Dubai’s Efforts in Strengthening Anti-Money Laundering (AML) Compliance

Dubai, a major global financial center, has been enforcing strong Anti-Money Laundering (AML) rules to keep its financial system safe and trustworthy. Over the years, to combat financial crimes, improve regulatory monitoring, and conform to global best practices, the emirate has been continually upgrading its AML framework.

This blog explores Dubai’s key milestones in strengthening Anti-Money Laundering (AML) compliance, from early regulations to recent legislative reforms, oversight committees, and strategic initiatives.

Enactment of Federal Law No. 4 of 2002

In the 1990s, no formal regulations related to financial crimes were yet in place. However, the UAE started recognizing the risks associated with financial crimes, particularly money laundering. So, the first major milestone in Dubai’s AML laws came in 2002 with the introduction of Federal Law No. 4, titled “Concerning Combating Money Laundering and Terrorism Financing Crimes.”

The legislation identifies a range of predicate offenses that generate illicit proceeds, including:

• Narcotics and psychotropic substances
• Kidnapping, piracy, and terrorism
• Environmental law violations
• Illicit dealings in firearms and ammunition
• Bribery, embezzlement, and damage to public property
• Fraud, breach of trust, and related offenses

The law imposes stringent obligations on financial institutions to implement internal policies, procedures, and controls to prevent and detect money laundering activities. This includes conducting Customer Due Diligence (CDD) and reporting Suspicious Transaction Reports (STRs) to the relevant authorities.  

Impact

This law laid the foundation for AML compliance. However, it lacked strict enforcement mechanisms and penalties.

Creation of the DIFC and DFSA

Dubai took a big step in making its financial regulatory framework stronger in 2004 when it established the Dubai International Financial Centre (DIFC). It is a special economic zone designed to attract global financial institutions. To regulate and manage financial activities within DIFC, the Dubai Financial Services Authority (DFSA) was created.

The DFSA operates under the DIFC Regulatory Law of 2004. It ensures strict adherence to AML and Counter-Financing of Terrorism (CFT) regulations. This way, DIFC was made one of the most secure and compliant financial hubs in the world.

Impact

This step introduced sector-specific AML regulations and thus brought Dubai’s framework closer to global financial hubs.

Federal Decree-Law No. 20

As financial crime threats were evolving, the UAE introduced Federal Decree-Law No. 20 of 2018. This law focused on:

• Expanding the definitions of money laundering crimes
• Establishing stringent penalties for non-compliance
• Improving financial institutions' due diligence obligations
• Making cooperation between national and international regulatory bodies stronger

This law mandates financial institutions and designated non-financial businesses and professions (designated non-financial businesses (real estate, law firms, and gold traders) to implement strong CDD procedures, maintain records, and report suspicious transactions. It also increased fines up to AED 50 million and introduced imprisonment for violations.

Impact

This law shifted AML compliance from banks to multiple industries and introduced harsher penalties.

Federal Decree-Law No. 26

Considering the rapidly changing financial arena, the UAE further introduced Federal Decree-Law No. 26 of 2021. This law:

• Strengthened penalties for AML violations
• Increased regulatory oversight over financial institutions and designated non-financial businesses, such as real estate and legal sectors.
• Enhanced reporting obligations to prevent illicit financial activities

The amendments introduced stricter penalties for violations, including fines and potential imprisonment, to deter illicit financial activities effectively. The aim was to close loopholes and prevent emerging financial threats.

Impact

This law addressed gaps in the previous law and strengthened enforcement across sectors.

Federal Decree-Law No. 7

In 2024, the UAE introduced Federal Decree-Law No. 7. It marks one of the most comprehensive AML reforms in recent years. This law introduced new governance structures to enhance AML enforcement. It includes:

Formation of the National Committee for AML Compliance

Chaired by the Governor of the Central Bank, this high-level committee was tasked with overseeing and coordinating national AML strategies, ensuring effective enforcement across sectors.

Creation of the Supreme Committee for Supervising the National Strategy to Combat Money Laundering and Terrorism Financing

Operating under the Presidential Court, this committee:

• Assesses the effectiveness of AML policies
• Proposes legislative amendments
• Supervises compliance evaluations

Establishment of the General Secretariat

Supporting the National Committee, this body is led by a Secretary General who also serves as Deputy Chairman of the National Committee and a member of the Supreme Committee.

Impact

This law shifted AML enforcement from individual institutions to a centralized, government-led approach. This new governance structure improved national coordination, ensuring a more powerful and responsive AML compliance framework.

Cabinet Resolution No. 71

To further reinforce compliance, the UAE issued Cabinet Resolution No. 71 of 2024. It introduced clear violations and administrative penalties for financial institutions and businesses that failed to comply with AML regulations. The resolution:

• Outlined specific offenses, including failure to conduct due diligence, non-reporting of suspicious transactions, and inadequate record-keeping
• Defined penalty structures, including fines and license revocations for non-compliant businesses; introduced strict fines of up to AED 1 million for non-compliance
• Strengthened regulatory authorities' enforcement powers to ensure strict adherence to AML laws

This resolution was a direct response to the FATF’s recommendations. It reinforces Dubai’s and the UAE’s commitment to global AML standards.

Impact

This law created a transparent penalty structure to deter financial crime.

The UAE’s National Strategy for AML/CFT/CPF

In September 2024, the UAE unveiled its National Strategy for Anti-Money Laundering, Countering the Financing of Terrorism, and Proliferation Financing (AML/CFT/CPF) for 2024-2027. This strategy focused on 11 strategic goals aimed at mitigating financial crime risks and ensuring the sustainability of AML efforts:

1. Deepening the comprehension of money laundering and terrorism financing risks specific to the UAE to ensure that relevant entities are well-equipped to address these threats.
2. Advancing global partnerships and strategic alliances to enhance the collective fight against financial crimes.
3. Enhancing the use of financial intelligence to support investigations, prosecutions, and the confiscation and recovery of illicit assets.
4. Implementing measures to increase transparency regarding real beneficiary procedures to prevent the misuse of legal entities and structures within the UAE.
5. Updating the UAE’s legal and regulatory framework to align with international standards, particularly those recommended by the Financial Action Task Force (FATF).
6. Bolstering the UAE's standing as a leading country in combating money laundering, terrorism financing, and weapons proliferation.
7. Emphasizing a risk-based approach to allocate resources efficiently, focusing on the highest threats within the financial system.
8. Improving collaboration among various national agencies and stakeholders to ensure a unified and effective response to financial crimes.
9. Utilizing advanced technologies to detect and disrupt financial crimes, including the adoption of artificial intelligence and data analytics.
10. Focusing on new and evolving risks such as trade-based money laundering, virtual assets, and cybercrime to adapt to the changing financial landscape.
11. Establishing mechanisms to maintain and continuously improve the effectiveness of AML/CFT measures over the long term.

Potential Impact

This strategy reflects a proactive approach, aiming to ensure that Dubai and the UAE remain ahead of emerging AML challenges.

Conclusion

Dubai has transformed its AML compliance framework significantly over the past three decades, evolving from foundational regulations in the 1990s to a sophisticated, globally recognized system now.

With continued legislative advancements, international cooperation, and technological integration, Dubai remains committed to protecting its financial system from illicit activities, reinforcing investor confidence, and ensuring compliance with international financial regulations.

As the UAE moves forward with its 2024-2027 AML Strategy, Dubai’s position as a secure and compliant global financial center is set to strengthen further, ensuring long-term financial integrity and sustainability.

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