What does ‘freezing’ mean?

The act of freezing funds or assets owned or controlled by a listed individual or legal entity includes preventing any transfer, conversion, disposition, or movement of those funds and assets.

What does ‘funds’ mean?

Funds mean assets of every kind, and in whatever form, whether:

·       Tangible

·       Intangible

·       Electronic

·       Digital

·       Cryptic

·       movable or immovable

·       corporeal or incorporeal

However, acquired, and any documents or instruments in any form, including:

·       national currency

·       foreign currencies

·       documents or deeds establishing ownership of such assets

·       any associated rights or interest in them

Why are individuals or legal entities listed in the sanction lists?

These Sanction Lists include names of individuals, legal entities, and groups that the UAE or the UN believe are detrimental to national or/and global peace and security. These individuals or legal entities or groups are mostly involved in acts of terror and violation of International Law.

Who must comply with Targeted Financial Sanctions (TFS) regimes?

Any person (or entity) in the UAE (including governmental authorities) subject to sanctions restrictions must implement TFS measures.

Similarly, UAE persons (both natural and legal entities) must comply with the sanctions restrictions when they are based abroad or conducting business abroad.

What are the consequences in case of a failure to comply with the obligations set out in Cabinet Resolution No. 74 of 2020, other applicable legislation, and this guidance note?

Any Person found to violate and/or be in non-compliance with the obligation in the Cabinet Resolution No.74 of 2020 or failing to implement procedures to ensure compliance may face imprisonment or a fine of no less than AED 50,000 (fifty thousand dirhams) and no more than AED 5,000,000 (five million dirhams).

What actions must an individual or legal entity take if designated Funds are detected?

If a financial institution or DNFBP determines that a fund it holds or administers is a targeted fund, these are the steps it must take:

1.     Immediately freeze all funds and any funds derived or generated from such funds without providing any notice to the customer or potential customer.

2.     Refrain from providing any financial or other services or from providing funds to or for the benefit of a listed individual, group, or legal entity.

3.     Immediately inform the Executive Office and the relevant Supervisory Authority of the freezing measures taken.

4.     Fully cooperate with the Supervisory Authority and the Executive Office in verifying the accuracy of the information provided.

5.     The Supervisory Authority and the Executive Office should be informed within two days of the freezing measure, including any actions taken with respect to assets, any assets frozen, and any other information relevant to or helpful to comply with relevant UNSC resolutions.

What is the legal framework for the implementation of the United Nations and National Terrorist Sanctions Lists?

The UAE issued Federal Cabinet Resolution No. 74 of 2020, establishing the framework for targeted financial sanctions, including the UN Consolidated List and the Local Terrorist List.

How can I find out who is a listed individual, group, or legal entity?

A person, group, or legal entity first has to be “designated” as falling within the scope of a relevant UNSC resolution in order to be subject to a freeze obligation and/or other restrictive measures under the Cabinet Resolution No. 74 of 2020. Either the UNSC or the relevant United Nations Sanctions Committee makes such “designations”.

What needs to be done if a current or former customer is listed?

The financial institution or the DNFBP must freeze any assets and must not offer any additional funds or services, and must immediately notify the Supervisory Authority or the Executive Office.

Can I be held liable for freezing funds of a listed individual or legal entity based on the Cabinet Decision?

If a freezing measure is carried out in good faith and to comply with the provisions of the Cabinet Decision, anyone or any legal entity is exempt from criminal, administrative, or civil liability.

Therefore, as long as the freezing actions were taken with the belief that the relevant funds are targeted funds, the individual or legal entity, financial institution, or DNFBP is exempt from any liability arising out of such measures, even if it later turns out that the frozen funds are not in fact targeted by the Cabinet Decision.

However, financial institutions, DNFBPs, and professionals should note that criminal sanctions may apply to persons who violate or fail to comply with the freezing obligations. As a result, both intentional and gravely negligent conduct may result in administrative sanctions and/or criminal penalties.

Can I be held liable for freezing funds of a listed individual or legal entity based on the Cabinet Decision?

If a freezing measure is carried out in good faith and to comply with the provisions of the Cabinet Decision, anyone or any legal entity is exempt from criminal, administrative, or civil liability. Therefore, as long as the freezing actions were taken with the belief that the relevant funds are targeted funds, the individual or legal entity, financial institution, or DNFBP is exempt from any liability arising out of such measures, even if it later turns out that the frozen funds are not in fact targeted by the Cabinet Decision.

However, financial institutions, DNFBPs, and professionals should note that criminal sanctions may apply to persons who violate or fail to comply with the freezing obligations. As a result, both intentional and gravely negligent conduct may result in administrative sanctions and/or criminal penalties.

What if my customer’s name does not match exactly or I am suspicious that the customer is listed or acting on behalf of a listed person?

In case of a partial match or suspected match with a listed individual or legal entity, a financial institution or DNFBP must freeze the assets and must immediately contact the relevant supervisory authority.

How can I determine whether I am in possession of targeted funds?

·       Financial institutions and DNFBPs are responsible for ensuring that effective processes, policies, and procedures are in place to implement Cabinet Decision No. 74 of 2020. In order to determine whether they hold or administer funds for listed individuals or legal entities, financial institutions and DNFBPs often check their customer databases and any information about potential or current customers against UN designations and Local Terrorist Lists. Immediately after being named on the Local Terrorist List by the relevant United Nations Sanctions Committee, the designated individual or legal entity must have their funds frozen by financial institutions and DNFBPs.

A failure by a financial institution or the DNFBP to implement freezing measures, immediately or within 24 hours after a designation has been made, or to provide any other funds or services to a listed individual or legal entity may constitute a breach of UAE law and will be subject to pecuniary and incarceration sanctions listed in the Cabinet Decisions set out in this document.

·       A number of financial institutions, businesses and professions rely on external screening services (e.g., World-Check) to verify that their clients are not subject to UN sanctions. The use of such online services is useful, however, they cannot be viewed as definitive proof that the Cabinet Decisions are being adhered to. Additionally, periodic checks should be made against the designations of the UN Sanctions Committees and the Local Terrorist List.

How long do I have to keep funds frozen?

Cabinet Decisions do not specify a timeframe for freezing measures. Therefore, the obligation to keep funds frozen may apply indefinitely in some cases.

An individual or legal entity whose name is removed from either the UN Sanctions Lists or the UAE Sanctions Lists also ceases to be subject to the obligation to freeze funds in relation to that individual or legal entity. Financial institutions and DNFBPs can only lift certain measures if they can verify that the relevant individual or legal entity has been removed from the list of designated individuals or legal entities by the UNSC Sanctions Committee.

What shall I do if my name is similar to a listed person?

If freezing measures were taken against funds of a person with the same name as a listed individual or legal entity but who is in reality not that person, the person may inform the Executive Office of their desire to lift the freezing measures.

Is my supervisory authority going to check compliance with the Cabinet Decision in the course of their onsite inspections?

According to Cabinet Decision No. 74 of 2020, financial institutions and DNFBPs are required to have in place adequate processes, policies, and procedures, including adequate resources, to verify that they are complying with all aspects of relevant Cabinet Decisions. In the course of their supervision activities, supervisory authorities will verify that financial institutions and DNFBPs are complying with this obligation. The failure to implement such procedures may lead to criminal as well as supervisory sanctions, as stipulated in the Cabinet Decisions.

Source: UN page | Committee for goods & material subjected to import & export (uaeiec.gov.ae)