What does ‘targeted financial sanctions’ (“TFS”) mean?
The term targeted sanctions means that such sanctions are imposed against specific individuals, entities, or groups. The term TFS includes both asset freezing without delay and prohibition from making funds or other assets or services, directly or indirectly, available for the benefit of sanctioned individuals, entities, or groups.
Why are individuals, entities, or groups designated in the Sanction Lists? The Sanction Lists include names of individuals, entities, or groups that the UAE or the UN believe are detrimental to national and/or global peace and security. These individuals, entities, or groups are mostly involved in acts of terrorism, terrorism financing, proliferation financing, and violation of international law.
What does ‘freezing’ mean?
Freezing prohibits the transfer, conversion, or movement of any funds or other assets owned or controlled by a designated individual, entity, or group in the Sanctions Lists.
What is the difference between ‘freezing’ and ‘suspending’?
Freezing and suspension measures follow the same procedures operationally (both are preventive measures that aim to stop the designated individual, entity, or group from gaining access to funds or other assets). Suspending indicates that the reporting entity has come across a ‘potential match’ and is not sure whether the individual, entity or group is indeed designated. The suspension measures should remain in place until further instructions are received from the Executive Office. Freezing indicates that the reporting entity has come across a ‘confirmed match’ and the freeze measures must remain in place until the designated individual, entity, or group is de-listed from Sanctions Lists or upon further instructions received from the Executive Office.
What does ‘without delay’ mean?
‘Without delay’ means applying freezing measures immediately upon identifying a match to the Sanctions Lists or in any case within 24 hours upon designation of an individual, entity, or group on the Sanctions Lists.
What does ‘funds or other assets’ mean?
Any assets, including, but not limited to, financial assets, economic resources (including oil and other natural resources), property of every kind, whether tangible or intangible, movable or immovable, however, acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such funds or other assets, including, but not limited to, bank credits, traveler’s cheques, bank cheques, money orders, shares, securities, bonds, drafts, or letters of credit, and any interest, dividends or other income on or value accruing from or generated by such funds or other assets, and any other assets which potentially may be used to obtain funds, goods or services.
What is the legal framework for the implementation of TFS in the UAE? Article 16(e) of Federal Law No. 20 of 2018 (amended by Federal Decree No. 26 of 2021) requires the prompt application of the directives when issued by the competent authorities in the state for implementing the decisions issued by the UN Security Council under Chapter (7) of UN Convention for the Prohibition and Suppression of the Financing of Terrorism and Proliferation of Weapons of Mass Destruction, and other related directives. In addition, the UAE issued the Cabinet Decision No. 74 of 2020, establishing the framework regarding TFS, including the Local Terrorist List and the UN Consolidated List and the procedures to implement TFS.
Who must comply with TFS?
Sanctions restrictions, including TFS measures, must be implemented by any Person (both natural and legal entities), including government authorities and FIs, DNFBPs, and VASPs located in the UAE and operating within the UAE’s jurisdiction.
Cabinet Decision No. 74 of 2020 requires implementing TFS on which sanctions lists?
The scope of Cabinet Decision No. 74 of 2020 in implementing TFS covers the UAE Local Terrorist List and UN Consolidated List only. International sanctions lists are out of the scope of the Cabinet Decision.
How can I find out who is a designated individual, entity, or group?
You can find out who are the designated individuals, entities, or groups by checking the updated Sanctions Lists in the links below:
▪ The link to the UN Consolidated List: https://www.un.org/securitycouncil/content/un-scconsolidated-list
▪ The link to the Local Terrorist List can be found at the bottom of the Local Terrorist List webpage on the Executive Office’s website: https://www.uaeiec.gov.ae/en-us/un-page#
Is there an excel format for the UAE Local Terrorist List?
Yes. The excel format of the UAE Local Terrorist List can be found under the ‘Sanctions Implementation’ section of the Executive Office’s website https://www.uaeiec.gov.ae/en-us/un-page#
What actions must FIs, DNFBPs, or VASPs take if funds or other assets of designated individuals, entities, or groups are detected?
In case an FI, DNFBP, or VASP determines that any of the funds or other assets it holds or administers belong to designated individuals, entities, or groups, it shall take the following steps to implement TFS:
a) Freeze all funds or other assets without delay, and any funds or other assets derived or generated from such funds or other assets, without providing any notice to the customer or potential customer prior to taking the freezing measures.
b) Refrain from providing any financial or other services or from providing funds or other assets to or for the benefit of a designated individual, entity, or group.
c) Report to the Executive Office and the relevant Supervisory Authority within five days of the freezing measures taken through goAML, including information on the status of and any action taken with respect to assets, the nature of assets and amount of assets frozen, and any other information that is relevant to or would facilitate compliance with Cabinet Decision No. 74 of 2020.
d) Fully cooperate with the Executive Office and the relevant Supervisory Authority in verifying the accuracy of the information provided.
