The UAE is susceptible to trade-based money laundering (TBML) and terrorist financing according to a principal of a Dubai-based risk consultancy.

Arjun Kalra of Crowe Horwath Risk Consulting nevertheless reckons that the emirates are ahead of the game compared with some other countries in some aspects of curbing TBML.

Trade finance

One of the major risks in the UAE is TBML according to Kalra, who says the challenge in this respect is to manage and monitor trade finance activities.

Financial institutions transacting in and with the UAE are particularly susceptible to these risks he argues, which means that banks need to implement manual processes to monitor for TBML. This is labour intensive and can lead to additional costs, inefficiencies and operational challenges.

Terrorist financing

Another susceptibility according to Kalra is terrorist financing, which he notes is increasingly monitored by international partners of UAE institutions.

However, he believes it is harder to detect than TBML because terrorist financing tends to involve lower transaction amounts to avoid detection.

TBML advantage

One area of TBML where the risk consultant argues UAE regulations are rigorous compared with some other countries is in the identification of beneficial ownership.

Kalra claims that in the UAE, details of beneficial owners of just 5 per cent of shares in a company will have to be declared to financial institutions. This compares with the US where only holders of more than 25 per cent of a company will have to declare ownership.

Categories: Trade Based Financial crimes News