In the UAE over the year, Real Estate Sector has been one of the critical pillars of the economy, thereby significantly contributing to the country’s GDP growth. The sector has experienced a significant boom; therefore, the country is a hub for real estate investors.
In its pursuit to further strengthen the Real Estate Sector, the government has enacted laws on Anti Money Laundering, which is to guide the sector, and has taken measures to enforce its compliance.
Classification of Real Sector Business Under the UAE Anti -Money Laundering Legislation
Under the UAE law, the Real Estate Sector is classified under Designated Non -Financial Business and Profession (DNFBPs)
The Role of Real Estate Professionals
Due to the nature of the business and activities in the Real Estate Sector in the UAE, real estate agents/ brokers or other professionals are individuals who deal with the sale, purchase, or leasing of real estate on behalf of customers. They may be authorized to perform various functions like representing one or more parties to a transaction, act as intermediaries between parties in terms of negotiation and execution of an agreement or contract. They may also operate in a fiduciary capacity or as trustees, administrators, and so forth.
Thus, the UAE Government has enacted Anti Money Laundering laws and guidelines to help the sector in its activities, as mentioned above, to combat any money laundering activity and related financial crime in the course of their business.
Obligations of Real Estate Professions under The UAE Anti Money Laundering Laws
Real estate companies, brokers or agents, and other professionals who engage in the sale and purchase of real estate on behalf of customers are required under the Anti- Money Laundering Laws to fulfill certain obligations to have effective compliance to the UAE law include
- Identification and Mitigation of risk
- Customer Due Diligence (CDD)
- Reporting Suspicious Transaction
- Appointment of a compliance officer
DUTY OF REAL ESTATE PROFESSIONALS TO IDENTIFY AND MITIGATE RISKS UNDER THE UAE ANTI-MONEY LAUNDERING LAW
Identification and Mitigation of risk is one of the effective risk-based Anti- Money laundering programs in the UAE; thus, it is the baseline of a practical approach to combating money laundering activities in the Real Estate Sector.
Identification of risk
According to UAE Anti-Money Laundering Law a Real Estate Company/ professional is required to understand, identify and assess its crime risk. In carrying out this duty, a real estate professional is required to identify specific risk factors as
- Client Risk; A Real Estate Professional is required to know the client’s status if a legal entity or not, the client or customer’s country of origin, the channel through which the customer got introduced to the professional, and all other important information about the client or customer.
- Country Risk; it is crucial to know the country from which the transactions will be carried out from to ensure it does not fall under the High-Risk Country
- Transactional risks; A real estate professional is required to know the purpose of the real estate transaction, for example, whether for residential or commercial, personal use, or reinvestment. They are to consider the circumstances surrounding each transaction, for instance, if the customer is in a hurry to conclude the transaction or when the client is involved in too many transactions within a short period.
- Geographical risks; Real Estate Professionals must consider geographic money laundering risk from domestic and cross-border sources. The location where the customers reside or conduct their activities is significant, and they should check whether the countries or jurisdictions they deal with are the subjects of international sanctions, such as targeted financial sanctions (TFS)
under the UAE Anti Money Laundering Law, Real Estate Professionals are required to document this assessment and continue to update them from time to time, and to readily make them available when the supervisory authorities request for them.
Mitigation of Identified Risk
Upon identifying and assessing the risk as mentioned above, the Real estate professionals are required to take steps to mitigate those risks.
As measures to mitigate risks under the UAE Anti Money Laundering legislation, real estate companies and professionals are required to do the following;
- Develop internal policies, control, and procedures; these internal policies must be in line with the nature and size of their business. Once the policies, procedures, and controls are formulated and put in place, they must be applied to all the businesses carried out by the company. Real Estate Professionals are at liberty under the law to utilize various methods that they consider appropriate, helpful, and suitable in line with their businesses. They must also document the procedures they adopt and apply them continuously to their businesses to have an effective compliance program against money laundering activities.
As part of their policies, it is crucial to put in place a process for screening customers and intending customers against sanction list. The senior management of the company must approve all the internal policies and procedures before using them.
Duty to have Customer Due Diligence measures under the UAE Anti Money Laundering Law
Under the UAE Anti Money Laundering Law, Real Estate Professionals must have effective Customer Due Diligence measures (CDD)- they are required to obtain information about any customer before transacting with the customer. Information relating to identity, purpose, reason for the transaction, the source of funds, former business activities of the customer, and countries to which the customer has affiliates and required to be obtained by the Real Estate professionals.
They are also required to establish and verify the identity of beneficial owners where third-party intermediaries, proxies, or legal structures or arrangements stand for the beneficiary owner and confirm their source of funds through reliable, independent sources.
In other words, they are required to know their customer by performing background checks before establishing any relationship. The management of the company must also approve transactions of any business relationship with the customer.
Duty to Report Suspicious Transaction.
Under the UAE Anti Money Laundering Law, if Real Estate Professionals have any reasonable ground to believe that the funds for the transactions are a proceed of money laundering and terrorism financing crime, they are mandated to immediately report such transactions as suspicious transactions to the Federal Intelligent Unit through an integrated system called the goAML. They must put in place indicators that will enable them to detect suspicious transactions under the law. Read more on suspicious transaction.
Duty to Appoint a Compliance Officer
Under the UAE Anti -Money Laundering Law, Real Estate professionals are required to appoint a compliance officer. The compliance officer is expected to possess the requisite expertise to discharge the duties as spelled out by the law.
Real Estate Professionals under the UAE Anti-Money Laundering Law are further required to comply with the directives of the Competent Authorities of the State in relation to the United Nations Security Council resolutions on sanction list under Chapter VII of the Charter of the United Nations. They are required to register in the automatic reporting system for sanctions lists to obtain automatically and instantly updated lists of targeted financial sanctions from the United Nations Security Council consolidated sanctions lists and domestic terrorism lists.
From the above, the UAE, in its robust compliance program on anti-money laundering in the country, recognizes the Real Estate Sector as one of the most significant economic drivers. The sector, therefore, must be protected from money laundering activities hence the obligations of the sector under the Anti Money Laundering Laws and enforcing strict compliance measures thereto.
Do you have questions relating to your roles as a Real Estate Professional under the UAE AML, call Experts today?