What if my customer’s name does not match the name of the designated individual or entity?
In case of a ‘potential match’ with a designated individual or legal entity, an FI, DNFBP, or VASP must first conduct an internal check on whether the potential match is a designated person. If the FI, DNFBP, or VASP is satisfied that the ‘potential match’ is not an individual or entity subject to TFS (‘false-positive result’) after conducting the internal check, then it can allow for the business relationship to proceed while keeping an internal record of the case.
If the FI, DNFBP, or VASP is unable to verify whether the ‘potential match’ is a confirmed match or a false positive, then it must suspend any transaction and report it to the Executive Office by submitting a PNMR through goAML. The suspension measures must remain in place until further instructions are received from the Executive Office.
If I identify a confirmed or potential match, how should I report it?
If you identify a confirmed match, you must freeze without delay and report by submitting a Funds Freeze Report (FFR) through goAML. The FFR must include details on the type and amounts of funds or other assets frozen, ID documents of the confirmed match, and any other supporting documents.
If you identify a potential match, you must suspend without delay and report by submitting a Partial Name Match Report (PNMR) through goAML. The PNMR must include details on the type and amounts of funds or other assets suspended, ID documents of the potential match, and any other supporting documents.
Do I need to report confirmed or potential matches separately to my Supervisory Authority?
No. FFRs and PNMRs submitted through goAML are received simultaneously by the Executive Office and your relevant Supervisory Authority.
Should I report previous transactions or business dealings with confirmed or potential matches?
Yes. You must report any previous transactions of designated persons, even if you do not currently hold any funds or other assets or provide any services to the designated person. The FFR or PNMR must clearly state that no funds or other assets are currently held, and no services are currently being provided to the designated person. If the designated person has never conducted a transaction with or through you, or you have never held any funds or other assets of the designated person, or you have never provided any products or services assets to the designated person during the life of the business relationship, this should be made clear.
Am I under an obligation to register in goAML?
Any person (natural or legal) that performs activities that fall under the definition of FIs, DNFBPs, or VASPs as per UAE legislation has an obligation to register on goAML to be able to submit suspicious transactions/activity reports (STRs/SARs) to the UAE FIU, as well as to submit TFS reports (FFRs/PNMRs) to the Executive Office and the relevant Supervisory Authority. FIs and DNFBPs that are not registered on goAML face the risk of being subject to administrative and/or financial sanctions by the relevant Supervisory Authority for failure to register on goAML.
How should I report a confirmed or potential match if I am not a goAML user?
If you identify a confirmed or potential match, and you are not a goAML user (Persons that do not fall under the definition of FIs, DNFBPs, or VASPs and are therefore not under an obligation to register on goAML), then you must report it by sending an email to the Executive Office on firstname.lastname@example.org with details of the case and attaching all supporting documentation. Registered goAML users must always report a confirmed or potential match using goAML.
If I identify that a customer is subject to international sanctions, however, the customer is not listed on the UAE Local Terrorist List nor the UN Consolidated List. Should I report it by raising an FFR or PNMR?
No. FFRs and PNMRs are used only to report confirmed or potential matches to the UAE Local Terrorist List or the UN Consolidated List. For designations on international sanctions lists (e.g., OFAC, UKHMT, EU, etc.), follow the instruction of your relevant Supervisory Authority on how to deal with matches to international sanctions lists.
What are the consequences in case of a failure to comply with the obligations set out in Cabinet Decision 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 Decision No. 74 of 2020 or failing to implement procedures to ensure compliance may face imprisonment of no less than one year and no more than seven years and/or a fine of no less than AED 50,000 (fifty thousand dirhams) and no more than AED 5,000,000 (five million dirhams). In addition, Supervisory Authorities can impose appropriate administrative sanctions (e.g., ranging from a warning letter to license cancellation) when there is a violation or shortcoming in implementing TFS obligations.
Can I be held liable for freezing funds of a designated individual or entity based on the Cabinet Decision?
The Cabinet Decision clearly states that any individual or entity is exempted from criminal, administrative, or civil liability if a freezing measure is carried out in good faith and for the purpose of complying with the provisions of the Cabinet Decision. Thus, as long as the freezing measures were taken based on the belief that the relevant funds are targeted funds, the individual or entity, FI, DNFBP, or VASP is exempted from any liability resulting from such freezing measure even if it later turns out that the frozen funds are in fact not targeted by the Cabinet Decision. At the same time, FIs, DNFBPs, and VASPs shall note that the criminal sanctions may apply to any Person who violates or fails to comply with the freezing obligation. Accordingly, both intentional and gravely negligent conduct resulting in the lack of application of a freezing measure may trigger administrative sanctions and/or criminal liability.
Can permission be obtained to access frozen assets by the designated individual or entity?
