As UAE introduced Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) and Financing of Illegal Organizations via Federal Decree-law No. (20) of 2018 with an aim of preventing the risk of financial terrorism, illegal transactions and money laundering.
The law requires every company in UAE to plan and build an AML compliance framework, non-compliance of which will attract huge penalties with imprisonment sentences. Hence, creating an effective AML compliance framework is essential.
Below are the top 5 mistakes every business makes while building an AML compliance framework.
Lack of Knowledge of the Existing Laws
One of the most common mistakes found among the businesses while preparing an AML compliance framework is lack of knowledge of the latest laws and regulations. Companies must be updated regarding changes in laws and must be mindful of the penalties as well. A slight negligence in compliance can put an entity at huge financial and reputation risk.
Lack of Support from the Top Management
The appointment of the AML compliance officers by the entities is mandatory by the law, and its non-compliance will attract penalties of AED 50,000. Most businesses do not prioritize the appointment of the compliance officer or do not provide adequate information, and documents required.
Many times, they do not even get an independent atmosphere to prepare and evaluate the performance of the AML compliance framework. Support from the top management and the staff is the most crucial in implementing the AML compliance framework.
Not Updating Transaction Monitoring Systems
Using an old version of software for data management gives an open opportunity to the threats. Storing, recording or tracking transactions in an outdated system can make it hard for the compliance officer to detect money laundering activities.
Traditional monitoring systems were based on rules that can analyze the customer data but cannot detect background financial activities. The latest version is introduced according to the modern threats and enhanced security levels.
Using the old version may expose the company to financial risks. The latest programs monitor comprehensive financial transactions, high-level security, and provide warning alarms.
Lack of Precise Policies and Procedures
Implementation of the AML compliance framework requires setting precise organizational policies and procedures. Communicating prevailing issues and having brainstorming sessions within the department can save a company from paying millions unnecessarily.
Communicating the policies and procedures required for the execution of an effective compliance program will keep everyone updated about the monitoring of transactions, and solving internal issues.
Most importantly, it helps to organize a structured flow of data & information horizontally and vertically. If the employees of the company are informed of the policies and procedures required for the implementation of the AML compliance framework, they can make timely efforts in saving an organization from the penalties due to non-compliance.
Inaccurate Data Input
Using misleading or inaccurate data during the monitoring process of the transactions can probably induce officers to take wrong decisions. If the data to be monitored is full of mistakes or inaccurate to perform monitoring activities, it does not serve the purpose of implementing the AML compliance program.
It leads data to remain un-verified due to negligence or missout in evaluation at an early stage, it will become impossible to detect the person behind illegal transactions. Identifying suspicious transactions is essential for effective compliance with the AML framework.
Having a preliminary understanding of the AML Compliance Framework regulations can save you from non-compliance and hefty penalties. It is advisable to consult a legal professional to interpret the provisions of the law accurately.
Become an AML Compliant Organization
At Flyingcolourtax, you can get the right consultations for all your AML-CFT requirements. Our qualified professionals can help you prepare and implement a robust AML compliance framework.
We can also assist you in accounting, taxation, financial modeling, company registration, and PRO requirements.
Register your free consultation with us to know more about the comprehensive services.
To learn more about 5 Most Common Mistakes Every Business Makes in Preparing an AML Compliance Framework, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.