AML Risk Assessment in the UAE: Laws, Compliance & Risks

This weblog explores AML risk assessment in the UAE, which is a process that sits at the very core of your financial operations.

The UAE is a magnet for global business, a powerhouse of finance, and a bridge between economies. But with this privilege comes a hefty responsibility and that is for you to make sure that your institution isn’t unknowingly enabling any kind of financial crime (take money laundering as an example, money laundering is not just an abstract threats, it is actually a very real risk that can shake the foundations of your business if left unchecked.

What is AML Risk Assessment in the UAE?

Where do you begin? First, know your risk. Your exposure isn’t the same as your competitor’s. It depends on a) what you offer, b) whom you serve, and c) where you operate. Without this understanding, you’re flying blind. Once you map out these risks, you can apply a risk-based approach, directing your resources where they matter most instead of spreading them thinly and hoping for the best.

Your institution’s ability to spot, measure, and neutralize risks related to financial crimes is non-negotiable. The Central Bank of the UAE has made it crystal clear: every financial institution must conduct a proper risk assessment to understand where it stands in terms of exposure to illicit financial activity.

So, what does this actually mean for you?

1. You need to know where the cracks in the foundation are. Your products, services, customer base, and geographic reach all dictate your level of risk.

2. Your approach must be tailored. There’s no one-size-fits-all template for AML risk assessment. The methods you use should fit the size, nature, and complexity of your business. And whatever risk strategy you choose, document it. A solid paper trail is your lifeline in case regulators come knocking.

3. This isn’t a ‘set-it-and-forget-it’ situation. The risk landscape changes constantly. What was low risk last year could be high risk today. Reviewing and updating your assessment regularly is the only way to stay ahead.

4. Prioritize where you put your resources. The UAE uses a risk-based approach to AML, meaning higher-risk areas receive more focus. Not everything needs the same level of attention, but overlooking significant threats can lead to serious consequences.

AML Risk Assessment for UAE Businesses: The UAE’s Framework

The foundation of UAE's AML Risk Assessment framework is the Federal Decree-Law No. 20 of 2018, AKA the UAE Anti-Money Laundering Law. This law defines the responsibilities of different organizations, including financial institutions, non-financial businesses (AKA DNFBPs), and other reporting bodies, with the goal of preventing illegal financial activities.

Also, there are the Central Bank of the UAE Guidelines, which provide detailed instructions on how FIs must handle everything from customer verification (due diligence) to risk assessments, reporting, and internal controls.

The UAE's policies are also aligned with FATF Recommendations. After being placed on the FATF grey list, the UAE made major improvements in its AML efforts, leading to its removal from the list in February 2024.

To learn more about key regulatory bodies overseeing AML compliance in the UAE, we suggest that you read this article: An Overview of Anti-Money Laundering (AML) Laws in the UAE

Compliance Requirements for Financial Institutions

• Your institution must strictly follow the UAE’s Anti-Money Laundering Law. This includes implementing processes to detect and stop money laundering or terrorist financing.

• You need to have a solid system in place to verify who your clients are and who ultimately benefits from the services you provide. This is known as Customer Due Diligence (CDD). To learn more about Customer Due Diligence in the UAE, we recommend that you read this article.

• Any transaction that seems questionable must be reported promptly to the UAE’s Financial Intelligence Unit (FIU) using the goAML system.

• It’s crucial to have compliance policies that are approved by your Board. These should clearly outline your institution's commitment to regulations and ensure that your compliance team is fully equipped to manage these obligations.

• Your institution must have a well-structured risk management framework.

• Make sure that all products and services you offer are communicated clearly.

• Fair treatment of customers is about offering competitive products and also about responding promptly to complaints and ensuring that clients’ needs are met without unfair practices.

• If your institution operates in the Islamic finance space, ensure that your products and services comply with Islamic principles. You must adhere to the Shari'ah Governance Standard to maintain compliance and trust with your clients.

• Keep your institution's reports up to date and submit them regularly to the UAE Central Bank. This includes financial statements and other compliance documentation.

• Keep stakeholders informed by disclosing any material information as needed, and maintaining openness in all dealings.

AML Risk Assessment Requirements for UAE Businesses

Let’s break down the key compliance obligations you need to keep in mind as a financial institution operating in the UAE:

AML Risk Assessment for UAE Businesses

Successful risk assessment strategies for UAE require a balance between regulatory compliance, operational efficiency, and technological advancements.

