The Standards Glossary, defines fraud as “Any illegal act characterized by deceit, concealment, or violation of trust. These acts are not dependent upon the application of threat of violence or of physical force. Frauds are perpetrated by parties and organizations to obtain money, property, or services; to avoid payment or loss of services; or to secure personal or business advantage”.
In brief, we can say that Money Laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds generated by illegal means, allowing them to maintain control over the same, ultimately providing legitimate cover for the source of income.
There are 2 general types of fraudulent acts: those intended to benefit an individual, either inside or outside the organization- at the organization’s expense and those perpetrated on behalf of an organization.
Common fraud schemes that injure the organization include the following:
- Skimming, Disbursement Fraud, Expense Reimbursement Fraud, Cash Theft, Payroll Fraud.
- Conflict of interest, Diversion, Acceptance of bribes or kickbacks, Intentional concealment or misrepresentation of events or transactions, Intentional failure of actions.
- Unauthorized or illegal use of confidential or proprietary information, Unauthorized or illegal manipulation of information technology networks or operating systems.
- Financial statement fraud.
- Corruption, Bribery.
The Financial Action Task Force on Money Laundering (FATF) is an US inter-governmental body, which sets standards and develops and promotes policies to combat money laundering and terrorist financing.
In 1990, FATF drafted the Forty Recommendations as an initiative to combat the misuse of financial systems to launder money. These Recommendations have since been endorsed by more than 130 Countries and are the International anti-money laundering standard against which national anti-money laundering systems are assessed.
In order to jointly comply with the above-mentioned Standards, on 30 November 2004, the Governments of 14 Countries of the MENA Region established the MENAFATF as a FATF Style Regional Body.
Previously, in 2002 the UAE issued the Federal Law No. 4 regarding Criminalization of Money Laundering. Then, on 30 April 2014 the UAE Federal National Council (FNC) passed a draft Law to amend the previous one regarding the criminalization of Money Laundering (Former “AML Law”).
The main topics concerning this Area are the Money Laundering through the physical transportation of cash, the illicit financial flows and the use of AML/CFT tools and the risks and threats of Money Laundering from Cybercrime.
The new AML Law expands the supervisory and regulatory role of the UAE Central Bank requiring it to superintend and monitor the operations of the Financial Institutions in the UAE, and to ensure that they comply with and properly apply the Law and its regulations.
Financial Institutions shall follow specific rules regarding the Anti-Money Laundering and Combating the Financing of Terrorism and the Financing of Unlawful Organizations.IFRS issued rules and regulations that shall be applied internationally for accounting and auditing related issues.In case a financial institution or account/auditor, finds error or fraud, it shall:
- Collect the documents he is working on.
- Collect relevant evidences (solid proofs justifying).
- Communicate to the related Authorities.
- Quantify the effect of that FRAUD/ERROR over the financial statement of the Company.
Each Country shall set and develop its Standards to combat the Money Laundering and Terrorism Financing. In accordance to the UAE Standards, all banks and other financial institutions, shall inform the Central Bank of the UAE of any transactions suspected to be related to illegal dealings, in particular in case of one or more of the following circumstances:
- Large cash deposits.
- Frequent exchanges of cash into other currencies.
- Overseas business arrangements with no business purposes.
- High value deposits or withdrawals not characteristic of the type of the account.
Banks and financial institutions shall verify the real identity of their Clients at all times, in this regard, it is mandatory to execute:
- CDD (Customer Due Diligence).
- KYC (Know Your Client).
- DRK (Details Record Keeping).
The Legal Group prides itself on having a specialized team dedicated to Anti Money Laundering and related matters under the supervision of their Partner Dr. Stefania Franchini who has been qualified in the UAE, as “Certified Crime Expert Money Laundering” which was conducted according to the standards and guidelines established by IPM USA.