Dealers in Precious Metals & Stones,

Precious Safeguards: Navigating the

UAE's Anti-Money Laundering
Landscape
Key Indicators (DPMS)

Payments are made in cash.

Usually, in a transaction of precious stones or metals, massive amounts are
involved. But if the payments are bifurcated in cash, multiple money orders,
cashier’s cheque, or traveler’s cheque, or are being paid through a third-party
account. Then you might suspect the probability of money laundering.

The customer is not willing to provide complete or accurate financial

references, contact information, or any type of business affiliations

The supplier or customer attempts to maintain a high degree of secrecy about

a transaction, like normal business records should not be maintained

Sales or purchases don’t confirm to industry standards.

Sales or purchases are unusual for a particular supplier, customer, or a type of

supplier or a customer
What is Customer Due Diligence?

Customer Due Diligence (CDD) is all about identifying potential

customers and checking their authenticity and legitimacy. In addition,
it means cross-verification of the details provided by the customer for
their legal validity and accuracy.

The CDD meaning remains the same, but the procedures change
across the industries. In total, there are four aspects of CDD, namely,
simplified, standard, enhanced, and ongoing.

By conducting CDD, businesses aim to mitigate the potential for

financial crimes such as ML/FT and PF. Additionally, this multifaceted
approach serves as a foundational element in establishing trust,
credibility, and regulatory compliance within the business landscape.
 Onboarding Customers

Know Your Customer

Identify the Customer and UBO.
Verify the identity using reliable sources.
Verify other details such as Occupation, Business activities Etc.

Name Screening
Identify status as PEP.
Check if customer is in sanctions list or Uae local terrorist list.
Search for Adverse media.

Customer Risk Assessment

Categorization as Low, Medium or High Risk

Enhanced Due Diligence

For High-Risk Customers : More inquiry , Additional Documentation & Stringent verification

Ongoing Monitoring
Regularly monitoring customers profiles and transactions
 Onboarding Customers

Identification and collection of customer information

The first step of CDD is to get the essential information from customers or potential customers. A Know Your
Customer Form or KYC form can be maintained for this purpose. The information to be obtained for the purpose
of AML due diligence includes the following:

KYC for Natural Persons

Complete Name
Address of the customer
Contact numbers
Additional/ alternative contact numbers
Legit, accessible, and working email address
Place of birth
Date of birth
Nationality
Gender
Government-issued identification number
Occupation
Signature
Along with the above, at a minimum, a copy of the ID document and proof of address are also obtained.
 Onboarding Customers

KYC for Legal Entities

Here is the list of information to be sought from the customer who is a business entity:

Name of the business entity

Type of the business entity
Nature of business the entity is into
Date and place of establishment
Information related to the board of directors
Certificate of establishment/incorporation
Information related to shareholders or ultimate beneficial owners
Annual report for the previous year
Information pertaining to senior management

Along with the above, a copy of the trade license, Memorandum of Association, Articles of
Association, address proof, UBO details, and organization chart are also obtained.

In high-risk situations, source of funds and source of wealth information is also obtained.
Enhanced Due Diligence

Enhanced Due Diligence is usually required for only those customers who have a high-risk
quotient and are more likely to get involved with money laundering or financing of terrorism.
There are undoubtedly quite a few factors that clearly establish that a particular customer hails
from a high-risk background. For instance, Politically Exposed People (PEPs) are usually
categorized as high-risk customers and require enhanced customer due diligence.

With the help of enhanced customer due diligence, the information of the customers is verified,
and critical information like the origin or the source of their funds, source of wealth, and the
primary purpose of the transaction is obtained.

Further, as a part of the enhanced CDD measures, it is ensured that the customer makes the
payment from the bank account in his own name.

It is also required to obtain approval from senior management before entering into a transaction
with high-risk customers. Once you meet the above Enhanced Due Diligence Requirements, you
can carry out transactions with the customer.
Ongoing Due Diligence

The risks associated with a customer change over a period of time.

One needs to have a proper monitoring system in place to detect changes in customer profiles.
Ongoing due diligence should aim at discovering changes in the attributes related to a customer.
Say a customer becomes a Politically Exposed Person or is placed on a Sanctions list. The KYC
software should trigger alerts for the compliance officer the moment it detects changes in the
customer profile, which necessitates a change in the risks associated with them.

Unless regulated entities require customers to provide their KYC documents on a regular basis, it
becomes difficult to detect changes in their risk profile. A change in risk profile would also be
reflected in the transaction patterns associated with a customer.

