The UAE government has been aware of the existence of money laundering locally since the 1980s. Due to the inflow of illegally earned money into the national economy, the UAE faced different problems such as imbalance in consumption and spending patterns, waste of national income for the benefit of foreign entities, and increase in domestic liquidity among many other negative impacts. The leak of illegal money also affected society through turning the social structure upside-down where smuggler/criminals were going to the top of the social pyramid.
In order to control and combat money laundering, the UAE government has taken a series of steps and legislations.
The UAE was one of the first countries in the region to introduce the Anti-Money Laundering Articles in its Federal Law. (Law No (3), 1987 Concerning Promulgating Penal Code.
In 1993, the Central Bank of the UAE issued a circular (No. 14/193), which introduced a new requirement for opening accounts for Charitable Institutions (under Associations). This circular also contains comprehensive customer identification requirements.
In 1998, the Central Bank of the UAE issued another Notification (No. 163/98), that imposed an obligation to report certain types of suspicious transactions concerning third party cheques or deposits of cash, when there are no known businesses or commercial activities.
In July 1999, the Central Bank of UAE established a Financial Information Unit named Anti-Money Laundering and Suspicious Cases Unit. At first this unit was staffed by only 6 individuals. However, after the tragic events of 9/11, the staff was doubled to twelve. This unit has access to all related authorities in the country as well as those abroad through the practices and workings of the National Anti-Money Laundering Committee.
In the same month the following year, the Central Bank formed the National Anti-Money Laundering Committee (MAMLC) based on a suggestion by the Ministry of Interior. This committee has overall responsibility for coordinating UAE anti-money laundering policy. It consists of the Central Bank, Ministry of Justice, Ministry of Interior, Ministry of Economy and Commerce, Ministry of Finance, the UAE Custom’s Council and the various Municipalities. This Committee also includes three main money changers and five of the largest national banks of the UAE as observers.
In 2002, in addition to anti-money laundering law, the Central Bank of UAE has issued a number of instructions and procedures to be adhered to by banks as well as financial institutions operating within the country. In middle of the 2002, the UAE also organized the 1st International Conference on Hawala.
In addition to being on top of fighting the illegal practice of money laundering within its borders, the UAE government has also taken necessary actions to combat money laundering in international and regional levels. In 1988, the UAE signed the UN Convention in Vienna against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. The UAE is also a major proponent of the Arab Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, which was signed in Tunisia in 1994.
The UAE government’s view is not only to reduce the financial crime but also prevent the criminal and terrorist groups that turn to money laundering through sound rules and regulations.
The United Arab Emirates is a member of the Middle East and North Africa-Financial Action Task Force (MENA-FATF), set up in 2004, and which has been responsible for a significant decrease in money laundering and terrorist financing activities since its inception. The MENA-FATF has been able to contribute to measures that are in sync with the cultural values and legal systems of its member countries.
The UAE has amended its legal arrangements to bring them more closely into alignment with the FATF’s recommendations. They have also recommended that all financial and other regulated institutions review their internal procedures to ensure their compliance, with significant penalties for non-compliance.
It is hoped that this type of collaborative approach will be effective in combating money laundering activities in the Middle Eastern on a regional scale. The more stable economies that should arise as a result, could give way to more lucrative trading partnerships between the region and the Western World.