Introduction
Due to incremental efforts to enhance its overall AML/CFT compliance, the United Arab Emirates (UAE) has been removed from the Financial Action Task Force’s grey list of jurisdictions under increased monitoring. This significant achievement comes as a result of the UAE’S commitment take action to combat financial crimes as demonstrated by the increased willingness to investigate and take enforcement actions in relation to money laundering, and the adaption of new guidelines and penal codes, and most importantly legal reform.
One significant reform is the recently introduced regulatory framework governing Ultimate Beneficial Ownership (UBO) introduced through Cabinet Decision No. 109 of 2023 on the Regulation of the Real Beneficiary Procedures (the “New UBO Law”) and Cabinet Decision No. 132 of 2023 on the Administrative Fines to be Imposed on the Offenders Violating the Cabinet Decision No. 132 of 2023 on the Administrative Fines to be Imposed on the Offenders Violating, outlining the sanction applicable in case of breaching thereof. The New UBO Law signifies a proactive step by the UAE government to align with global standards and strengthen its regulatory environment. This article explores the key provisions of the New UBO Lawand its connection to the UAE’s efforts to be removed from the grey task list.
Understanding the New Law
The New UBO Law addresses the challenges that come with identifying the ultimate beneficial owner in entities with complex structures. This is done through its wide scope of application, increased disclosure requirements and widening of discretionary powers to the relevant authorities.
- Scope and Applicability of the New Law
The New UBO Law applies to all mainland entities and entities established in the commercial free zones and excludes entities in the financial free zones, ADGM and DIFC, as well as government owned companies and government partners.1
- Disclosure Duties
Entities subject to the New UBO Laware required to keep updated information like shareholder’s register, real beneficiary’s record; and its related records if found, in addition to any other information or records required to be kept by other regulations.
- Registrar’s Discretion in Identifying the Ultimate Beneficial Owner
Entities with complex structures must be mindful of the increased discretion the Registrarhas in identifying the UBO where they are mandated to use a risk-based approach to identify any concealment that may be in the ownership hierarchy.
- Breaches and Sanctions
Non-compliance with the New UBO Law attracts sanctions ranging from warnings to financial fines depending on the degree of the breach. The sanctions can be summarised as follows:
- First time breach: written warning with notice of adjustment within an identified period.
- Second time breach: warning with notice of adjustment in addition to monetary fine ranging from AED 5,000 to AED 50,000 depending on the breach.
- Third time breach: warning with notice of adjustment in addition to monetary fine ranging from AED 10,000 to AED 100,000 depending on the breach.
- Measures you Can Take to Mitigate Risk
Ensure that all your entity’s records and registers are kept up-to-date as well as ensure your adherence to any disclosure duties you have under the New UBO Lawas well as other applicable legislations like the Companies Law.
In case your corporate structure is complex, please take extra step by taking legal advice from experienced corporate and regulatory legal advisors.
Although these measures have
How can we help?
Our expertise in corporate law and regulations allows us to provide effective and accurate advice to our clients, taking into consideration their unique circumstances and needs. Additionally, our experience and knowledge in handling corporate and commercial disputes enable us to represent clients in court proceedings.
Our corporate team has successfully advised and represented clients across various industries, including, but not limited to, oil & gas and energy, real estate, investment advisory and consumer goods, and we have advised a broad range of clients such as entrants to the UAE, Emirati families (including Royal families) and UAE-based enterprises. For further information, please contact Gerry Rogers, Corporate Partner, on gerry.rogers@habibalmulla.com, or any of the members of our team.
- A government partner is federal or local government that contributes or owns shares in the company.