If the customer happens to be a High-risk customer, he should be placed under more frequent
monitoring and CDD refresh.
Re-KYC

KYC must not be a one-time event. As customers’ details and regulations change, you must
also update these data points in your database. That is why re-KYC of customers is essential.
Re-KYC means periodic updates of the customers’ KYC details.

For a smooth conduct of the re-KYC process, you must invest your time, effort, and money in it.
Recollect the information on customers, verify them, and add them to your database. This must
lead to accurate and up-to-date details on all your customers. You also need to carry out
sanctions screening and customer risk assessment to classify customers into low-risk, medium-
risk, and high-risk customers and apply suitable countermeasures to fight against the risks they
pose.
Checklist for Re-KYC

Changes in the KYC Documentation

Changes in the beneficial owner
Customers making unusual transactions not aligned with their
profile
Changes in a business relationship with a customer
Changes in ownership structure at the customer’s end
 Verification Of Customers

The second step of the KYC under the CDD program is to verify all the information that has been
collected in the identification step. Again, it is essential to note that most of the collected data
can be confirmed with the help of a government agency’s site or any reputable independent
institution. For instance, documents like identity cards, tax receipts, and passports can be
verified on the respective government portals based on the unique number associated with
them.

Name Screening

Name screening is done to identify if the customer is a sanctioned individual or entity, a

politically exposed person or a person with a criminal history and adverse media references. The
primary objective behind carrying out the process of name screening is to check that the
customers do not fall under the following categories:

Sanctioned individual or an entity

Politically Exposed Persons (PEPs)
Reported in Media with alleged involvement in any criminal activities
 Customer Risk Profiling

At this stage, the AML Compliance Officer determines the risk level of each customer or potential
customer based on various factors. While performing risk-based customer due diligence, the
following risk factors are taken into consideration:

Type and nature of business relationship/transaction

Nationality of the customer
Political exposure of the customer
Mode of payment (Cash, Bank Transfer, Cheque)
Net worth of the individual
Documentary evidence available
Amount of transaction
The complexity of business structure
Local/international business
Transaction with a customer based in a blacklisted country
Transaction with a customer based in a grey-listed country etc.
Ongoing Monitoring

Once the Customer Due Diligence process is completed and necessary decisions around risk
classification have been made, regular monitoring of the customer’s risk profile cannot be
overlooked. Monitoring should be carried out regularly for identified accounts for all financial
transactions. The customer’s behavior, along with accounts and transactions, must be
compatible with the usual activities, and this needs to be tracked or overviewed at all costs.
Depending upon the risks associated, ongoing due diligence frequency is determined.

Reporting Suspicion

During applying CDD measures, if the reporting entity comes across any suspicion or
reasonable grounds that suggest that a customer is involved in criminal activity, it must take a
thorough investigation and must report that information on the goAML platform via suspicious
activity report (SAR). It should be noted that all employees, company directors, and officers are
prohibited from tipping off customers if a SAR/STR has been filed against them.

Additionally, they need to report other reports, like HRC and HRCA, when engaging with a
customer belonging to a high-risk country.
Politically Exposed Person (PEP)

The UAE Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) laws define a Politically
Exposed Person (PEP) as a natural person assigned with prominent public functions in any Emirate in UAE or
any country other than UAE.
Ongoing monitoring of PEPs is one of the most crucial aspects of PEP screening. PEP screening tools support
ongoing monitoring and help comply with legal obligations.

A prominent public function does not necessarily need to be popular, but it holds considerable importance to
society at large. Such a position puts a PEP in the driver’s seat where they can influence public policy,
government programs, and the functioning of any business, establishing a business relationship either directly,
through beneficial ownership, or through close associates or family. A PEP may acquire a prominent public
function or position in a government or government organization by means of an appointment, promotion
through civil ranks, or majority from an election .

Identifying PEPs while carrying out AML compliance is important because PEPs are persons with political power
who can exercise political influence or pressurize businesses to carry out business activities and other
administrative tasks at their discretion without creating a paper trail.
Examples of Politically Exposed Persons

Here are the examples of persons considered as PEPs:

Examples of Domestic PEPs include heads of government or state, senior government, military and judicial
officials, senior executives of state-owned corporations and important political party officials holding official
posts within the government.
Examples of Foreign PEPs include heads of government or state, senior government, military and judicial
officials, senior executives of state-owned corporations and important political party officials holding official
posts within the government.
Examples of HIOs PEPs or International Organization PEPs include managing director, secretary, chairperson,
president, and such designations in international organizations such as the World Bank and International
Monetary Fund, to name a few.
Examples of close associates of PEPs include natural persons having joint ownership rights in a legal person or
arrangement or any other close business relationship with PEP, natural persons having individual rights in a
legal person or arrangement established in favor of PEP.
Examples of related persons include direct family members, close associates, partners, prominent members of
the same political party or civil organizations as the PEP, close friends or advisors, business partners or
associates, etc.
Sanctions List

Meaning

Sanctions List flags certain individuals, entities, and countries to fight against financial crime. Governments
maintain a Sanction List across the globe to prohibit business transactions with such individuals, entities, and
countries.

