Not long ago, the UAE used to be least regulated as businessmen were able to receive money by cash or by bank transfer from anonymous sources outside of the country. However, things changed in recent times with the introduction of the AML/ CFT law. Nowadays every money transfer needs to be validated by the invoice or the transfer should be from an approved customer.
The AML/ CFT guidelines helped the UAE economy to become more transparent and comply with global standards against financial crimes. However, the new standards increased the compliance pressure on the banks, which made the process of corporate bank account opening in Dubai, UAE challenging. After the implementation of the AML law in the UAE, the banks began to exercise due diligence on new clients as well as existing account holders. New KYC forms were introduced which asks the customers if they are dealing with high-risk countries, high-risk individuals, risky business activities, etc.
The following is a list of KYC requirements made tough by the introduction of the AML/ CFT Law in the UAE.
1. Background history of the shareholders
After the introduction of the AML/CFT Laws, the applicant’s and shareholders’ background financial history is under increased scrutiny. The business owner should prove to the bank that he has sufficient knowledge about the industry in which he is going to open the business. The banks want to understand the creditworthiness and debt history of a person or the company. The banks also mandate the physical presence of the applicant to sign the documents.
2. Residency Visas
For opening a corporate account in Dubai, the applicant is required to have a UAE residence visa. The lack of residence visas will cause delays in the opening of the account and may even lead to the rejection of the application. Lack of residency visas will attract increased due diligence process including scrutiny regarding nationality, the purpose of opening the bank account, etc.
3. Address of Physical Office
The banks ask for the address of the physical office of the company during the process of corporate account opening in Dubai. The businesses with a DED license in Dubai mainland might not find this requirement off-putting as the physical office is mandatory to obtain a trade license in Dubai mainland. It is reported that some banks verify the physical address of the clients by sending an official for inspection at the address mentioned in the KYC form.
4. High-risk business activities
The AML/CFT Law requires the banks to provide information to the authorities about high-risk business activities that can be used for money laundering. The businesses that offer insolvency services, investment business, trust and company services, aggressive tax schemes, real estate management, payroll services, consultancy services, or any business or services that favour anonymity is considered high-risk business activities. Investors dealing with any high-risk activities are likely to undergo extreme due diligence requirements and they might find the account opening process highly challenging in the UAE.
5. Business with High-Risk Countries
Investors face a tough hurdle while submitting an application to open a corporate bank account in the UAE if their business involves dealings with high-risk countries. The Financial Action Task Force (FATF) from time to time releases the list of jurisdictions that it deems as high-risk under the AML/CFT regulations. As per the list on 30 June 2020, Iran and the Republic of North Korea are at the top of the FATF blacklist. FATF terms Iran and North Korea as high-risk jurisdictions subject to a ‘Call for Action’.
Other countries that require increased monitoring as per the FATF include Albania, The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Myanmar, Panama, Pakistan, Syria, Nicaragua, Yemen, etc. Business deals with such high-risk countries would result in higher levels of supervision including scrutiny of the business relationship, the requirement for higher levels of internal reporting and management approval, more frequent monitoring of transactions, and more frequent review/ updating of customer’s due diligence information.
6. High-Risk National
As per the AML/CFT regulations, banks in the UAE banks adhere to the restrictive policy of prohibiting the transfer of funds to and/or from Specifically Designated Nationals (SDNs). SDNS are high-risk individuals located anywhere in the world. They may have acquired sanctions in different countries due to their links with human rights abuses, nuclear proliferation, terrorism, narcotics trafficking, transnational criminal organizations, or their support to sanctioned regimes.
The banks will scrutinize the bank account opening the application to check if the business has dealings with high-risk individuals or if the client himself is a high-risk National. With the heightened KYC procedures, the banks intend to identify the individuals suspected of being involved with criminal activities, to provide information on companies or clients suspected of involvement in money laundering/bribery, or to expose politically exposed Persons (PEPs) among other reasons.
Associate with Corporate Bank Account Opening Service Provide
The AML/CFT laws introduced by the UAE aims to curb financial crimes of money laundering and financing of terrorism. Though the laws were enacted to align the economy in line with the global standards, they paved the way for tough due diligence measures on the process of bank account opening in Dubai. Businesses now need to undergo intense KYC procedures to get their business bank account opened in Dubai. The banks scrutinize the KYC documents against a string of parameters including involvement of high-risk activities, high-risk nationals, and high-risk countries. Reputed business setup consultants in Dubai such as Jitendra Business Consultants (JBC) offers its clients expert advice on the documents needed to submit to the bank. JBC recommends the businesses comply with KYC requirements to successfully open a bank account in Dubai.