In its effort to Combat Money Laundering and Terrorism Financing in the Country, the UAE Government has laws and regulations that guide the activities of all persons, whether natural or entities. The Audit Profession/ Business as one of the businesses classified under the Designated Non-Financial Business Profession (DNFBPs)[1] has various roles under the UAE Anti-Money -Laundering Law to combat money laundering and terrorism financing activities.
Due to the nature of their business of examining accounts, books, records, papers, policies, and procedures of their clients, the Audit professionals are in a unique position to identify potential money laundering risk and detect potentially suspicious activities. It is therefore vital that audit professionals understand their obligations under the UAE Anti Money Laundering Law.
In this writes up, we shall focus on the responsibilities of Audit professionals under the UAE Anti Money Laundering Law.
Roles of Audit Professionals
Audit professionals perform a variety of roles or functions relating to their activities which include;
- Financial audits of client’s books, records, and annual and periodic accounts;
- Operational audits of client’s internal controls, governance structures, and risk management processes and procedures;
- Compliance audits on client’s adherence to legal and regulatory requirements.
Duties of Audit Professionals under the UAE Anti Money Laundering Law
Audit Professionals, as DNFBPs, are required to fulfill certain obligations, which constitute the basis of an effective risk-based Anti-Money Laundering program. These obligations include:
- Identifying and assessing ML/FT risks and mitigating the risk;
- Maintaining adequate risk-based customer due diligence (CDD) and ongoing monitoring procedures
- Identifying and reporting suspicious transactions
- Appointing a Compliance Officer and ensuring sufficient staff screening and training
Risk Identification and Assessment for Auditors under the UAE Anti -Money Laundering Law
The UAE Anti Money Laundering Law requires the Audit professionals to identify and assess the Money Laundering and /Financing Terrorism risks to which they are exposed[2]. They are required to put certain factors into consideration when identifying and assessing money laundering risks. Audit business is considered a unique business and Audit professionals carrying out their duties under the UAE Anti Money Laundering Laws are required to approach risk assessment in two perspectives as follows;
- They are to identify and assess their own money laundering risk relating to the nature and type of their customers;
- Their responsibilities to identify and assess their client’s money laundering risk when employed in that role by the client.
While carrying out some roles, Audit professionals may receive money from their clients and carry out valuations on assets or liabilities of a company. Their activities may also include the approval of changes in a company’s capital structure or the payout of dividends, the approval of a write-off of uncollected debts, etc. These roles and more can expose Audit Professionals to money laundering risk; thus, they are required to consider factors such as customer risk, geographic risk, product and services risks, delivery channel risk when performing their risk identification and assessment.
Factors Audit Professionals must consider in their Risk Assessment under the UAE AML.
Audit Professionals under the UAE AML are required to consider factors such as
- Client type, size, complexity, and transparency
- Country of origin of persons associated with the client, including beneficial owners, to know whether the person is associated with a High-Risk Country
- The industry/sector of the client helps them know whether it is associated with a higher risk of money laundering.
- Channel by which the client is introduced and communicates
- Type, size, complexity, transparency, and geographic origins of financial arrangements associated with the client[3] .
- Any unusual nature of the financial arrangements, structures, or circumstances associated with the client, particularly compared with what is standard practice in the local market
Audit professionals are required to consider the risk factors when performing audit functions on a client’s internal controls on anti-money laundering matters. To mitigate anti-money laundering risks, they are to pay attention to the client’s internal policies, procedures, rules, and governance structures. They are to formulate an effective risk-based approach involving appropriate internal resources such as the Anti-Money Laundering compliance officer, senior management, and a process for the periodic review and update of the risk assessment.
Audit professionals may utilize various methods in assessing money laundering risk, depending on the nature and size of their businesses. Whatever methods they use, either in evaluating their risks or that of the client, should be proportional to the size and nature of the business.[4] They are also required to document the method and the rationale for adopting the method. Audit Professionals should apply it consistently across the related business activities.
Customer Due Diligence (CDD)
In line with the nature of their work, they are required to have robust Customer Due Diligence Measures,[5] whether in connection with their own Anti Money Laundering obligations or connection with the AML obligations of their clients.
Under the UAE Anti-Money Laundering Law, audit professionals are required to conduct background checks on their customers before any business relationship. They are required to get information about their customer’s identities and verify such information using reliable, independent sources.
Audit professionals must have a procedure for screening clients, both old and prospective clients, inclusive of their beneficial owners and their managements against Sanctions Lists[6].
Auditors are required to pay attention to the register of the true beneficial owner of their clients[7]. Read more on Beneficial Owner link to https://farahatco.com/blog/register-ubo-under-uae-aml-legislation/
Duty to report suspicious transactions under the UAE Anti -Money Laundering Law
Audit professionals are required to report suspicious transactions to the Federal Intelligence Unit (FIU). Under the UAE Anti-Money Laundering Law, Audit professionals must immediately report any transaction they reasonably suspect is a suspicious transaction to the FIU.[8] They must put in place indicators to help them detect suspicious transactions and are mandated under the UAE Anti-Money Laundering law to register with the goAML[9]. The goAML is the medium through which the Audit professional can submit their Suspicious Transaction reports to the Federal Intelligence Unit. Link to https://farahatco.com/blog/filing-suspicious-transaction-reports-dnfbps-uae-anti-money-laundering-law/ to know more about Suspicious Transactions.
Duty to Appoint a Compliance Officer under the UAE Anti- Money Laundering Law
Under the UAE law, Audit professionals are required to appoint a compliance officer[10] who shall be competent to carry out his or her role as a compliance offer as spelled out under the UAE Anti – Money Laundering Law. You need to know the roles of a Compliance Officer link to https://farahatco.com/blog/role-compliance-officer-uae-aml-law/
Audit Professionals under the UAE Anti-Money Laundering Law are to also comply with the directives of the Competent Authorities of the State in relation to the United Nations Security Council resolutions on sanction list under Chapter VII of the Charter of the United Nations[11]. They are required to register in the automatic reporting system for sanctions lists to obtain automatically and instantly updated lists of targeted financial sanctions from the United Nations Security Council consolidated sanctions lists and domestic terrorism lists.
In conclusion, due to the role of Audit Professionals in the UAE, the Anti-Money Laundering Laws in force in the Country have mandated all Audit Professionals to adhere strictly to the crucial provisions of the UAE Laws guiding their businesses to enable them to combat money laundering and terrorism financing risks.
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- Article 3 Cabinet Resolution No. 10 of 2019 ↑
- Article 4 Cabinet Resolution No. 10 of 2019 ↑
- Supplemental Guidance for Auditors.pdf (economy.gov.ae) ↑
- Supplemental Guidance for Auditors.pdf (economy.gov.ae) ↑
- Article 5 Cabinet Decision No. 10 of 2019 ↑
- Guidelines 10 International Financial Sanctions ↑
- Article 8,9,10,11 Cabinet Decision No. 10 of 2019 ↑
- Article 17 Cabinet Decision No. 10 of 2019 ↑
- Overview (economy.gov.ae) ↑
- Article 21 Cabinet Decision No 10 of 2019 ↑
- Laws and Regulations Details | Committee for goods & material subjected to import & export (uaeiec.gov.ae) ↑