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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Rulebook Modules
Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module (AML) [VER16/07-19]
AML 7 Customer Due Diligence
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Notices
Financial Markets Tribunal
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  • AML 7.3.8

    (1) A Relevant PersonG must take reasonable measures to determine:
    (a) if a customer, or a Beneficial OwnerG of a customer, is a Politically Exposed PersonG (PEP); and
    (b) for a life insurance or other similar policy, if a beneficiary of the policy, or a Beneficial OwnerG of a beneficiary, is a PEPG .
    (2) If a customer, or a Beneficial OwnerG of a customer, is a PEPG , a Relevant PersonG must:
    (a) obtain the approval of senior management to commence or continue the business relationship with the customer;
    (b) take reasonable measures to establish the source of wealth and source of funds of the customer or Beneficial OwnerG ; and
    (c) increase the degree and nature of monitoring of the business relationship, to determine whether the customer's transactions or activities appear unusual or suspicious.
    (3) If a beneficiary of a life insurance or other similar policy, or a Beneficial OwnerG of a beneficiary, is a PEPG , a Relevant PersonG must:
    (a) obtain the approval of senior management to make any payout under the policy;
    (b) take reasonable measures to establish the source of wealth and source of funds of the beneficiary or Beneficial OwnerG of the beneficiary; and
    (c) increase the degree and nature of monitoring of its business relationship with the policyholder, to determine whether the customer's transactions or activities appear unusual or suspicious.
    (4) A Relevant PersonG must carry out the additional Customer Due DiligenceG referred to in (3) before it makes any payout under the policy.
    Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

    • AML 7.3.8 Guidance on CDD

      1. Items (a) to (c) in AML Rule 7.3.2(2) should be obtained from a current valid passport or, where a customer does not possess a passport, an official identification document which includes a photograph. The concept of domicile generally refers to the place which a person regards as his permanent home and with which he has the closest ties or which is his place of origin.
      2. Under AML Rule 7.3.1(3), a Relevant PersonG is required to verify the identity of a person based on reliable and independent source documents, data or information. A Relevant PersonG should generally have sight of original identification documents and retain a copy of the identification document. However in complying with AML Rule 7.3.1, it may not always be possible to obtain original documents. Where identification documents cannot be obtained in original form, for example, because a Relevant PersonG has no physical contact with the customer, the Relevant PersonG should obtain a copy certified as a true copy by a person of good standing such as a registered lawyer or notary, a chartered accountant, a bank manager, a police officer, an EmployeeG of the person's embassy or consulate, or other similar person. The DFSAG considers that downloading publicly-available information from an official source (such as a regulator's or other official government website) is sufficient to satisfy the requirements of AML Rule 7.3.1. The DFSAG also considers that CDDG information and research obtained from a reputable company or information-reporting agency may also be acceptable as a reliable and independent source as would banking references and, on a risk-sensitive basis, information obtained from researching reliable and independent public information found on the internet or on commercial databases.
      3. For higher risk situations the DFSAG would expect identification information to be independently verified, using both public and non-public sources.
      Derived from RM117/2013 [VER9/07-13]
      [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
      [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

