Anti-money laundering (AML) precautions and attempts to prevent terrorist financing (CFT) are matters which are often associated with compliance departments within Western electronic trading companies whose responsibility it is to ensure compliance with the world’s most recognized financial industry regulators.
Today, the United Arab Emirates‘ trade organization for FX, the Foreign Exchange and Remittance Group (FERG) has turned its attention to these compliance matters by raising concerns over what the organization considers to be ‘grey transactions.’
At a conference which was held at the Rose Rayhan Rotana Hotel in Dubai, the organization convened to discuss new and more advanced AML and CFT measures, several industry figures made their positions clear.
“FERG is registered with Dubai Chamber of Commerce & Industry with the support of the Central Bank of the UAE,” said FERG chairman Osama Al Rahma according to a report covered by Emirati news source Albawaba.
“We advocate the transfer of money globally through channels that are secure, transparent and governed by strict Anti Money Laundering regulations as posited by the Central Bank of the UAE. FERG is committed to completely stamping out grey areas and unethical practices in the remittance and exchange sector.”
Nada Hussain Al Ali, STR analyst from the Central Bank of the UAE, spoke about the FATF revised recommendations and Risk Based Approach that the exchange houses need to follow while conducting/monitoring the transactions.
FERG member Al Ansari Exchange highlighted on one of the key topics discussed at the conference was the 21st century AML techniques. The discussion highlighted the possibility of ‘smurfing’, whereby large transactions are restructured into smaller ones that don’t draw attention. The possibility of money mules – people recruited to transfer stolen money across national borders – was also discussed.
FERG member Al Rostamani International Exchange highlighted the importance of strict compliance procedures to combat money laundering and terrorist financing. According to the Al Rostamani International Exchange proper controls such as transaction screening, real time monitoring and pattern analysis should be in place to detect / identify any suspicious transactions and report the same to the regulatory authority.
As a mandatory requirement the entire log of daily transactions should be uploaded to the UAE Central Bank at the end of each day for their review, the Exchange said.
Al Fardan Exchange, a member of FERG discussed the AML / CFT compliance program, its importance and objectives. The presentation highlighted the policies, procedures and actions that help prevent law violations and detect them.
The compliance programme helps ensure that a financial institution has a compliant culture, and minimizes risks to the reporting entity and its directors/management and employees of criminal, civil or administrative liability.
The presentation stressed on the need for financial institutions to develop and implement a compliance program to meet AML/CFT laws, regulations and standards including reporting, record keeping and client identification obligations.
Orient Exchange, a FERG member stressed on the necessity for all exchange houses to deploy AML compliance vested software to monitor every payment instructions routed through their system.
UAE Exchange, also a FERG member, pointed out the importance of combating fraud across all sectors and released the findings of a recent research done by the exchange house which showed that a financial organisation typically loses 5 percent of revenue a year due to fraud alone.
“It’s important to realise that threats of fraud are internal as well as external. Externally, we need to watch out for counterfeit currency, identity theft, transaction manipulation and fake identifications. But there are also internal risks that all financial institutions must guard against, such as collusion, misuse of authority, and data manipulation to hide misappropriation. The first step is always to identify the risk, and then put in place regulatory measures to guard against it,” Al Rahma added.
Meanwhile, Lulu International Exchange touted the benefits of technology in automating data analysis to catch suspicious transactions. Compliance Officers can use big data to create models that gather, analyse, assess and quantify risks. Automated triggers can be set up for activity that looks statistically improbable, flagging up unusual transactions for manual overview.
“Non-compliance with the best AML practices has a negative effect on brand equity for exchange houses. Not only can it hurt the image of the remittance and exchange industry as a whole but can also lead to more serious repercussions such as regulatory fines or even license provoking,” concluded Al Rahma.