MLRO Report

What are the contents that must be included in the MLRO report in UAE ?

One of the most crucial tasks of an organization is to ensure that money is not stolen or embezzled. The primary purpose of an MLRO report is to keep tabs on money laundering activities. MLRO report is a record of transactions between the bank and its customers, including loans, deposits, and money transfers. It also records the financial position of the bank and compliance with laws, regulations, and codes of conduct.

The objective of this blog is to educate our readers about what should be included in the MLRO report. Let’s get into it!

What is a MLRO Report?

•  MLRO reports are the first-point of contact for businesses and financial institutions with regards to anti-money laundering and combating financing of terrorism (AML-CFT) compliance requirements.
•  Each report should include details of risk assessment, training programs and processes for identifying, assessing and reporting suspicious activity, as well as a summary of the steps taken to implement AML-CFT controls.
• The report should also include details of risk management measures applied, such as due diligence checks for individuals involved in any money laundering activity.
•  The report should include measures taken to ensure compliance with the relevant legal, regulatory, and ethical standards.
•  Banks, insurance companies and designated non-financial businesses and professions (DNFBPs) must submit a Money Laundering Reporting Officer (MLRO) report to the Central Bank of UAE (CBUAE) or Ministry of Economy (MoE).
•  This report should include details of risk assessment, training programs and processes for identifying, assessing, reporting suspicious activity, as well as an overview of money laundering controls implemented.
•  It should also detail how the business or institution has implemented its due diligence procedures.
•  MLRO reports provide valuable insights into money laundering activities within a business or institution's environment.

Key Information to Include in MLRO Report

• Companies and financial institutions, banks and insurance companies in the UAE are required to submit the MLRO report to CBUAE

• For DNFBPs, the requirements of MLRO report differ from that of financial institutions. The report must include internal controls and procedures of the company, details of customer relationships and activity, any suspicious activity reported to authorities, financial records for reporting year, and compliance with AML-CFT laws.
• Designated Non-financial Businesses (DNBs) such as jewelry shops, electronics stores, taxi companies, etc must also submit their MLRO report to the Ministry of Economy (MoE).
• MLRO report must assess the extent to which a company is committed to applying AML-CFT rules and procedures and state what needs to be updated or developed.
• The report must include relevant information on bank account balances, customer lists, financial records for reporting year, etc.

Internal Control Elements for MLRO Report

•  The MLRO report should include the number of SARs submitted and the number of clients rejected due to lack of information.
•  It should also include the AML-CFT training components, the number of courses and the training provided to employees and any issues concerning the AML training.
•  The report should evaluate the efficiency of the company in adhering to AML/CFT laws.
•  The report should include review of the Customer Due Diligence (CDD) file to ensure information is updated and relevant.
•  The report should include results of the national risk assessment.

The MLRO report must contain all relevant details regarding internal controls, including reporting entity's compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws, customer due diligence processes, internal audit activities, and management oversight activities.

What must be included in the MLRO report in UAE?

•  Financial institutions such as banks and insurance companies must submit the MLRO report to the Central Bank of UAE (CBUAE)
•  It should include the company's financial statements, a description of management and organization, the legal structure of the entity, any regulatory information, risk management policies, AML/CFT policies, and compliance management procedures.
•  Designated Non-Financial Businesses (DNFBPs), including financial intermediaries, money transmitters, political organizations, casinos and others are required to submit the report to the Ministry of Economy (MoE)
•  The report should assess how committed the entity is to applying anti-money laundering/countering the financing of terrorism (AML/CFT) frameworks. It should explain how the activities are supervised by management and how they are carried out in a compliant manner.
•  All suspicious activities and transactions worth $10k or more must be reported to financial intelligence units (FIU).

How to prepare a MLRO report in UAE?

•  Financial institutions, such as banks and insurance companies, must submit a MLRO report to CBUAE. The report details the financial activities of the reporting entity and its compliance with AML/CT rules.
• The report should provide an overview of the business activities of the reporting entity, including its ownership structure, financial activities, risk management practices, and compliance with AML regulations.
•  Designated Non-Financial Businesses and professions (DNFBPs), such as lawyers and accountants, must submit the report to MoE. The report details the financial activities of these businesses and their compliance with AML/CT rules.
•  A competent person who has expertise in AML services should be hired to conduct the MLRO report. This person should review the reports submitted by DNFBPs to ensure that all necessary steps are taken for AML-CFT compliance.
•  By following these steps, businesses can ensure their financial activities are compliant with AML regulations.

Conclusion

A MLRO report is an essential document in the UAE financial sector that provides a statement of the management’s philosophy and objectives, as well as the activities and results of the bank for the previous year. It also includes a report on the bank’s financial position, activities, and future plans. This report is prepared by senior management in collaboration with other management-level staff such as directors or senior management. It helps stakeholders understand how the organization functions and how it plans to achieve its objectives. The report also has information about risk management practices in place within the bank. Preparation of such reports requires detailed analysis of all aspects of an organization, including financial health and performance, customer satisfaction, and internal controls. Therefore, it is crucial that you understand what must be included in these reports to produce accurate reports that are useful to stakeholders.