The FATF(Financial Action Task Force), which was founded in 1989, is an intergovernmental organization which primarily focuses on combating money laundering. In the year 2001, the organization inculcated policies to combat terrorism financing. FATF monitors the progress of the member countries in implementing initiatives to combating terrorism financing and money laundering activities through mutual evaluations of the member nations. Through mutual evaluations, the organization gets to understand the countries that adhere to the policies and the countries that are not making progress. Subsequently, the countries that do not implement the policies are put on the FATF blacklist. The United Arabs Emirates is among the member countries of FATF and is expected to adhere to the FATF policies and recommendation based on the mutual evaluation reports.Consequently, UAE will require to amend some of its legislative laws in a bid to adhere to recommendations of the FATF mutual evaluations. This proposal assesses the areas of development in the current UAE legislation in light of the FATF mutual evaluation report.
The 2018 FATF Mutual Evaluation Report contains various provisions including the recommendations concerning member countries combating terrorism financing and money laundering. The organization plans to combat terror through the slogan "No money No terror" which means that without finances, the terror groups cannot thrive. As for the UAE, it has the mandate to implement FATF recommendations of ensuring that terrorist activities are minimized in the Arab nations. One of the areas of developments in the UAE legislation is to discontinuing the legislating shell corporations.The shell companies acquire legal certificates from the government and have active bank accounts; however, there is never an account of their physical setting or business location. Most likely, terror organizations acquire funds through the shell companies.
FATF asserts that the aspect of transparency is an essential factor to inhibiting terrorism financing. That is, the legal persons and legal intermediaries can misuse legal arrangements to fund terror activities. According to Federal Law No. 7 of 1976, the government authorizes the establishment of State Audit Institutions. The UAE legislation should ensure that government officials and business people undergo an assessment of the transactions that they make. The misuse of legal arrangements can consequently contribute to criminals concealing their illegal activities. The government should enact policies to ensure that there is an audit of businesses and government officials to enhance transparency which facilitates the reduction of illegal activities in UAE. Once there is transparency, instances of criminal and terror activities within the nation will be minimal.
Also, there exist professional money launderers (PMLs) who assist in setting the infrastructure for criminals to acquire the proceeds of their illegal activities through legal means. The FATF asserts that such money laundering activities affect the progress of a nation economically. As for the UAE, it can empower the criminal justice system to aid in the evaluation of the activities of the PMLs and consequently prevent money laundering and terrorist financing activities. The criminal justice system of UAE can implement the crime pattern analysis to assess the possibility of money laundering crimes in the past. The crime pattern analysis as applied in Dutch countries encompasses the assessment of money laundering and suspicious transaction reports about individuals who are most likely to be involved in illegal activities. The inclusion of the intervention in UAE legislation will facilitate the assessment of patterns of crimes on money laundering by assessing the past activities of the people who conduct suspicious transactions and activities. Further, the crime pattern analysis reports present an aspect of transparency to facilitate the prevention of criminal activities by legal persons and intermediaries.
Money launderers either bank their illegal proceeds in banking institutions within their nations and sometimes keep it in banking institutions in foreign countries. Initially, the UAE government was perceived to be non-compliant with the aspect of cash declaration and disclosure. However, FATF recommends that member nations should minimize the aspect of boundaries and jurisdictions to addresses the issues of AML and terrorist financing deficiencies. Professional money launderers prefer to bank their crime proceeds in the international arena while on the other hand, they bank legal proceeds in their home countries. UAE should enact the aspect of no jurisdictions to ensure that criminals do not continue executing illegal activities either within UAE or the international arena.
The Human Rights Act facilitates the protection of every human being. In a bid to improve the protection of human rights, the criminal justice system should ensure that there is no in-flow of finances from human trafficking activities. Human trafficking activities are carried out for various reasons such as organ removal, sexual exploitation, and forced labor. As for the UAE, the Human Rights Act should protect both citizens and foreigners who come into the state seeking employment. In this case, the government can adhere to FATF recommendations and ensure that the corporations that have employed foreigners compensate them appropriately without any aspects of labor exploitation. Although UAE does not experience high rates of human trafficking in comparison to nations such as Nigeria, the government of the UAE should amend the provisions of Human Rights Act, and ensure that corporations do not increase their profits through the exploitation of their foreign workers.
