(AML-CFT Decision Articles 20.3, 21 and 44.12)

(AML-CFT Decision Articles 20.4-5, 21.4)

In order for their ML/FT risk assessment and AML/CFT mitigation measures to be effective, FIs should ensure that their employees have a clear understanding of the ML/FT risks that the FI is exposed to and can exercise sound judgment, both when adhering to the FI’s AML/CFT risk mitigation measures and when identifying suspicious transactions. Furthermore, due to the ever-evolving nature of ML/FT risks, FIs should ensure that their employees are kept up to date on an ongoing basis in relation to emerging ML/FT typologies and new internal and external risks. . Depending on the nature, size and level of complexity of an FI, an FI should also screen staff to ensure high standards when hiring employees.

Thus, to ensure a high level of competence and AML/CFT programme effectiveness, FIs should formulate and implement appropriate policies, procedures and controls with regard to staff screening and training. An effective training program should not only explain the relevant AML/CFT laws and regulations, but also cover the institutions’ policies and procedures used to mitigate ML/FT risks, scope of target employees such as but not limited:

These measures should be applied across organisations and financial groups, including their foreign branches and majority-owned subsidiaries. Examples of some of the factors that should be considered when determining appropriate staff screening and training measures include, but are not limited to:

(AML-CFT Decision Articles 20, 31, 32)

When an FI is part of a group, the FI is obliged to implement appropriate group-wide AML/CFT programmes, and to apply them in relation to all branches and majority-owned subsidiaries of the financial group. The specific requirements that must be met by FIs with respect to their foreign branches and majority-owned subsidiaries are set out in the relevant provisions of the AML-CFT Decision, and reflect those to which FIs are subject within the State.

In meeting these obligations with regard to their branches and majority-owned subsidiaries in foreign countries, FIs, and in particular FIs that are members of financial groups, should ensure that the measures they apply are consistent with the requirements of the AML-CFT Law and AML-CFT Decision. In this regard, FIs should establish appropriate policies and procedures for the exchange and sharing of data and information, including those required for the purposes of CDD and ML/FT risk management, between the foreign branches and subsidiaries and the head office, for the purpose of combating the crimes of money laundering and the financing of terrorism and of illegal organisations, and for reporting suspicious transactions.

In situations where these measures are not possible due to legislative or regulatory restrictions in the foreign countries in which their branches and majority-owned subsidiaries operate, FIs (including those which are members of Financial Groups) should implement the necessary additional measures, commensurate with the nature and size of their businesses, that will enable them to manage and mitigate appropriately the ML/FT risks that relate to their foreign operations. Examples of some of the measures that should be considered include but are not limited to:

In particular, in cases in which the minimum AML/CFT requirements of host countries in which FIs maintain foreign operations are less strict than those of the State, FIs should take the necessary measures to ensure that their foreign branches and/or majority-owned subsidiaries in those countries implement requirements consistent with those of the State, to the extent permitted by the laws and regulations of the host countries. If such host countries do not permit the proper implementation of the AML/CFT requirements consistent with those of the State, FIs should apply appropriate additional measures to manage and mitigate the ML/FT risks (including but not limited to those described above). They should also inform the relevant Supervisory Authorities of the circumstances and comply with any additional supervisory actions, controls, or requirements of the Competent Authorities of the State (up to and including, if requested, terminating their operations in the host countries).

(AML-CFT Decision Article 20.6)

A robust and independent audit function is a key component to a well-functioning governance structure and an effective AML/CFT framework. FIs are obliged to have in place an independent audit function to test the effectiveness and adequacy of their internal polices, controls and procedures relating to combating the crimes of money laundering and the financing of terrorism and of illegal organisations. In this regard, FIs should ensure that their independent audit function is appropriately staffed and organized, and that it has the requisite competencies and experience to carry out its responsibilities effectively, commensurate with the ML/FT risks to which the FIs are exposed, and with the nature and size of their businesses.

It should be noted that, while most FIs are expected to have the capacity to meet these requirements internally, depending on the nature and size of their businesses, some FIs (particularly smaller ones) may not necessarily have the resources to maintain a fully functioning and effective internal audit unit. In such cases, those FIs should ensure that they take adequate measures to obtain the necessary capabilities from qualified external sources. They should also ensure that they have in place adequate internal capabilities to provide sufficient coordination with and oversight of any external resources they may utilise, and that such external resources are adequately regulated and supervised by relevant Competent Authorities.

FIs should ensure that the periodic inspection and testing of all aspects of their AML/CFT compliance programmes, including ML/FT business risk assessment and AML/CFT mitigation measures, and CDD policies, procedures and controls, is incorporated into their regular audit plans. They should also ensure that all their branches and the subsidiaries in which they hold a majority interest, whether domestic or foreign, are part of an independent audit testing programme that covers the effectiveness and adequacy of their internal AML/CFT polices, controls and procedures.

Some of the factors FIs should consider in determining the appropriate frequency and extent of audit testing of their AML/CFT programmes by their independent audit functions include but are not limited to:

The scope of such audits should include but not be limited to:

(AML-CFT Decision Articles 4.2(a), 4.2(b)(5), 8.1(a), 15.1(b) and 15.2, 17.3, 21.3, 25.1(d))

A cornerstone of any sound governance structure, including those related to AML/CFT compliance, is senior management involvement and accountability. The members of an FI’s senior management (together with the members of the board of directors in those organisations that have one) are ultimately responsible for the quality, strength and effectiveness of the FI’s AML/CFT framework, as well as for the robustness of its compliance culture. In this regard, an FI’s senior management should set the ML/FT risk appetite and a proper “tone at the top,” by demonstrating their commitment to ensuring an effective AML/CFT compliance programme is in place, and by clearly articulating their expectations with regard to the responsibilities and accountability of all staff members in relation to it.

Under the AML/CFT legal and regulatory framework of the UAE, the senior management of all FIs are responsible for performing certain functions related to the assessment, management and mitigation of the ML/FT risks to which their organisations are exposed. These responsibilities can be grouped broadly into categories which include:

Some FIs may operate as small or mid-sized businesses, without large staff organisations or sophisticated IT infrastructures. In such cases, individual managers and employees may often be called upon to undertake multiple roles and responsibilities in the course of day-today business activities, and it may be difficult at times to maintain a clear separation of duties or functions. While an FI’s small size does not in any way exempt it from fulfilling its obligations under the AML-CFT Law and AML-CFT Decision, and without prejudice to guidance provided in the previous sections, the following additional considerations are of particular importance to small and mid-sized FIs.