Anti-Money Laundering

Criminals commit crimes for many reasons. One of these is to profit and obtain value or money in a variety of forms, for instance cash or all types of property, whether real or personal, heritable or moveable. They also try to obscure the illegal origin of these proceeds. They perform a number of money laundering (ML) activities/transactions to ensure that their illegal activities/transactions are not discovered. The term ML denotes the process(es) which criminals use to obscure the real origin of the proceeds which have been derived from criminal activity and to make illegal proceeds appear as if they were legitimate property. ML is an effective way for criminals to avoid prosecution, conviction and confiscation of illegal proceeds since their origin is disguised or turned into legitimate proceeds. This depends on the criminal activity which generates the illegal proceeds which can take various forms, such as drug trafficking, human trafficking, embezzling, fraud, tax evasion, bribe and piracy. These crimes are “predicate offences” for ML and cover any crime which generates illegal proceeds. The criminalisation of ML has therefore two important objectives. Firstly, to prevent criminals from committing crimes which generate illegal proceeds, namely predicate offences for ML. Secondly, to prevent money launderers from enjoying their illegal proceeds.

This chapter deals with the existing literature about the features of the FIU and its functions in AML. This necessarily entails focusing on the SARs/STRs on ML which are received by the FIU. Indeed, the SARs/STRs regime forms the backbone of the tasks of the FIU. We will therefore explore the relevant literature about the role of the FIU in relation to the SARs/STRs regime. The chapter is divided into three sections, each dealing with a specific theme: (1) FIUs and international standards, (2) the UAE’s FIU legal framework and (3) the UK’s FIU legal framework.

This chapter deals with the well-established doctrine of banking confidentiality, which applies to all banking transactions across the world. The banking sector is the most attractive area for ML activities/transactions and will therefore be analysed in the following chapters. The sector, out of all reporting entities, also submits the majority of SARs/STRs on ML to the national FIU annually, as analysed in Chaps. 6 and 9. The submitting of SARs/STRs can conflict with the principle of banking confidentiality since such reports contain information about a customer’s bank account and financial affairs, which might lead to criminal or civil liability being imposed. The main objective of this chapter is to justify on which legal grounds SARs/STRs can be submitted in a way which does not prejudice the principle of banking confidentiality, ensuring that the principle is respected and safeguarded without it being exploited for ML activities.

In this chapter I discuss the FIU from the perspective of international standards. The FATF is considered to be a global standard setter for counteracting ML. In section “The General Features of the FATF”, I examine the Forty FATF Recommendations, which set out the international standards for combating ML, and I assess whether these Recommendations are obligatory and therefore have to be implemented and adopted by national anti-money laundering laws (NAMLL) in member states. I scrutinise the international requirements which reporting entities, such as banks and other financial institutions, have to discharge in relation to AML. This includes CDD measures, record keeping and STRs requirements. These requirements are essential for reporting entities to identify an STR and to determine whether or not to send the STR to the national FIU. In addition, it will be discussed how the FATF mechanism assists in assessing whether provisions of NAMLL are compatible with the Recommendations.

This chapter focuses on how the legal system of the UAE combats ML, with the particular purpose of evaluating the role which the UAE’s FIU plays through dealing with STRs received from the reporting entities. The powers granted to it are also critically assessed. Section “How the Legal System of the UAE Combats ML” examines the UAE’s legal system in relation to counteracting ML. In this section, the requirements, which are imposed on banks and other reporting entities, in respect of detecting and preventing ML, are evaluated. These requirements are set out in regulations and circulars, which are issued by the supervisory and regulatory authorities, for instance the Central Bank. However, some of these requirements are still vague, for instance the meaning of CDD. In this section I also critically analyse the different ML definitions in the FLMLC 2002 and the CBR 24/2000 and the practical consequences of having different definitions for ML.

As mentioned at the end of the previous chapter, there are insufficient data and information available about the functions of the AMLSCU to fight ML and to deal with STRs in particular. This information is important for removing any ambiguities and vagueness and to analyse critically the functions of the AMLSCU. No UAE case law exists to clarify or interpret the statutory responsibilities of the AMLSCU, the basis of STRs or even the role which compliance officers at reporting entities play within the STRs regime. Moreover, in order to analyse the negative consequences of the AMLSCU’s current functions, it is necessary to examine whether the current model is an ideal type, which enables it to carry on its functions to deal with STRs properly. For these reasons, in the present chapter I adopt an empirical approach which makes use of the qualitative method in order to analyse the outcomes highlighted in the previous chapter and to evaluate the functions and legal powers of the AMLSCU when dealing with STRs.

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This Chapter is pivotal in terms of the UK’s AML system since it examines the SAR requirements, which are imposed on reporting entities. One of the principal objectives of the SAR requirements is to protect the reputation and integrity of the financial system. The SARs system aims at preventing and detecting ML activities or at least mitigating its consequences by prohibiting the use of illicit proceeds. The main objective of the current Chapter is to critically analyse the legal basis for SARs and the types of disclosure, which are required under the SARs regime and the complicated requirements, which can, in practice, overlap with each other. The required, authorised and protected disclosures are evaluated to appreciate the legal consequences. In case of non-compliance, one of the three offences of failing to report SARs can be committed, namely the second group of ML offences contained in Part 7 of the POCA 2002.

The objective of this Chapter is to critically evaluate the functions of the SOCA, now the NCA, as the UK’s FIU law enforcement model and to assess this model in terms of its ability and power to handle SARs received from the reporting entities. This is essential in order to evaluate in the Final Chapter the chances of the UAE successfully adopting this model. In addition, this Chapter critically analyses the efficiency of the consent regime in relation to the SARs and the practical problems associated with the grounds for submitting SARs to the NCA.

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