Who Must Comply?

It’s not just banks, actually, any business in the financial sector or related industries must follow these regulations. This includes:

• Banks, insurers, and other financial institutions who are directly involved in providing financial services.

• Designated Non-Financial Businesses and Professions (DNFBPs) such as real estate agents, legal professionals, auditors, and even dealers in precious metals or stones.

Customer Due Diligence (CDD) & Enhanced Due Diligence (EDD)

• Customer Due Diligence (CDD): You need to have a clear process for verifying your customers’ identities and understanding their business dealings.

• Enhanced Due Diligence (EDD): For higher-risk clients, such as politically exposed persons (PEPs) or clients from high-risk regions, you need to apply a more thorough level of scrutiny.
  

Know Your Customer (KYC) and Beneficial Ownership Verification

• KYC Regulations: You’re required to implement solid systems to know who your customers are, what their business is, and verify the authenticity of their identity.  Read more: 10 Best KYC Software Solutions & Tools Reviewed  

• Beneficial Ownership Verification: Make sure to identify the ultimate beneficial owners of the companies or accounts you're working with to prevent hidden illegal activities.

Suspicious Transaction Reporting (STR) to the Financial Intelligence Unit (FIU)

If you spot something suspicious, it’s your duty to report it to the UAE's FIU immediately (time really matters here). This includes transactions that seem suspicious or that raise red flags for potential money laundering activities.

Record-Keeping & Reporting Obligations

• Keep Detailed Records: You must store and maintain customer records and transaction details for at least 5 years.

• Regular Reporting: Regularly submit required reports to regulatory bodies.

The Role of Compliance Officers and AML Teams

Your compliance officers and AML teams are the backbone of your institution’s efforts to stay compliant. They must:

• Implement and regularly update your institution's AML policies and procedures.

• Train staff regularly so that everyone is on the same page with the latest compliance rules.

• Monitor transactions, investigate suspicious activities, and submit reports when necessary.

4 Common AML Challenges in the UAE

As a financial institution operating in the UAE, these are the main AML compliance risks in the UAE you need to be aware of:

1. Geographic Risks

The UAE’s role in global trade links it to high-risk regions, increasing the risk of trade-based money laundering. Also, international transactions can expose you to countries with weaker AML regulations. Monitor these closely.

2. Customer Risks

High-net-worth individuals and PEPs carry higher risks of financial crimes and so enhanced due diligence is required. Also, always verify the actual owners because companies hiding true ownership can mask illegal activities.

3. Delivery Channel Risks

Cash-heavy businesses and informal transfers (like hawala) are more prone to money laundering, so you need to monitor these closely. Also, online banking and e-KYC processes can be vulnerable to fraud, identity verification is your ally here.

4. Product and Service Risks

Free zones, the growth of fintech and virtual assets, as well as large property deals, all can be misused to launder money.

Risk-Based Compliance in UAE’s AML Strategy

The UAE has introduced a new National Strategy for Anti-Money Laundering, Countering Terrorism Financing, and Proliferation Financing for 2024-2027. This risk strategy includes 11 main goals focused on improving risk-based compliance and strengthening the country's financial system.

It aims to tackle new AML compliance risks in the UAE like trade-based money laundering and cybercrime while promoting better cooperation between the public and private sectors.

The strategy also focuses on improving transparency, enhancing oversight of financial institutions, and updating laws to meet global standards. This initiative follows the UAE’s removal from the FATF grey list in February 2024, showing its commitment to global financial security.

To learn more about how the UAE's AML framework affects businesses in 2025, download the whitepaper.

Last Thought

At the end of the day, AML risk assessment in the UAE fortifies your institution’s future. Address AML risks head-on, and you don’t just meet regulations; you build trust, strengthen your foundation, and ensure long-term resilience in an ever-evolving financial world. To combat money laundering and fraud, businesses must implement risk assessment strategies for UAE that address sector-specific vulnerabilities and emerging threats.

FOCAL’s platform products and solutions, including AML compliance, Customer Due Diligence, Transaction Monitoring, and Device Fingerprinting, enable a strategic, data-driven approach to managing AML risks.

To explore how FOCAL can benefit your business, schedule a one-on-one demo with one of our experts and see the platform in action.