Skip to main content
Entire section Custom print Text Only Rich Text Print

Annex 2. Synopsis of the Guidance

Effective from 16/6/2021
Purpose of this Guidance (1)PurposeThe purpose of this Guidance is to help Licensed Financial Institutions (LFIs) understand and mitigate risks when providing services to the dealers in precious metals and stones (DPMS) and real estate (RE) sectors, and to guide them in fulfilling their AML/CFT obligations. The FATF's Mutual Evaluation Report of the UAE issued in April 2020 stated that the two sectors are weighted as highly important in terms of risk and materiality in the UAE.
ApplicabilityThis Guidance applies to all natural and legal persons, which are licensed and/or supervised by the CBUAE, in the following categories:
  • national banks, branches of foreign banks, exchange houses, finance companies, payment service providers, registered hawala providers and other LFIs; and
  • insurance companies, agencies, and brokers.
Understanding and Assessing the Risks of DPMS(2.1)ML/TF Risks of DPMSDPMS present higher risks to LFIs because their services and products are attractive to illicit actors as the trade in precious metals and stones permits illicit actors to move large quantities of value in a liquid, fungible format across borders outside of the traditional financial system.
Features of DPMS that Increase RiskNot all DPMS pose equal risk to LFIs. DPMS with the following characteristics may be higher risk:
  • Operating in jurisdictions with lax or non-existent regulation or that are high risk for crime and terrorism;
  • Offer products and services—such as the sale of gold bullion or of uncut stones—that allow customers to access a widely traded, fungible, anonymous form of value; or
  • Serve a high-risk customer base, such as a high proportion of PEPs.
Supervision of DPMS in the UAEDPMS in the UAE may qualify as DNFBPs when they carry out any single monetary transaction or several transactions that appear to be interrelated or equal to more than AED 55,000. If so, they are required to apply AML/CFT controls like those used by LFIs. They are supervised by the Ministry of Economy, which has issued guidelines for supervised entities describing their AML/CFT compliance obligations.
Understanding and Assessing the Risks of the RE sector (2.2)ML/TF Risks of the RE SectorThe RE sector presents a higher risk to LFIs because the sector offers an attractive way for illicit actors, criminals, and corrupt officials to move and store value while hiding their identity.
Features of RE Sectors that Increase RiskNot all customers and transactions related to the RE sector (in the UAE or elsewhere) pose equal risk to LFIs. Sectors with the following characteristics may be higher risk:
  • Weak regulation and/or supervision of real estate brokers and agents;
  • Widespread use of cash to purchase real property;
  • Lack of transparency on beneficial owners of real estate;
  • Openness to foreign purchasers, including 'golden visa' programs; and
  • High liquidity and rising prices.
Supervision of the RE Sector in the UAEReal estate agents and brokers qualify as DNFBPs when they conclude operations for the benefit of their customers with respect to the purchase and sale of real estate. When they qualify, they are required to apply AML/CFT controls like those used by LFIs. They are supervised by the Ministry of Economy, which has issued guidelines for supervised entities describing their AML/CFT compliance obligations.
Mitigating Risk: Requirements for LFIs (3)Risk-Based Approach

LFIs must take a risk-based approach in their AML programs and to individual customers. This means that they should assess all customers, including DPMS and RE sector customers, to determine their degree of risk.

In assessing the risk of a DPMS and RE sector customers, LFIs should consider at least the following factors:

  • The jurisdiction(s) in which the customer is based or does business, including both the jurisdictional risk of crime and terrorism but also the regulation in place on the DPMS and real estate sectors;
  • The products and services the customer supplies to its customers;
  • The customer's customer base;
  • The quality of the customer's AML/CFT controls, where they exist.
Customer Due DiligenceFor all customers, including DPMS and RE Sector customers, LFIs must perform Customer Due Diligence with the following components:
Customer Identification: DPMs and RE sector customers will often be businesses, and LFIs should ensure that their customer has the required licenses.
Identification of Beneficial Owners: DPMs and RE sector customers will often be legal persons. For all legal person customers, LFIs must identify all individuals who, individually or jointly, have a controlling ownership interest in the legal person of 25% or more. If no individual can be identified, the LFI must identify the individual(s) holding the senior management position(s) within the legal person customer.
Understand the Purpose of the Account and the Nature of the Customer's Business: The purpose of the account and the nature of the customer's business are critical drivers of risk for DPMS and RE sector customers. LFIs should fully understand how their customer makes money and what types of transactions it expect to carry out through the LFI's account. As they seek to understand the customer's business, LFIs should collect all information necessary to assess customer risk.
Perform Ongoing Monitoring: For all customers, LFIs must ensure that the customer information on file is up to date and accurate, and that the customer's activities are in line with the expectations set at onboarding. If not, the customer risk rating may need to be changed.
Special Considerations for RE transactions: Many transactions related to the RE sector will be between persons who are not themselves members of the sector. LFIs should perform due diligence on all transactions that are outside of a customer's normal behavioral profile. If LFIs discover that a transaction is related to the purchase or sale of real estate, it may be necessary to perform additional due diligence.
Suspicious Transaction ReportingFor customers of all types, LFIs must report any behavior that they reasonably suspect may be linked to money laundering, the financing of terrorism, or a criminal offence. Please consult the CBUAE's Guidance on Suspicious Transaction Reporting for further information.
Governance and TrainingThe measures discussed above should be supported by a larger AML/CFT program with effective governance arrangements, including a sufficiently empowered Compliance Officer, and training that educates LFI staff on the risks of these sectors.