Whopping $500 million fines are just one reason sanctions and anti-money laundering measures continue to haunt international commerce. With advances in electronic transmittals, hundreds of billions in dirty money swirls all over the world with breathtaking speed and efficiency. Rather than passively watching the problem spiral, however, the United Arab Emirates and one of its prominent regulators have stepped in with aggressive preemptive action.

With last week’s mega fine imposed by the U.S. on ABN Amro (since acquired by Royal Bank of Scotland) for “turning a blind eye” to sanctions against Iran, Cuba and other countries, the focus of international efforts to control criminal cash flows has received renewed attention. The U.S. and the UN have traditionally borne the yoke of international trafficking cops, but when it comes to money laundering, the United Arab Emirates and the Dubai Financial Services Authority (DFSA) have drawn a line in the sand.

The Sanctions Committee of the United Nations, for example, is a subset of the UN Security Council. From Saddam’s Iraq, to Darfur in the Sudan, the UN has long advocated the use of sanctions “as an enforcement tool when peace has been threatened and diplomatic efforts have failed.” As a consequence, companies and individuals doing business with rogue states bring themselves within the legal jurisdiction of a world body.

The U.S., meanwhile, has a number of different mechanisms for combating illicit traffic. On an international scale, the Office of Foreign Assets Control (OFAC), contained within the Department of Treasury, maintains a list of Specially Designated Nationals. Doing business with individuals and companies on this list subjects U.S. citizens and residents to criminal penalties. Because the list is public information, a presumption of intent when doing business with any person or entity on the list. OFAC maintains a list of 20 extant sanctions programs on its website; the site also includes a list of memoranda between OFAC and bank regulators.

Though not as large or influential as the UN or U.S., the UAE, a geographically a tiny Gulf outpost, has in its own right backed up its claim as a world financial center by committing considerable energy and resources to combating not only money laundering but the financing of terror. The DFSA oversees the Dubai International Financial Centre (DIFC), a self-contained financial free zone with its own civil and commercial law framework located in the Emirate of Dubai. As for penal law, however, UAE federal law still applies not only to the DIFC but all free zones. The DFSA thus provides the compliance mechanisms and the UAE the criminal penalties for money laundering.

While not an Islamic issue, money laundering has received attention from both the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). Both organizations, in their respective governance and corporate responsibility provisions, underscore the importance of compliance with relevant AML laws.

via A Line in the Sand: Getting Tough on Money Laundering in Dubai and the UAE.

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