically, Involvement in cash border movements, layering through currency exchange, and third-party laundering. Sectors exploited by individual mules and shell/front entities due to the large foreign resident population.

   DPMS and Real Estate Sector: Involves the use of unknown sources of funds, third parties, and manipulation of property prices, In addition to Concealment of funds and beneficial owners.

   Virtual Assets / Virtual Asset Service Providers (VASPs): Cryptocurrencies pose significant ML threats due to their anonymous and decentralized nature and facilitate the rapid movement of funds across jurisdictions, complicating.

4. Terrorism Financing

Terrorist financing activities pose a Medium-high risk within the UAE, with funds being channelled through various means, including donations (sent abroad), informal financial networks.

Key Developments:

• Enhanced Enforcement: The UAE has demonstrated a robust approach to enforcement. Notably, Balvinder Singh Sahni, a prominent businessman, received a five-year prison sentence, and assets worth AED 150 million (~US$41 million) were confiscated. Additionally, the UAE Central Bank imposed a fine of AED 5.8 million (~US$1.6 million) on a bank for deficiencies in its anti-money laundering (AML) program.
• Leadership in Crypto Regulation: UAE had the first regulatory authority, Virtual Assets Regulatory Authority (VARA) for crypto based business.
• Transparency and Public Engagement: The publication of the full 72-page National Risk Assessment (NRA) report signifies a new level of openness, providing stakeholders with detailed insights into the nation's risk landscape.

Strategic Initiatives and Future Outlook

1. Alignment with International Standards

The UAE's removal from the Financial Action Task Force (FATF) grey list in February 2024 reflects its substantial progress in addressing AML/CFT deficiencies. The NRA serves as a testament to the nation's proactive measures and its alignment with global best practices.

2. Implementation of a Risk-Based Approach

The assessment advocates for a risk-based approach across all sectors, encouraging entities to tailor their AML/CFT measures based on specific risk exposures. This strategy aims to allocate resources efficiently and enhance the effectiveness of compliance programs.

3. Enhancing Supervisory Frameworks

The NRA calls for the strengthening of supervisory mechanisms, particularly in free zones and among smaller entities. Consistent oversight and enforcement are vital to ensure uniform compliance and mitigate systemic risks.

Implications for Stakeholders

For businesses operating within the UAE, the 2024 NRA underscores the importance of:

• Conducting comprehensive risk assessments to identify and mitigate potential vulnerabilities.
• Ensuring transparency in ownership structures and maintaining up-to-date beneficial ownership information.
• Enhancing staff training and awareness on AML/CFT obligations and red flags.
• Engaging proactively with regulatory bodies to stay informed about evolving compliance requirements.

Conclusion:

The UAE's latest ML/TF Risk Assessment reflects a significant shift towards stringent compliance and proactive risk management. These developments not only bolster the nation's financial integrity but also reinforce its position as a responsible global financial center. Stakeholders are encouraged to align their operations with the insights provided in the NRA to contribute to the nation's ongoing efforts in safeguarding financial integrity.

With a deep understanding of risk management and compliance frameworks, Crowe provides businesses with the insights and expertise necessary to navigate these complexities. From strengthening KYC processes to implementing tailored compliance solutions, since 1981 Crowe UAE helps organizations stay ahead of regulatory demands and mitigate risks effectively.

For consultation and for tailored compliance solutions, contact our team at Crowe UAE, +971 55 343 8693, manesh.nair@crowe.ae

For a detailed review of the UAE's 2024 National Risk Assessment, access the full report here: UAE NRA 2024 Report.

*source: NRA 2024 Report