Governments, including the UAE government, have enacted stringent legislation to combat the crime of Money Laundering (ML) and Terrorist Financing.
As part of a risk-based strategy, you may need to Know Your Customer (KYC) and learn about the company processes, industries, and characteristics of potential and present clients. Strong KYC processes will allow you to assess your chances of engaging in money laundering and other criminal actions.
Companies like HLB Abu Dhabi offering AML consulting services can assist you with more information. Continue reading to learn more.
Why is a Risk-Based Approach to AML Important?
- Organizations must take a risk-based approach to AML since it helps them to be more proactive in dealing with criminal activity such as ML-FT.
- A risk-based AML methodology lets you set stop gaps rather than waiting for illegal transactions and transfers to occur.
- A risk-based AML methodology ensures that no illicit transactions have occurred or reduces the amount of money transferred. HLB Abu Dhabi AML consultants can advise you on adopting a risk-based AML-CFT strategy.
Factors of a Risk-Based Approach in AML Compliance
You must guarantee that your risk-based AML strategy covers the following components:
Anti-Money Laundering Transaction Monitoring
Businesses must apply the ML risk rating of their customers correctly. It is critical to monitor and prevent transactions. Companies and relevant organizations must combine risk characterization with restriction measures within their system to improve the efficiency of transaction monitoring.
Know Your Customer Guidelines
- Financial institutions must verify the identity of customers and conduct ongoing monitoring to ensure that their activities are consistent with their stated business or personal purposes. It includes conducting background checks and reviewing the source of funds for high-risk customers.
- KYC regulations compel businesses to verify a customer’s identity and business claims. Basic identity information such as name, birth date, address, and identification number get collected.
- It also provides more specific financial information such as employment, location, predicted transaction behavior, and so on. With all of this information, the financial institution will be able to construct a more thorough picture of any risk connected with the customer.
AML/CFT compliance begins with assessing the level of risk posed by specific customers, transactions, and products. Financial institutions must consider factors such as the nature of the account, the location of the customer, and the size and frequency of transactions to identify potentially suspicious activities.
Suspicious activity monitoring and reporting
Financial institutions must establish procedures for monitoring and detecting suspicious activities, as well as reporting them to the relevant regulatory authorities. It involves implementing automated systems and training personnel to recognize and escalate potential red flags.
Record keeping and reporting
Financial institutions must maintain accurate records of customer information and transactions for a minimum of five years. In addition, they must report certain transactions, such as large cash deposits or wire transfers, to the appropriate government agencies.
AML/CFT program oversight
Financial institutions must establish a comprehensive AML/CFT compliance program that includes regular testing, training, and oversight to ensure that the program remains effective and up to date with regulatory changes. It involves designating a designated compliance officer and providing ongoing training to employees.
AML Compliance Officer
An AML compliance officer is responsible for identifying ML/FT problems and reporting them to the appropriate authorities. According to Article 21 of Cabinet Decision No 10 of 2019, appointing an AML compliance officer is a legal requirement in the UAE.
In the UAE, both FIs and Designated Non-Finance Businesses and Professions (DNFBPs) such as precious metals and stone dealers, real estate brokers, trust and corporate service providers, and auditors must designate an AML compliance officer.
An AML Compliance Officer’s responsibilities include the following:
- Detect any crime-related transactions.
- Examine and scrutinize records, collect data on suspicious transactions, and make choices such as informing Financial Intelligence Units (FIU).
- Assess if the organization’s internal policies and processes comply with UAE AML regulations, provide recommendations for updating or developing such procedures, create and send MLRO report to top management, and send a copy to Supervisory Authority
- Plan, carry out, and document ongoing AML-CFT training programs.
- If required, collaborate with FIU by providing all needed data.
Adverse Media Screening
Check for any unfavorable news about a consumer or a business. Such adverse media reporting can have an extensive influence on the choice to collaborate. Keeping an eye on such news is the best method to safeguard your firm from any potential problems that arise when interacting with clients with high-risk profiles.
Hire the Best AML Consultants with HLB Abu Dhabi
Implementing a risk-based approach is critical for ensuring AML compliance in the UAE. HLB Abu Dhabi may assist firms in implementing a risk-based AML-CFT strategy.
With an expert compliance team, HLB Abu Dhabi is one of the top providers of AML consultancy services. Our highly experienced staff of AML advisors is committed to ensuring you comply with the AML Law while avoiding penalties.