Circular No. (2) of 2022, issued by the UAE's Anti-Money Laundering Department, provides direct instructions for implementing Targeted Financial Sanctions (TFS) in line with United Nations Security Council Resolutions (UNSCRs) 1718 (2006) concerning North Korea and 2231 (2015) related to Iran.
The circular is a key component of the UAE's robust legal and regulatory framework to combat money laundering, terrorist financing, and, crucially, proliferation financing—the provision of funds for manufacturing or acquiring weapons of mass destruction.
For Whom: This directive is specifically issued for Designated Non-Financial Businesses and Professions (DNFBPs), which include:
Real estate brokers and agents
Dealers in precious metals and precious stones
Auditors and accounting firms
Corporate services providers
Legal consultancy firms
Implications for DNFBPs
The circular places a significant and legally binding responsibility on DNFBPs, moving them to the frontline of preventing sanctions evasion. The key implications are:
Increased Regulatory Burden: DNFBPs must actively integrate sanctions compliance into their daily operations, client onboarding, and transaction processing. Non-compliance can lead to severe administrative penalties, including substantial fines and license revocation.
Operational Integration: Businesses must now have concrete, documented procedures for screening, due diligence, and reporting. This requires allocating resources to technology, staff training, and potentially hiring compliance specialists.
Heightened Risk Management: The circular obligates DNFBPs to be more vigilant, particularly with transactions that may have links to North Korea or Iran, or those involving "dual-use" goods—items that have both commercial and military applications.
Mandatory and Time-Sensitive Reporting: There is a strict, non-negotiable requirement to report any matches or suspicious activities to the UAE's Financial Intelligence Unit (FIU) through the goAML portal. The short deadlines underscore the urgency of these matters.
Actions to be Taken by DNFBPs
To comply with Circular No. (2) of 2022 and its underlying regulations, such as Cabinet Decision No. 74 of 2020, DNFBPs must take the following specific actions:
Develop and Implement Policies: Establish and document clear internal policies, procedures, and controls for the implementation of TFS. This framework should be approved by senior management.
Implement Robust Screening Procedures:
Subscribe to Sanctions Lists: Register with the Executive Office of the Committee for Goods & Materials Subjected to Import & Export Control to receive automatic and immediate updates to UN and local sanctions lists.
Screen All Parties: Screen all new and existing clients, beneficial owners, and all parties involved in a transaction against the sanctions lists specified in UNSCRs 1718 and 2231.
Conduct Enhanced Due Diligence (EDD): For any transaction or business relationship linked to North Korea or Iran, apply EDD measures. This involves gathering additional information to understand the transaction's purpose, the source of funds, and the customer's business profile in greater depth.
Verify Dual-Use Goods Transactions:
Familiarize your business with the "UAE Control List" of dual-use items.
For customers involved in cross-border trade, verify whether the traded goods are on this list.
If a transaction involves a dual-use item, you must confirm that the customer holds a valid permit for such trade from the relevant UAE authorities.
Adhere to Reporting Obligations (Without Delay):
Utilize the goAML portal for all required reporting.
Confirmed Match: If a client or party is a confirmed match on a sanctions list, freeze their funds/assets and file a Funds Freeze Report (FFR) within 5 business days.
Potential Match: If there is a potential or partial match, suspend the transaction/activity and file a Partial Name Match Report (PNMR) within 5 business days. Await instructions from the FIU before proceeding.
Suspicious Transactions: Report any transaction or activity suspected of being related to sanctions evasion or proliferation financing by filing a Suspicious Transaction Report (STR) or Suspicious Activity Report (SAR).
Provide Continuous Staff Training: Regularly train all relevant employees on their TFS obligations, how to identify red flags related to sanctions evasion, and the internal procedures for screening and reporting.
Maintain Meticulous Records: Keep detailed records of all screenings conducted, due diligence measures taken, reports filed, and decisions made. These records must be maintained for at least five years and be readily available for inspection by supervisory authorities.