AML (Anti-Money Laundering) & ESR (Economic Substance Regulation) Compliance Registration in the UAE is crucial for businesses to ensure they are complying with both local and international regulations. Here's everything you need to know to get started:
AML compliance ensures businesses do not engage in illegal activities like money laundering or terrorist financing.
- Know Your Customer (KYC): Businesses must verify the identity of their clients and partners, especially for financial transactions. This includes checking passports, Emirates IDs, proof of address, and financial background.
- Risk Assessment: Companies must assess the risks of money laundering associated with their business and maintain proper internal controls to detect suspicious transactions.
- Suspicious Transaction Reporting: Businesses must report any suspicious activity to the UAE Financial Intelligence Unit (FIU), which works under the Central Bank of the UAE.
- AML Training: Employees should be trained in detecting and handling suspicious transactions.
- Maintain Records: Businesses need to keep records of transactions for a minimum of 5 years.
- Banks, financial institutions, and insurance companies (obviously).
- Real estate brokers, law firms, and corporate service providers (especially those handling large sums of money).
- Any business involved in cross-border transactions.
The UAE’s ESR came into effect in 2019 to align with international standards set by the OECD and EU. This regulation ensures that businesses that carry out certain activities have real economic substance in the UAE.
Businesses conducting relevant activities in the UAE, such as:
Banking and Financial Services
Insurance
Investment Fund Management
Headquarters Business
Shipping
Holding Company Activities
Intellectual Property Business (e.g., patents, trademarks)
Distribution and Service Center Activities
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ESR Notification: Businesses need to submit an Economic Substance Notification to the relevant regulatory authority (usually the UAE Ministry of Finance or the free zone authority).
- Deadline: Annual submission of the notification within 6 months from the end of the financial year.
- Penalty: Failure to comply may lead to fines starting from AED 10,000 and up to AED 50,000 for repeat violations.
- Economic Substance Report: Businesses engaged in relevant activities are required to submit a report confirming that they meet the substance requirements in the UAE (e.g., having office space, employing staff, or conducting operations in the country).
Assess if your business engages in any of the activities listed under ESR.
Verify that you have the required economic substance in the UAE, such as office premises, employees, and local management for certain activities.
Submit the ESR notification to the relevant regulatory authority (free zone authority or Ministry of Finance) to ensure compliance.
Ensure that you maintain accurate records to demonstrate your economic substance in the UAE.
- AED 10,000 fine for failure to submit an annual ESR notification.
- For repeated violations: fines can increase to AED 50,000.
- Closure of the business or license revocation if not compliant after repeated offenses.