For the UN Consolidated List, the Executive Office, in limited circumstances, may permit access to frozen funds based on a request by the designated individual or entity. The applicant will, in such case, receive a written statement from the Executive Office stating the amount and conditions of access to the assets. For the Local Terrorist List, the Ministry of Justice may permit access to frozen funds in some limited circumstances based on a request by the designated individual or entity or any affected third party. The applicant will, in such case, receive a written statement from the Ministry of Justice stating the amount and conditions of access to the assets.
May I permit transfers to be made into frozen accounts, and if so, which ones are subject to what conditions?
The Cabinet Decision provides that FIs, DNFBPs, or VASPs may credit frozen accounts with interest or other earnings on those accounts; or with payments due under contracts, agreements, or obligations that were concluded or arose before the date on which the individual or entity was designated, provided that any additions to such accounts shall also be frozen. The Executive Office and the relevant Supervisory Authority must be notified about such transactions by submitting an FFR through goAML with information and supporting documentation on the additional amounts added to the account.
How can I determine whether I am in possession of targeted funds?
FIs, DNFBPs, and VASPs are responsible for having in place effective processes, policies and procedures to implement the provisions of the Cabinet Decision No. 74 of 2020. This involves frequently checking customer databases and any information obtained on potential or existing customers against Sanctions Lists to determine whether an FI, DNFBP, or VASP possesses or administers funds for designated individuals or entities. The obligation by FIs, DNFBPs, and VASPs to freeze funds of designated individuals or entities applies immediately after a designation is published by the UAE Cabinet on the Local Terrorist List or by the UNSC in its Consolidated List.
When and how often do I have to conduct screening?
FIs, DNFBPs, and VASPs must undertake regular and ongoing screening on the latest Local Terrorist List and UN Consolidated List. Screening must be undertaken in the following circumstances: Upon any updates to the Local Terrorist List or UN Consolidated List. In such cases, screening must be conducted immediately and without delay to ensure compliance with implementing freezing measures without delay (within 24 hours). Prior to onboarding new customers. Upon KYC reviews or changes to a customer’s information. Before processing any transaction FIs, DNFBPs, and VASPs are also required to identify, assess, monitor, manage and mitigate terrorist and proliferation financing risks, particularly sanctions-related risks. The internal screening process must take into account such a risk assessment. Where there are higher risks, FIs, DNFBPs, and VASPs should take commensurate measures to manage and mitigate the risks, including applying enhanced screening measures. Correspondingly, where the risks are lower, they should ensure that the screening measures are commensurate with the lower level of risk. FIs, DNFBPs, and VASPs must ensure full implementation of targeted financial sanctions in any risk scenario.
How long do I have to keep funds frozen?
The Cabinet Decision does not limit the timeframe for any given freezing measure. Accordingly, the obligation to keep funds frozen could apply indefinitely in some cases. FIs, DNFBPs, and VASPs are required to lift the freezing measures if the name of a designated individual or entity is removed from the Sanctions Lists.
What shall I do if my name is similar to a designated person?
In case freezing measures were taken in relation to funds of a person that has the same (or similar) name as a designated individual or entity but who is in fact not the same person, such person can send a request to lift the freezing measures to the Executive Office. Such a request should include a grievance letter addressed to the Executive Office of the Committee for Goods & Materials Subjected to Import & Export Control and other supporting documents (such as ID documents) and should be sent to the Executive Office by email through email@example.com
Is my Supervisory Authority going to check compliance with the Cabinet Decision in the course of their onsite inspections?
The Cabinet Decision No. 74 of 2020 provides that FIs, DNFBPs, and VASPs are under an obligation to have in place adequate processes, policies and procedures, including resourcing thereof, to verify that they are complying with all aspects of the relevant Cabinet Decisions. Supervisory Authorities will verify compliance by FIs, DNFBPs, and VASPs with this obligation during their supervisory activities. A failure to have in place such procedures may result in the application of criminal as well as supervisory sanctions as stipulated in the Cabinet Decision.
Are Politically Exposed Persons (PEPs) part of the scope of implementing targeted financial sanctions (TFS)?
No. Obligations to implement TFS are exclusively on the individuals, entities, and groups that are designated on the Sanctions Lists (regardless of whether they are considered as PEPs).
Should we conduct screening for Politically Exposed Persons (PEPs)?
PEPs are out of the scope of Cabinet Decision No. 74 of 2020 and you are advised to follow your Supervisory Authority guidance and other best practices on the customer due diligence required when dealing with PEPs, including on screening.
Is notifying the customer after implementing freezing measures considered as “tipping off”?
No. FIs, DNFBPs, and VASPs may notify their customers after the freezing measures have been implemented. As long as the customer is notified after the freezing measures have been taken, it is not considered as tipping off. However, FIs, DNFBPs, and VASPs must not inform their customers prior to taking the freezing measures.
What should I do if one of my customers is affected by a freezing measure?You should notify the customer of the Grievances and Requests process as reflected on the Executive Office’s website.