DFSA release Anti-Money Laundering Report

The Dubai Financial Services Authority (DFSA) recently published its Financial Crime Prevention Programme 2018 Anti-Money Laundering (AML) Report (the Report), which discusses key policy developments in respect of financial crime in the Dubai International Financial Centre (DIFC), the DFSA’s supervisory approach to fighting financial crime and themes and trends in relation to financial crime prevention.

Policy Developments

As the DIFC’s independent financial services regulator, the DFSA is responsible for supervising and enforcing Anti-Money Laundering (AML), Counter-Terrorism Financing (CTF) and sanctions compliance requirements (the AML/CTF Regime). In its Report, the DFSA summarises recent policy developments, including the recent amendment of the DIFC Regulatory Law in October 2018, to align it with the recommendations of the Financial Action Task Force (FATF), in particular with regards to AML and CTF compliance of Designated Non-Financial Businesses and Professions (DNFBPs), and associated amendments to the DFSA’s Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module (more detail on the mentioned developments can be found in our previous articles here, here and here). In line with its ambitions to be a major fintech hub for the region, a particularly interesting policy development is the DFSA’s engagement with the adoption of digital on-boarding solutions and distributed ledger technologies (ie blockchain) for Know-Your-Customer (KYC) / Customer Due Diligence (CDD) practices.

Supervisory Approach

The Report also outlines the DFSA’s supervisory approach with regards to financial crime, which includes conducting risk assessments and monitoring of regulatory and financial returns. In 2018, the DFSA restructured its Supervision Division with the primary objective of refining its risk-based supervisory approach to the ever-changing nature and complexity of risk profiles and business models in the DIFC. This has been done by providing the DFSA’s Financial Crime Prevention Team (the FCP Team) with complete oversight of financial crime risks across the entire supervised population, including over DNFBPs and DFSA Regulated Auditors, rather than just certain sectors or categories of regulated persons. The Report discusses some of the DFSA’s supervisory initiatives, including targeted AML reviews, targeted AML client file reviews, sectoral and thematic reviews, outreach events and investigations.

The DFSA’s Annual AML Return

Furthermore, the DFSA presents the main findings and key results it obtained through the AML Returns received last year. The now online form allows the DFSA to capture key qualitative data which presents an overall snapshot of the AML landscape in the DIFC. The DFSA’s analysis revealed some interesting themes, including:

• that most senior management teams believed that they had adequately assessed their firm’s AML/CTF risks, a finding which did not reflect the DFSA’s own conclusion from the visits and reviews it had conducted – potentially warranting a reconsideration by DFSA regulated firms of financial crime considerations;
• a 41% increase (from 2017 to 2018) in the number of Suspicious Activity Reports (SARs) being submitted – potentially indicating a more robust approach to CDD and transaction management; and
• that there is a variety of the types and frequency of AML training provided by firms to employees. Presentations by Money Laundering Reporting Officers (MLROs) and computer-based training accounted for 79.1% and 38.4% respectively.

Looking forward

The DFSA’s overarching objective remains to improve its approach to fighting financial crime. The Report states that the DFSA hopes to achieve this through continued thematic and sectoral reviews, collaboration with other domestic and international stakeholders and sustained review and implementation of the AML/CTF Regime.