Such individuals and entities are added to the sanction list for various reasons, including terrorism, war crimes,
and the proliferation of weapons of mass destruction.

Sanction List meaning in simplest terms is, a publicly listed directory of entities and individuals upon whom
economic or legal restrictions have been imposed.
Who are on a sanctions list :

Sanctions might be leveled as a result of explicit or illegal activities or in order to achieve a foreign policy or a
diplomatic aim. These sanctioned lists are usually passed by the act of an international authority or by
governments—for instance, the United Nations Security Council Resolution.

Several international sanctions lists incorporate targets involved in the financing of criminal or terrorist
activities. Sanctions screening lists basically include organizations, individuals, or the entire nation engaged in
severe crimes like terrorist financing.

Here are a few activities that a sanction list claims to counter.

• Terrorism and terrorist financing

• Violation of human rights
• Drug trafficking
• Weapons proliferation
• Money laundering activities
• Violation of international treaties
• Violation of international contracts
Impact of being on a sanctioned list :

Restrictions on financial transactions and business dealings: After addition to the sanction
list, an individual/entity/economy is forbidden to have any financial or business relations with the rest of the
economies.

Travel bans and visa restrictions: As per UN Sanctions measures in the Travel ban, All the member
countries are required to prevent entry into or transit through their territories by designated individuals. This
process, in turn, will restrict the physical movements of the sanctioned.

Reputation and perception of individuals and entities on the list: The sanctioned do carry
a reputational risk as they are infamous for certain activities which they have committed and are on the list in
the first place. Other entities and economies are bound to cut ties with the sanctioned.
United Arab Emirates AML Sanctions List , Mandatory Screening

The UAE is a member of three main regional bodies that issue sanctions – the Arab League, the
Terrorist Financing Targeting Centre (‘TFTC’), and the Gulf Cooperation Council (‘GCC’).

Additionally, the UAE maintains two main lists of sanctioned individuals and entities –

a. The local list – This list consists of a local terrorism list issued pursuant to the Anti-Terrorism
Law. It is also called the UAE Sanction List.
b. UN Sanctions list – This consists of a sanction list issued by the UN Security Council.

The government of the UAE maintains the Local Terrorist List, designating individuals and entities.
This sanctions list is maintained by the UAE’s Executive Office for Control and Non-Proliferation.
Apart from the Local Terrorist List, the UN Consolidated List is essential for sanctions screening, as UAE is a
member of the United Nations and has committed to implementing UN sanctions regimes. All natural and
legal persons in the UAE are required to screen their clients and business partners against this Local Terrorist
List as well as the UN Consolidated List to effectively implement Targeted Financial Sanctions (TFS)
regulations.

Additionally, if a company has overseas operations, is involved in international trade, or handles

transactions in foreign currencies (particularly the US Dollar), foreign sanctions regimes also need to be
screened.
Information to be screened against Sanctions

Names: Customer’s or other counterparty’s legal names (as well as aliases) should be screened against
sanctioned lists. This includes the names of individuals, companies or other legal persons, and vessels.

Date of Birth: If available, dates of birth can be used to increase screening accuracy and minimize false
positives, particularly for common names.

Nationality: With the nationality of the person known, sanctions screening will provide more accurate
results.

Location: A counterparty's address –including their street address, city of residence, province, and
country–may be screened to verify a customer’s identity.

Identity Card’s: Government-issued ID, including passport numbers for individuals or business
registration or tax numbers for corporate entities should be screened. These unique identifiers similarly
increase screening accuracy and reduce false positive rates.
When should the Information to be screened against Sanctions

Sanctions should be screened:

• Before formalizing a business relationship with a counterparty (client, vendor, partner, employee)

• On a daily basis for all existing relationships

• For all transactions and payments, before execution or processing

• Upon change in a customer’s identification information

• Upon an update in the sanctions database, all counterparties should be immediately re-screened

With the growth of sanctions lists and sanctions use, many lists change multiple times a week and
sometimes multiple days in a row. Sanctions screening means integrating Know Your Customer (KYC)
checks into your customer onboarding process, your vendor management system, your customer
relationship management system and more.

