A Combat Against Dirty Money
Shorter distances, instant transfers, rapid connections are a movement towards the emerging globalization. As it is getting easier and faster to gain anything on a click of a mouse and enabling individuals and corporations to reach around the world farther, faster, deeper, and cheaper than ever before, it has also resulted in new risks. It has turned the international financial system into a money launder’s dream. This inadvertent consequence of globalization offers a serious challenge to law enforcement agencies and financial regulators.Money-laundering is the process by which criminals cover the illegal origins of their means and safeguard their assets, to maintain a safe distance from suspicious law enforcement agencies and avert leaving a trail of incriminating evidence.The Wolf of Wall Street is a perfect movie that shows the glamour and the dark side of money laundering where the fun doesn’t last for long!
Money Laundering in UAE
Money laundering is one of the most creative crimes of the 20th Century. To understand the concept of Anti- Money Laundering, one must first understand what Money Laundering is. Numerous businessmen around the world are known to make money through illegal means which could be frowned upon by the society as well as by the laws governing a state. Massive amounts of funds are generated from illicit activities such as drug trafficking, tax evasion, smuggling, theft, arms trafficking and corrupt practices. These dealings of funds are mostly in the form of cash. The criminals who generate these funds need to bring them into the legitimate financial system without raising doubt.
The conversion of currency into other forms makes it more usable. It also puts a distance between the criminal activities and the funds. ‘Money laundering’ is the term given to the process by which illegally obtained funds are given the appearance of having been legitimately obtained. Money can be laundered in many ways if one has the crookedness and the willingness to take the risk. One may reduce the amount to small flows of cash and add it slowly into the business stating profits since if there is a lump sum amount of money flowing into the legitimate business at the same time, it could raise suspicion. Another cunning trick a launderer could play is by depositing illegally gained money into an off-shore bank that has a strict secrecy and would not disclose the details of the accounts to any government due to their rules and regulations. Over time, the involvement of trusts has also played a huge factor in money laundering as trust does not necessarily have to disclose the details of the trustees or their income. Hence, it is basically a system which helps the launderer disguise his money as a legal form of income by not disclosing the illegal source through which the money was actually obtained.
To eliminate the illegal means of converting illegitimate funds into legal obtained, Anti Money Laundering was introduced. Anti-Money laundering is a set of rules and regulations that govern how Credit institutions that accept credit and payment are able to detect if the cash that has been deposited to said institutions are made through illegal procedures or not. There has been an argument stating that the Anti Money Laundering laws only cover a limited number of transactions and is not vastly expanded to all types of criminal activity, but it is to be noted that these laws help set up the basics for the institutions that accept credit from customers and it is up to the institutions and not up to the government or the launderers to be in touch with these rules and regulations and make sure that they follow it. The anti-money laundering laws are used to mainly target all sorts of suspicious activities which include tax evasion, funds of the public that could possibly be corrupted and primarily the trading of goods which are illegal in the country where the laws are set up.
Implications of the Law
The Federal Law Number 4 of 2002 concerning Anti-Money Laundering (the Anti-Money Laundering Law)discusses the importance of Money Laundering and the incriminating rules and regulations that are put forward to combat this illegal movement. The Federal law also states that the launderers who commit this crime shall be criminally liable for this offense. The Law that has come into place in the United Arab Emirates allows the Central Bank to possess the power of freezing the assets of any suspected accounts that are believed to be laundering money for a period of not more than a week. The Public Prosecution also has the power to order the seizure of such suspected property or proceeds.
The Federal Law has given the Central Bank the authority in the United Arab Emirates. Under the Federal Law, the Bank has the authority to set the limitation for the amount that can be deposited into the account without any need of showing proof or declaration. If the limit is exceeded then the account holders have the obligation to show a certificate of declaration via the declaration system stating how the money had come into account. The Central bank has also set up a special Unit that aids with detecting any suspicious activity that takes place which could relate in any way to money laundering. Once the Unit detects any sort of suspicious activity, it is their duty to notify the Attorney General about said suspicion and the Attorney General should take the necessary action.
The Anti-Money Laundering Law makes a provision for an Anti-Money Laundering Committee which is commonly known as national Anti- Money Laundering Committee’ which is governed by the Governor and has representatives from all the Ministries established in the UAE. Their main scope is to compose anti- Money Laundering rules and regulations for UAE They are also given the responsibility to aid the exchange of information between the credit institutions, as well as represent UAE in cases related to International Money Laundering.