    • AML 7.3.8 Guidance on identification and verification of Beneficial Owners

      4. In determining whether an individual meets the definition of a Beneficial OwnerG , regard should be had to all the circumstances of the case, in particular the size of an individual's legal or beneficial ownership in a transaction. The question of what is a "minor" ownership interest for the purposes of the definition of a Beneficial OwnerG in AML Rule 7.3.3 will depend on the individual circumstances of the customer. The DFSAG considers that the question of whether an ownership interest is minor should be considered in the context of the Relevant Person'sG knowledge of the customer and the customer risk assessment and the risk of money laundering.
      5. When identifying Beneficial OwnersG , a Relevant PersonG is expected to adopt a substantive (as opposed to form over substance) approach to CDDG for legal persons. Adopting a substantive approach means focusing on the money laundering risks of the customer and the product/service and avoiding an approach which focusses purely on the legal form of an arrangement or sets fixed percentages at which Beneficial OwnersG are identified (or not). It should take all reasonable steps to establish and understand a corporate customer's legal ownership and control and to identify the Beneficial OwnerG . The DFSAG does not set explicit ownership or control thresholds in defining the Beneficial OwnerG because the DFSAG considers that the applicable threshold to adopt will ultimately depend on the risks associated with the customer, and so the DFSAG expects a Relevant PersonG to adopt the RBA and justify on reasonable grounds an approach which is proportionate to the risks identified. A Relevant PersonG should not set fixed thresholds for identifying the Beneficial OwnerG without objective and documented justification as required by AML Rule 4.1.1. An overly formal approach to defining the Beneficial OwnerG may result in a criminal "gaming" the system by always keeping his financial interest below the relevant threshold
      6. The DFSAG considers that in some circumstances no threshold should be used when identifying Beneficial OwnersG because it may be important to identify all underlying Beneficial OwnersG in order to ensure that they are not associated or connected in some way. This may be appropriate where there are a small number of investors in an account or fund, each with a significant financial holding and the customer-specific risks are higher. However, where the customer-specific risks are lower, a threshold can be appropriate. For example, for a low-risk corporate customer which, combined with a lower-risk product or service, a percentage threshold may be appropriate for identifying "control" of the legal person for the purposes of the definition of a Beneficial OwnerG .
      7. For a retail investment fund which is widely-held and where the investors invest via pension contributions, the DFSAG would not expect the manager of the fund to look through to any underlying investors where there are none with any material control or ownership levels in the fund. However, for a closely-held fund with a small number of investors, each with a large shareholding or other interest, the DFSAG would expect a Relevant PersonG to identify and verify each of the Beneficial OwnersG , depending on the risks identified as part of its risk-based assessment of the customer. For a corporate health policy with defined benefits, the DFSAG would not expect a Relevant PersonG to identify the Beneficial OwnersG .
      8. Under Federal AML legislation, if the customer is a legal person, the Relevant PersonG must identify any person who, alone or jointly with other persons, has a controlling ownership interest of 25% or more in the legal person i.e. it applies a specified threshold. This does not affect the approach that should be taken under AML Rule 7.3.1(1)(b) and AML Rule 7.3.3 for verifying the identity of Beneficial OwnersG , where no threshold is specified (see Guidance items 4 to 7 above). As a result, under the Federal AML legislation a Relevant PersonG will need to obtain information identifying natural persons who have a controlling interest of hold more than 25%. Then, in accordance with the risk-based approach in Guidance items 4 to 7, the Relevant PersonG should determine whether it is necessary also to identify other persons who may be Beneficial OwnersG , and verify their identity
      Derived from RM117/2013 [VER9/07-13]
      [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
      [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]
      [Amended] DFSA RM258/2019 (Made 26th June 2019). [VER16/07-19]

    • AML 7.3.8 Guidance on politically exposed persons

      9. Individuals who have, or have had, a high political profile, or hold, or have held, public office, can pose a higher money laundering risk to a Relevant PersonG as their position may make them vulnerable to corruption. This risk also extends to members of their families and to known close associates. Politically Exposed PersonG ("PEP") status itself does not, of course, incriminate individuals or entities.
      10. Generally, a foreign PEPG presents a higher risk of money laundering because there is a greater risk that such person, if he was committing money laundering, would attempt to place his money offshore where the customer is less likely to be recognised as a PEPG and where it would be more difficult for law enforcement agencies in his home jurisdiction to confiscate or freeze his criminal property.
      11. Corruption-related money laundering risk increases when a Relevant PersonG deals with a PEPG . Corruption may involve serious crimes and has become the subject of increasing global concern. Corruption offences are predicate crimes under the Federal AML legislation. A Relevant PersonG should note that customer relationships with family members or close associates of PEPsG involve similar risks to those associated with PEPsG themselves.
      12. The DFSAG considers that after leaving office a PEPG may remain a higher risk for money laundering if such person continues to exert political influence or otherwise pose a risk of corruption.
      13. The fact that an individual is a PEPG does not automatically mean that the individual must be assessed to be a high risk customer. A Relevant PersonG will need to assess the particular circumstances relating to each PEPG to determine what risk category is appropriate. If the PEPG is assigned a high risk, then the Relevant PersonG will need to undertake the Enhanced Customer Due DiligenceG measures under AML Rule 7.4.1. However, even if a PEPG is not assigned a high risk, the Relevant PersonG is required as a minimum to undertake the additional customer due diligence measures specified in AML Rule 7.3.8(2) and (3) for PEPG s.
      Derived from RM117/2013 [VER9/07-13]
      [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
      [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]