The Executive Office for Control & Non-Proliferation provides that screening shall be conducted regularly and
on an ongoing basis.
 Reporting Suspicious Transactions and Activities

Reporting institutions are required to promptly submit a suspicious

transaction report to the Financial Intelligence Unit.
Jewellers must report any kind of suspicious transactions to the Financial
Intelligence Unit as and when they suspect it. You must add all the relevant
information for the suspected transaction and keep it updated. You must be
extra vigilant to identify any suspicion in any transaction or customer.
Some of the indicators for suspicious transactions include:
• Unnecessary complex transactions whose purpose or beneficial owner is
not known
• Transactions that are inconsistent with the customer’s risk profiling
• Large transactions (relatively large to a customer’s income or turnover)
• Large deposits or withdrawals inconsistent with customer’s business nature
• Unexplained changes in the ownership of entities or unnecessary
involvement of a third party
• Transactions involving high-risk countries or third parties with no
relationship with customers
• Unclear or dubious sourcing of funds for a transaction
• Refusal of customers to provide relevant information or proofs required for
due diligence measures
Dealers in Precious Metals and Stones Report (DPMSR)
Ministry of Economy issued a Circular (No. 08/AML/2021 dated 02 June 2021),
instructing the dealers in precious metals and stones to register the specified
transactions – cash transactions or transactions through wire transfers (in case
of legal person) exceeding a certain amount in the report named as Dealers in
Precious Metals and Stones Report (‘DPMSR).
The said reporting requirement was made effective from 12th June 2021.

Who is required to file DPMSR?

All the dealers in the precious metals and stones (‘DPMS’) licensed in the UAE
must report transactions equal to or exceeding AED 55,000 in cash or wire
transfers (in specified cases). Irrespective of the registration as a mainland
company or with a freezone, all the DPMS are required to file DPMSR for
transactions equal to or exceeding the specified cash transaction limit and wire
transfer limit in the UAE.
What are the transactions to be reported in a DPMSR on the
goAML portal? (DPMSR)

Cash transactions with resident individuals equal to or exceeding AED 55,000

Cash transactions with non-resident individuals equal to or exceeding AED 55,000
Cash transactions with corporate entities (legal persons) equal to or exceeding AED 55,000
Transactions with corporate entities (legal persons) involving international wire transfers equal
to or exceeding AED 55,000
Local wire transfers made through an exchange house
Instalment transactions in cash equal to or exceeding AED 55,000, to be reported at the time of
receiving funds
Unfixed gold transaction involving cash equal to or exceeding AED 55,000
Advance payment in cash equal to or exceeding AED 55,000, to be reported at the time of
receiving funds
Wire transfers from a mainland/onshore company to a Free zone company (not part of the same
company)
Transaction between two Free Zone companies, settling the payment in USD through the
international wire transfer
 Why is AML training critical for your employees

Awareness of money laundering threats and mitigating measures is essential for any
company to safeguard the business from being exploited by financial criminals.

Awareness of threats allows people to use the right action plans to combat the same.

AML Compliance Officer cannot single-handedly identify and fight the money laundering
threats. He needs support from every single employee of the company.
And here comes the need to train the employees. If you train your employees on money
laundering threats, they can take steps to manage or reduce ML/FT risks.

AML training is crucial to any organization’s overall AM/CFT framework.

 Importance of AML training

Organized criminals launder dirty money into the financial system, using legit business
organizations as their means. Without well-trained employees, business organizations
could not detect such crimes being executed through them. An AML-trained employee
would act as a line of defense and contribute towards making the company a hostile
setting for laundering money.

Some companies say they know all their clients and do not expect any threat from them.
Some say that they are too small to conduct training for employees. Whatever the case
is, AML training is vital to keep money laundering risks at bay.

Financial criminals do not attack a business based on size or business-client relationship.

They keep looking for new tactics to launder small or significant amounts of money
through any method, with the only intention of not getting caught.

So, every firm to whom AML regulations are applicable must conduct AML training for its
employees, making employees capable enough to identify suspicious activities or
transactions and report the same promptly.
 Importance of AML training

It is mandatory for Designated Non-Financial Businesses and Professions (DNFBP’s), to

comply with AML regulations and their requirements. As one of the requirements is to
conduct ongoing AML training for the staff, all the obligated entities shall comply with the
same to avoid non-compliance penalties and ensure a better AML framework to fight
money laundering (ML) and financing of terrorism (FT).

