Speed Read

• The Dubai Courts recently announced the establishment a specialised court to hear cases relating to alleged money laundering and other financial crime.

• This is the latest in a series of steps taken by the United Arab Emirates (UAE) to implement its commitment to upholding the integrity of the international financial system. It is also part of the UAE’s broader strategy to develop and improve its standing and competitiveness as an international financial centre.

• The new court will help Dubai keep pace with international anti-money-laundering (AML) standards and developments.

Introduction

The Government of Dubai Media Office announced the establishment of a specialist court to hear cases relating to money laundering and financial crime. This is one of several steps taken over the last few years to tackle financial crime and enhance the integrity and robustness of the UAE’s financial system.

Anti-Money-Laundering Developments in the UAE

Between 2013 and 2018, 282 money laundering cases were identified in the UAE. This led to 50 prosecutions and 33 convictions.

Such a modest level of enforcement and convictions had been a source of concern, given the UAE’s status as a leading financial and business centre in the Middle East, along with the nature and extent of the financial institutions established in the UAE and the value of funds moved through the UAE.

Since 2018, the UAE has taken steps to enhance the strength of its AML regime. This began with the issuing of Federal Decree No. 20 of 2018 on Anti-Money Laundering and Countering the Financing of Terrorism.

The decree defined a perpetrator of a money-laundering offence as any person who is aware that money is derived from a felony or misdemeanour, and who intentionally commits one of the following acts (the drafting of which is broadly similar to the equivalent primary money laundering offences in the UK Proceeds of Crime Act 2002):

• transferring or transporting proceeds of crime with intent to conceal or disguise its illicit origin

• concealing or disguising the true nature, origin, location, way of disposition, movement or rights related to any proceeds or the ownership thereof

• acquiring, possessing or using such proceeds

• assisting the perpetrator of the predicate offence to escape punishment.

The decree (along with a supplemental by-law passed in 2019) established a robust legal framework to support UAE authorities that are concerned with tackling financial crime. The decree also consolidated and expanded the scope of the preventative measures to the full range of standards covered by the Financial Action Task Force (FATF) and provided further powers to competent authorities across the whole of the UAE.

In April 2020, FATF published its Mutual Evaluation Report on AML and counter-terrorist financing measures in the UAE. The report praised the UAE for having made “significant improvements” in recent years, but also noted several areas for potential enhancement.

The UAE has been swift and proactive in seeking to remedy some of the concerns raised by the report and has already taken several key steps in this regard:

• the introduction, in August 2020, of new requirements for entities to disclose their beneficial owners

• the establishment, in November 2020, of a court specialising in money laundering and tax evasion crimes in Abu Dhabi

• the establishment, in February 2021, of the Executive Office to Combat Money Laundering and Terrorist Financing, designed to improve national and international coordination and cooperation on money laundering and terrorist financing issues at both policy and operational levels.

These developments have been coupled with a stronger emphasis on enforcement. For example, the Abu Dhabi Criminal Court recently convicted eight companies and 40 individuals of various nationalities of fraud and money laundering offences. The defendants (23 of whom are expatriates now facing deportation) have been sentenced to prison terms ranging between five and ten years, and have been collectively fined almost AED 860 million (approximately £170 million). The Dubai Misdemeanour Court also recently convicted three companies and eight individuals of cyber fraud and money laundering, resulting in imprisonment, deportation and fines for the offenders.

This latest step of creating a court in Dubai focused on money laundering and financial crime shows that the UAE remains focused on this space. Indeed, one of the “priority actions” recommended in the FATF report was that “all Public Prosecutions, but especially Dubai Public Prosecutions given its risk exposure, [should] prioritise the pursuit of money laundering charges, including complex or standalone prosecutions in cases of foreign predicate offending.” This new specialised court will help Dubai do exactly this.

Brief Comment

This new court supports the trend in the UAE towards judicial specialisation, which is important in prosecuting cases of financial crime since they often require specialised knowledge and expertise.

Given the status of the UAE (and particularly that of Dubai) as a leading international financial centre, it is important that its business environment be underpinned by strong money laundering laws and supported by a regulatory and judicial framework which is able to deter and ultimately prosecute breaches. The new court is a useful part of a package of measures introduced by the UAE over the last few years to enhance the confidence of the international business, financial and political community in the UAE as a safe place from and through which to conduct business. The recent conviction of 8 companies and 40 individuals in Abu Dhabi, along with significant prison sentences and fines, indicates how effective these specialist courts can be and demonstrates the determination of UAE authorities to prosecute money laundering and related crimes. The Emirati authorities are to be congratulated for their initiative and leadership in this regard.

It is important to note that the UAE’s specialist AML courts will not be able to operate properly in a vacuum. The success and integrity of the system will also depend upon extraneous factors such as the quality of transaction monitoring by financial institutions, prompt and accurate reporting of suspicious activity, and the accuracy and completeness of data provided to regulators. Robust judicial oversight and meaningful penalties for enablers as well as perpetrators will also be key.

In the meantime, the inauguration of the new court is a significant positive step forward and sends an important signal to those seeking to abuse the financial services sector in the region: the UAE authorities mean business.