The Ugly Truth About Money Laundering in Dubai
Comprehending the reality of money laundering in Dubai is essential for those working in the fiscal sector. This is an activity in which dirty money is converted into money that is clean. The sources of the cash are actually criminal; the cash is invested in ways which conceal the way the cash was made.
While carrying out monetary trades and creating relationships with new customers, responsibility lies with the business. The owner or organization must identify its obligation and recognize such circumstances later in the trade period. The central bank in almost any state supplies AML and CFT with complete guides to fighting such actions. These policies, when embraced religiously, supply the banks with enough security to discourage such scenarios.
The Risks of Money Laundering in Dubai:
The significant hazard of just about any type of money laundering is that a bank faces a risk to its reputation. The risk might cause a financial institution to face fees and various investigations. The greatest hurdle a bank must clear is mistrust from customers, which would be disastrous.
This is a danger which lies in individuals, internal processes and system. It is a threat that will be a part of the operations of the company. It creates disruption in the smooth operation of the business.
Legal threats may also be created as a result of uncertainties in terms of the legal actions that develop and that the corporation must manage.
Such threats include scenarios in which the bank has loaned money to a certain group; they pertain to the banking industry.
Among the major effects a bank confronts is the upsurge in opportunity cost.
So many undesirable effects are brought about by money laundering because of the hazards it presents. It ultimately causes the bank to confront losses and raises the likelihood of significant hazards as well as the opportunity cost of the financial institution.
Criminal organizations have three goals when laundering the profits of illegal actions. These are:
- associated with their illegal action.
- to invest their profits in the criminal cycle and foster action that is prohibited.
- to take pleasure in the gains of the unlawful action
How to Fight Money Laundering in Dubai, Abu Dhabi, UAE and Sharjah:
Fighting money laundering is difficult for just about any financial institution. In the UAE, ethnic customs, smuggling and terrorism make the detection of suspicious cash transfers especially difficult. For this reason, other financial institutions, along with banks, must be alert in understanding their customers and tracking customer actions.
In certain nations, these duties in many cases are perceived as conflicting with ethnic customs and customer relationships.
Steps are being taken by the authorities in the UAE towards applying AML/counter-terrorism funding laws, guidelines and regulations. Nevertheless, you can find many deficiencies in the fiscal and legal strategies which must be addressed:
- A substantial casual cash market exists, and the banking system is not entered by several monetary trades.
- Cash coverage demands aren’t consistently applied and some states would not have money reporting requirements for people leaving the United States.
- Financial intelligence units are created relative to international standards, but a number of them lack autonomy, expertise and sufficient organization.
- It’s not easy to discover a balance involving the seclusion of individuals’ rights versus the necessity to safeguard society against terrorists and criminals.
Big money laundering is an easy instance of transferring cash, typically from nation to nation, to mislead authorities into believing every bit of their illegally obtained cash came from legit sources and also to hide where it came from. Law officials then seize cash which is found to be linked to unlawful action.
Drug Dealers: Drug dealers typically handle large sums of money, which makes it difficult for authorities to produce a paper trail. Red flags are raised by substantial sums of cash.
Mobsters/Gangs: Like drug dealers, many cash transactions are performed by these people while keeping safe networks abroad.
Corrupt Politicians: With greater access to lobbyists and cash networking, the action of money laundering can appear to be among the most effective methods to protect one’s assets. Mostly, anyone in a place of power whose activities usually go unquestioned will take advantage of this activity.
Embezzlers: Cases have shown that individuals who have taken money from their places of business or an employer will partake in actions to conceal these recently acquired assets.
Con Artists: Any person prepared to deceive someone out of their assets is ready to clean up her or his sources.
Terrorists: Terrorists are heavily involved in money laundering. Terrorist actions must be funded; otherwise, weapons as well as explosives wouldn’t be obtainable assets.
There are three main measures: Integrating, Layering and Setting.
Setting: is basically depositing the “awful” cash into a well-recognized financial institution. The deposit is created in cash. This is an extremely risky move, depending on how the financial institution follows bank secrecy laws or bank reporting laws. Occasionally, the launderer will divide his “earnings” over several banks to reduce the deposited sum.
Layering: is the most complicated step in the laundering procedure. This calls for directing the cash with the purpose of hiding its sources through financial institutions. Launderers may buy expensive items like automobiles, yachts or jewelry. Again, hiding the source is essential.
Integrating: is the final part of the procedure where the market is entered by the bid with the appearance of being lawfully brought in by way of a trade that is legal. Here the money launderer can determine how they use their resources, like a privately owned business, to make “business gains” or “business expenses”.
Money laundering has become an increasing area of focus for businesses and authorities as sanctions have widened against nations.
Companies face even harsher punishments, including fines ranging between Dh300,000 and Dh1.
The regulatory framework is further beefed up by the newest laws. They penalize staff, supervisors and board members of businesses that fail to report terrorist financing or money laundering performed by their firms, with a jail term of up to 36 months, a fine of up to Dh100,000 or both.
For the very first time, the law will also protect whistleblowers of money laundering in Dubai – reporting suspected money laundering or terrorist funding.
Worldwide, anti-money-laundering costs are increasing at a typical speed of 53 per cent for banks, in accordance with a KPMG survey.
Here are a few proactive ways you can help prevent this kind of fraud:
- Pay by check or by credit/debit card rather then cash when you purchase goods and services.
- If cash is paid by you, insist on a receipt from the register, if there is one.
- Otherwise, insist on a written receipt.
- Do not pay your household workers in cash.
- Do not take large cash payments.
DISCLAIMER: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific or legal advice on the information provided and related topics, please contact us.
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