With all these requirements, employees need to know their role in fighting ML/FT and how
to do their duties. They must know the trending anti-money laundering typologies to
identify the threats in routine business operations quickly.

To safeguard the business and its reputation, Companies need skillful and knowledgeable
employees to implement a robust AML framework to safeguard the business from being
exploited by money launderers.

AML training brings a consistent understanding, across all levels, of the importance of
AML compliance and their role in identifying ML/FT threats to save the company and its
reputation. All the employees, including the senior management, stay more aligned with
AML-related organizational objectives, resulting in the more successful adoption of the
AML/CFT compliance program.
 Participants in AML training

All the relevant employees handling customers, transactions, and delivery channels must
receive adequate AML training, whether a full-time employee or a part-time or
contractual one. If they, in any way, are involved in activities related to customer-
servicing or business partner interactions, they must receive the necessary training
around AML and CFT.

As the AML Compliance Officer is the person running the show, he must be well-trained,
well-qualified, and well-aware of the basic AML concepts, regulatory obligations, roles,
and responsibilities to handle the AML/CFT framework of the company, etc.

AML Training requirement is not just limited to front-line employees; AML training is also
critical for senior management. Senior management is responsible for implementing an
effective and comprehensive AML compliance program. They need to understand the
basic concepts and regulatory requirements to efficiently manage the AML framework
across the organization. Thus, senior management shall also be included in training
programs and lead by example.
 AML Fines & Penalties in UAE

AML compliance is mandatory for financial institutions, Designated Non-Financial

Businesses and Professions (DNFBP), and other regulated entities. The UAE Ministry of
Economy announced different Money Laundering Fines and Penalties in UAE. The
Ministry has listed 26 categories of fines for violating the money laundering and terrorism
financing laws.

The UAE government monitors the AML compliance and has set up a specialised unit to
investigate the control of DNFBPs, dealers in precious metals and stones, auditors, real
estate agents and brokers, etc., as such businesses and professionals are prone to
money laundering and corruption.

Let’s know the different fines and penalties applicable in the UAE for violating AML rules
and regulations.
Money Laundering Fine of Dirhams 1 million or more

When organizations fail to take appropriate

actions for customers included in the
international or local sanction lists – they
must follow the due diligence process
before starting a business relationship.

If there is a dealing with unauthorized

banks, AED 1 million or more fine is also
applicable. The penalty is also applicable if
bank accounts are opened or maintained
using fake names, not the actual holders’
names.
Money Laundering Fines and Penalties of Dirhams 200,000 and above

If the Enhanced Due Diligence process is not followed to identify the high-risk
customers.
If the FIU- Financial Information Unit is not informed of the STR- Suspicious
Transaction Report in cases where the institutions cannot follow the customer
verification process- due diligence process before creating or maintaining a business
relationship or carrying out a transaction for the benefit of the client or in his name.
If the FIU has asked for additional information for the reported suspicious transactions
and organizations fail to comply, then a fine is also levied in such cases.
Due to suspicions about the nature of the business relations- its process or intentions
are disclosed directly or indirectly to the customer or a third party. In that case, such
actions attract a penalty of AED 200,000 or more.
If the measures identified by the National Committee for Combating Money
Laundering regarding customers from high-risk countries are not implemented, the
fines are levied.
Money Laundering Fines and Penalties of Dirhams 100,000 and above

If the requisite measures are not adopted for identifying risk and evaluating the same
when the services are provided or undertaken with new professional activities.
If the requisite due diligence measures are not taken for clients before establishing or
continuing a business relationship or making a transaction that benefits the customer.
If the customer identity and that of the UBO or their deputy is not verified before or
while establishing a business relationship or before with a client with whom there’s no
previous business relationship.
If there’s a delay of information about the STR to the FIU in events where there’s a
suspicion that the customer is related to crime wholly or partly- if there’s reasonable
ground to suspect that the client money is involved in establishing the business
relationship has been obtained from criminal activities.
If the due diligence measures are not followed for PEPs-Politically exposed Persons
before establishing or maintaining a business relationship.
If proper records are not maintained on the financial transactions with the customers.
Conclusion: Precious Metals, Precious
Safeguards

In conclusion, it is crucial for dealers in precious metals or

stones in UAE to comply with Anti Money Laundering rules
to prevent illegal activities.

Our AML solutions assist in putting in place stringent

monitoring procedures to ensure complete adherence to
legal requirements.
Thanks
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questions? @nrdoshi.com
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