Auditor's Role in AML Compliance in UAE

Role of an Auditor in Ensuring AML Compliance in UAE

Auditors are expected to play an essential role in ensuring financial compliance, including anti-money laundering regulations. The risk of money laundering is real, and auditors can play a vital part in identifying and combating money laundering activities.

Auditors are in the best position to identify non-compliance with anti-money laundering regulations due to their extensive understanding of clients’ businesses, processes, and systems. They can detect suspicious transactions by analyzing financial information and assessing risk factors.

In this blog, we will discuss auditors’ role in ensuring AML compliance as well as tips and strategies for auditors to ensure successful AML audits.

Understanding AML/CFT Obligations for Auditors

Auditors and accountants in the UAE must comply with AML regulations as adopted by Decree-Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019. External auditors are subject to AML regulations if they are involved in transactions such as issuing financial or non-financial instruments, providing financial or non-financial services, or engaging in non-financial transactions of any kind for their clients.

It is important for auditors to assess customer, geography, channel, product, and service risks when conducting due diligence. This will help them identify and mitigate any financial crime risks associated with their work with customers and stakeholders. The UAE Cabinet established the Anti-Money-Laundering and CFT Executive Office in 2020 to meet international standards and ensure compliance by businesses in the country. Failing to meet the shifting demands of AML/CFT can result in sanctions and legal implications.

What is an auditor’s role in ensuring AML compliance?

As auditors, you are required to follow the AML/CFT compliance requirements as per Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree-Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations. This means that you must monitor transactions, accounts, records, and governing structures of an entity to ensure it is compliant with these regulations. While doing so, you must be aware of the red flags of money laundering such as the transfer of real estate ownership to prevent any financial irregularities from taking place. By following these regulations, you can avoid any risk of money laundering and keep your clients happy.

Key elements of successful AML compliance programs?

• A successful AML compliance program needs to include processes to detect and prevent money laundering and terrorist financing activities.
• Companies should ensure they have a senior AML compliance officer to ensure they adhere to regulations. This can be done by having a clear understanding of the norms related to AML and having an ongoing process to adhere to them.
• Financial institutions should conduct regular AML or CTF compliance audits to evaluate their compliance with regulations. These audits will help financial institutions identify areas for improvement in their anti-money laundering and counter-terrorism financing policies, practices, and procedures.
• Banks and credit unions should understand the legislation, regulations, rules, and policies related to AML. This ensures that they are aware of any changes in the legal or regulatory environment surrounding anti-money laundering and counter-terrorism financing.
• Companies should have a clear understanding of the norms related to AML and have an ongoing process to adhere to them. This can include having a risk assessment framework in place, developing internal policies, and training employees on anti-money laundering and counter-terrorism financing best practices.

Tips and strategies for auditors to ensure successful AML audits

Auditors must ensure their AML audits are successful by following a few tips and strategies.

First, auditors should set deadlines for the due diligence process. As part of the due diligence assessment, auditors must obtain financial data from accounting staff and double-check accounts to make sure all information is obtained before closing the accounts. It's important for auditors to obtain information on employees and any suspicious transactions as quickly as possible.

Additionally, auditors must ensure that VAT and economic substance filing is available (if relevant).

Finally, auditors must conduct regular policy reviews on anti-money laundering at least once a year, either internally or by hiring third-party audit firms. Through these steps, auditors can ensure they are meeting the requirements of anti-money laundering laws in the UAE.

The role of auditors in ensuring AML compliance

Auditors in the UAE must be approved by banks to ensure AML compliance. There are various aspects of auditing that an auditor should be aware of, including the provisions of Federal Law No. 2 of 2015 regarding Commercial Companies Law and International Accounting Standards and Practice. Auditors must also pay attention to customer risk, geographic risk, channel risk, and product and services risk to ensure AML compliance.

In addition to their financial qualifications, auditors must also have knowledge of financial regulations and principles of good business practices. Also, auditors must be able to identify financial controls, processes, and procedures as well as other measures needed for AML compliance.

What do auditors need to know about AML compliance?

Auditors in the UAE must be aware of the red flags of money laundering to remain in compliance with AML regulations. Auditors should familiarize themselves with the anti-money laundering (AML) framework, as well as the recent Cabinet Decision No. 10 of 2019 on amending the implementing regulation of Decree-Law No. 20 of 2018 on anti-money laundering and combating the financing of terrorism and illegal activities.

Auditors must comply with the AML regulations, including the Cabinet Decision No. 10 of 2019 Concerning the Implementing Regulation of Decree-Law No. 20 of 2018 On Anti-Money Laundering And Combating Financing Of Terrorism And Illegal Activities. Auditors must assess risk and monitor transactions for signs of money laundering, conduct due diligence on customers, and ensure that they and the companies they audit are compliant with AML-CFT requirements.

Conclusion

Now that you have a clear understanding of the critical aspects of ensuring AML compliance, you are well-positioned to conduct successful AML audits and help your organization maintain a strong compliance stance. However, auditors must be ever-vigilant about the changing financial landscape and regulations. Regular updates on industry developments and regulations in the region will ensure auditors remain well-informed and continue to support their organizations with best-in-class financial practices.

Contact us now if you have any queries regarding the AML compliance service in Dubai!!