Anti-Money Laundering (AML) compliance is of paramount importance for real estate companies operating in the United Arab Emirates (UAE) to prevent their businesses from being exploited for illicit financial activities. The UAE has put significant emphasis on strengthening AML regulations in recent years. Here are some best practices that real estate companies in the UAE should adhere to remain AML compliant:
- Carrying out Customer Due Diligence (CDD) and Know Your Customer (KYC)
Knowing your customers is necessary as it is required for real estate owners to know and verify the identities of their clients, including beneficial owners, before onboarding.
Real Estate Owners must conduct KYC before onboarding their clients. Collect their identity details and documents and verify those. Also, collect proof of the entity’s registration, office address, and finances. Only after all these verifications must you onboard them.
Such customer investigation does not stop during the business relationship, but rather real estate agencies must conduct thorough due diligence to identify every client’s risks. Ultimate Beneficial Ownership, source of funds, presence in other countries, and type of product/service are important factors to collect information on. You must also screen them against sanctions, terrorist lists, watchlists, and adverse media.
All these examinations help Real estate agencies build a customer risk profile. They must adjust their due diligence measures based on each customer’s risk level.
- Enhanced Due Diligence (EDD):
Additional verification steps and ongoing monitoring need to be carried out high-risk clients, such as politically exposed persons (PEPs) or clients from high-risk jurisdictions.
- Risk Assessment:
Conduct a comprehensive Enterprise-Wide Risk Assessment to identify and evaluate specific AML risks associated with real estate activities. The EWRA helps real estate agencies to identify risk factors, likelihood of materializing, the gross risk, controls deployed to counter ML, TF, and PF risks, and the residual risk. It is advised that it should be an ongoing process that adapts to changes in real estate business environment.
- Suspicious Activity Reporting:
Establish clear procedures for identifying and reporting suspicious transactions to the UAE’s Financial Intelligence Unit (FIU). Timely reporting is essential. Comply with UAE regulatory requirements for reporting transactions that exceed the AED55,000 thresholds to the appropriate authorities.
- Internal Controls and Policies:
Develop and implement robust AML policies and procedures tailored to real estate business which will also serve as a guide to the employees in carrying out their day-to-day compliance work. The AML/CFT compliance program must be aligned with the EWRA to counter various risks. Real estate agencies must ensure that the policies are signed by the top management, and a complete trail of updates must be maintained. They are to also ensure that the internal policies and compliance program is aligned with current requirements.
- Record Keeping:
Maintain accurate and up-to-date records of all transactions, including customer information, transaction history, and communications. Real Estate agencies are to retain these records for a minimum period of 5 years as required by UAE regulations. These are essential during audits or when asked by supervisory authorities.
AML regulatory requirements ask you to submit reports like STR, SAR, FFR, PNMR, HRC, and HRCA. Besides, as a real estate entity dealing in cash or crypto, you must also submit a Real Estate Activity Report (REAR).
- Training and Awareness:
Provide regular AML training and awareness programs for all employees to ensure they understand their obligations and can identify and report suspicious activities.
- Senior Management Oversight:
Ensure that senior management is actively engaged in and supportive of AML compliance efforts. This includes providing necessary resources and oversight.
- Third-Party Risk Management:
Evaluate the AML compliance of any third parties you engage with, such as agents, intermediaries, or property management companies.
- Audit and Independent Review:
Regularly conduct internal audits and assessments of your AML compliance program, and consider seeking independent reviews to identify weaknesses and areas for improvement.
- AML Officer:
Appoint an AML Compliance Officer responsible for overseeing and implementing the AML program and acting as a point of contact for AML-related matters.
- Technological Solutions:
Consider implementing AML software and technology solutions to automate AML checks, enhance due diligence, and improve transaction monitoring.
Conclusion
Failure to comply with AML regulations in the UAE can result in severe penalties, including fines and legal actions. Real estate Agencies should prioritize AML compliance as an integral part of their operations to protect their reputation, financial stability, and legal standing while contributing to the broader effort to combat and curb money laundering and terrorist financing in the UAE. Real estate agencies are advised to seek professional real estate and property lawyer in the UAE who are experts in AML Compliance consultancy in the UAE.
For more information about real estate and Anti-money laundering in Dubai, please reach out to us for a free consultation.
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