The Anti Money Laundering Law also states the punishment that is faced by the offenders for the crime related to Money Laundering and since the United Arab Emirates take the crime very seriously, the punishment for such an offense is usually very vigorous. The punishment itself includes a jail term of up to seven (7) years or a fine of AED 300,000 (UAE Dirhams three hundred thousand) or both. This is one way of countering Money laundering by creating very serious punishments for such offenses. Even if a person has knowledge of money being laundered but fails to report it to the authorities, he could be in cold waters facing a term of imprisonment as well as/ or a fine ranging around AED 10, 000 (UAE Dirham ten thousand).
Whistle Blowing is a process where a person who is working in an organization finds out that the organization is dealing with an activity that is deemed illegal and comes out to talk about it to the higher authorities within the organization or to the outside world by publicly speaking about it. People who come forward to discuss are hence called Whistle Blowers and they are said to be scrutinized for leaking the confidentiality of the organization. Since this happens, the whistleblowers are protected by certain laws and in some instances, a third party could also offer protection to the whistleblowers.
In the United Arab Emirates, there has been no law regarding the Whistleblowers for a very long time until recently one was implemented in 2016. Generally, all over the world, whistleblowers would be protected by the law and they would have certain advantages to not lose their job due to the exposure of the unlawful activity. However, it is not the same in the United Arab Emirates, in this country, the whistleblower is said to be at risk and they are liable to have breached the Law even if they have informed the police or the authorities of the illegal activities. This is due to the fact that the whistleblowers have breached the employment contract as when they had entered into an employment contract, they would have signed a confidentiality agreement stating that they would maintain the confidentiality of the company and cannot spill out company secrets which will lead to a breach of the privacy of the organization. In the UAE, for being a whistleblower, the punishment could range up to imprisonment for one (1) year or a fine of up to AED 10, 000 (UAE Dirham ten thousand).
These rules have taken a change in the New Financial Crime Laws stating that protection can be given to the whistleblower depending on the crime that has been reported. This law, even though in place has not yet been well implemented so it is still a working progress and whistleblowers in U.A.E need to be cautious on how and who they share the trade secrets or the illegality of the organization with.
In India, laws that came into form at the beginning of the 21st century, the main objective was to reduce or eradicate money laundering and if an offender has been caught with money laundering, the government was instilled with the power of confiscating any property that the money launderer would have purchased from the profits that were derived by illegal means. Many people who have power and influence in India are able to get away with laundering money but sometimes they get caught due to the intensity of the amount as well as the power that the person has internationally. The best example for such a scenario is the case of Vijay Mallya, a billionaire at one point who has absconded and charged with offenses regarding Money Laundering. All the property that was in his name had been seized and were sold at auctions to the highest bidder. In summary, even though there could be many cases of people evading the government in India when they are caught for the offense, they are punished to the highest extent and the money is dissolved.
In the United States of America, money laundering is settled by two ways. One is the preventive method, which means that the financial institutions have a certain amount to which the client is able to deposit the money into the institutions and if the amount exceeds that given a certain amount, the client will have to declare the method through which they have obtained the funds and the means through which they received it. This is to prevent any sort of money laundering at the early stages.
The other way is the criminal route, where the offender has been caught with laundering money illegally and in this case, it would lead to criminal investigation and if guilty, offender is imprisoned. In the USA, there are strict punishments to combat money launderers.
Money Laundering co-relates with Customer Due Diligence since it deals with the problem at its early stages. Most of these foreign banks knowingly as well as unknowingly are involved with the crime of money laundering because they wish to keep their client's information intact. It ends up attracting large customers and them in return deposit a considerable amount in these foreign banks since there are no questions asked, and no questions answered. Hence, there is a problem with the regulations in these types of institutions and even though the rules in Banks in the United Arab Emirates are strict. The businesses that take place here may also deposit the illegal money that has been made into offshore banks where the rules are more lenient, and the launderers do not face any problems.
The global threat of money laundering poses exceptional challenges to the law enforcement authorities.To contest the evidentiary path of a money launderer, law enforcement agencies must identify and use tools and techniques that can aid them when crossing international boundaries. The system of Anti Money Laundering in the United Arab Emirates is a very new concept and has a lot of room for enhancement but for a law that had come into place for just about ten years or so, the country is doing a solid job with reducing the offense of money laundering in the country. Due to the increased level of punishments and methods of cutting the offense at the early stages, the UAE is countering Money laundering in the best way possible.Legal authorities with financial institutions and regulators working together can combat this increasing problem of money laundering.