Recent reports of the corruption of the UAE officials affirm that only one percent of the total corruption cases are reported in the UAE. The corruption cases contribute to various crimes such as the prevalence of money laundering activities, illegal activities which generate revenue to terrorists and criminals among other negative implications. Improving the effectiveness of the criminal justice system ensures the reduction of corruption incidences in UAE. In this case, the police and the government officials will stop corruption activities by ensuring transparency and failing to take bribes. The primary goal of the UAE government should be combating terrorism and money laundering. As such, the uncorrupt government organizations will ensure that they prevent and minimize the occurrence of criminal and terror activities. The effective implementation of the FATF recommendations will require the government empowering the criminal justice system.
The Federal Law No.4 purports that the government officials should identify the means to reduce instances of money laundering and terrorism financing. However, a recent report asserts that the UAE was non-complaint to reporting the incidences of suspicious financial transactions which could be an indicator to money laundering and terrorism financing. The government can enhance the Federal Law No. 4 by ensuring that there is adequate assessment of all financial transactions in the financial institutions in UAE. Some banking institutions still allow for high cash threshold transfers which raise an alarm of the prevalence of criminal activities in the region. As such, the government should facilitate the means to monitor the number of transactions by business people and government officials. This improves accountability for all the transaction in UAE. Moreover, the government should enact measures that monitor wire transfers.
The DIFC Law No. 1 of 2004 is concerned with the regulation of banking activities. Mostly, money laundering activities occur through bank transfers. For instance, shell companies create bank accounts to keep the proceeds of their illegal activities. Subsequently, corrupt officials may use bank transfers to send money to foreign nations for funding terror activities. As such, the implementation of efficient and effective regulatory laws facilitates the accountability for all transactions through the financial institutions in UAE to prevent problems of money laundering and terrorism funding. UAE government can achieve transaction regulation by conceding additional authority to the central bank. Henceforth, the Central government conducts the supervision and regulation of the operations by financial institutions to ensure they comply with the AML law and its regulations. Therefore, for the UAE government to adhere to FATF recommendations for AML(Anti-Money Laundering)activities and the prevention of terrorism financing.
The airport declaration is another essential intervention in enabling UAE to comply with the FATF Mutual Evaluation requirements. Initially, the UAE AML law stipulated that the central bank was to set the maximum amount of cash that people could fly with into UAE without the need for a declaration. As such, people could enter the region with costly precious stones; hence, this could be the window that terrorists continued to bring their illegal proceeds into the country. In a bid to enhance the AML Law, the government should require that anybody who is entering UAE to declare their possessions at the airports. The declaration does not only involve cash but also, financial instruments and expensive and precious stones such as diamonds and gold. In improving the AML Law, the new law should require the declaration during entry and exit from UAE.
Furthermore, there should be an establishment of harsher punishment for people who break the AML law. UAE sufficed to be non-compliant to various FATF recommendations including failure to report suspicious transactions, corruption activities, lack of declaration and disclosure, lack of customer due diligence among other aspects. Therefore, UAE should make punishments harsher for officials who fail to report the violation of the AML law. The government and the citizens of UAE should strive to uphold AML laws and prevent the prevalence of criminal activities. The punishment should include imprisonment as well as fines depending on the intensity of the crimes. Particularly, money launderers should receive harsher punishments such as long-term imprisonment as well as high fines. Further, the AML laws should include the confiscation of proceeds of criminal activities besides punishing the criminals through fines and imprisonment.
The UAE government should also facilitate the protection for whistleblowers who report instances of Terrorism Financing and money laundering. One of the aspects that contributes to the prevalence of criminal and terror financing is the fear by the whistleblowers that the perpetrators will eventually harm them due to lack of protection from the government. As such, UAE should enhance AML laws by facilitating protection of the whistleblowers. Also, the criminal justice system should ensure they create partnerships with individuals working in financial institutions who provide knowledge concerning suspicious transactions in the state.
Alhosani WH. A critical analysis of the function played by the UAE's Financial Intelligence Unit in counteracting money laundering with particular reference to the UK's Financial Intelligence Unit (Doctoral dissertation, Bangor University (Law), 2014).
Areas CF. The United Arab Emirates. 2018.
Gibbs T. An analysis of the Effectiveness of Anti-Money Laundering and Counter-Terrorist Funding Legislation and its Administration in the UAE (Doctoral dissertation, School of Advanced Study, University of London, 2017).
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