The UAE has introduced a raft of new reporting requirements aimed at reducing the potential for illegal activity, including money laundering, in the property market.
The Ministry of Economy (MoE) and the Ministry of Justice (MoJ), working with the UAE’s Financial Intelligence Unit (FIU), have developed a regulatory framework for real estate transactions involving virtual assets.
The UAE is one of the first countries to implement such a mechanism, which will see all estate agents, brokers and law firms having to file reports to the FIU when buying and selling freehold properties in the UAE.
The new rules apply when any of the following methods of payment are used, whether for a portion or the entirety of the property value:
- Single or multiple cash payment(s) equal to or above Dhs55,000.
- Payments that include the use of a virtual asset.
- Payments where the fund(s) used in the transaction were derived from a virtual asset.
The reporting mechanism requires estate agents, brokers, and law firms to record the identification documents of the parties to the transaction in question. The rules apply to both individuals and corporate entities that are parties to the real estate transactions listed above.
Organisation working in the real estate sector have been informed about the specific requirements by the MoE and MoJ.
Meeting Financial Action Task Force standards
The MoE and MoJ play an important role in the UAE’s framework for money laundering as the supervisory authorities for designated non-financial businesses and professions (DNFBPs), including estate agents and brokers and law firms, respectively.
The two ministries apply a risk-based, supervisory approach in line with UAE legislation and the international standards set by the Financial Action Task Force (FATF).
Minister of Economy Abdulla bin Touq Al Marri said that “the adoption of the highest standards of transparency and governance, in addition to the necessary regulations to ensure economic and financial stability while combating malpractice within the business community, are all priorities of the Ministry of Economy and its partners in local, federal, and private sector entities”.
Al Marri added: “The UAE is keen to adopt procedures and regulations that promote sound financial practices in the sector in line with the highest international standards. The new requirements, with regards to the reporting rules of both the real estate and legal sectors, ensure the development of their regulatory frameworks, leaving little or no room for manipulation or illegal practices that could negatively impact the work environment and the economy and investment within these sectors.”
Abdullah Sultan Bin Awwad Al Nuaimi, Minister of Justice, said: “The introduction of reporting rules for certain transactions in the real estate sector is another example of how the UAE is coordinating across the government and with the private sector to strengthen the national framework for anti-money laundering and countering the financing of terrorism.”
He added, “By working closely together to provide a clear regulatory framework and effective reporting tools, the UAE is able to take quick action to protect the economy from known and emerging risks.”
And Ali Faisal Ba’Alawi, head of the UAE FIU, said: “These new measures will improve the quality of financial intelligence available to the FIU and will be used to trace the suspicious movement of funds or investments as part of our fight against money laundering and terrorism financing. Importantly, the requirements further strengthen the stability and integrity of the UAE’s real estate sector and provide all stakeholders with greater transparency in a sector that is a key contributor to the UAE’s economy.”
The Central Bank of the UAE recently issued new guidance on anti-money laundering and combatting the financing of terrorism (AML/CFT) for licensed financial institutions (LFIs) on the risks related to payments, and the preventive measures that LFIs should apply in order to mitigate such risks.