The term “STRs” mean both suspicious transactions and activity. A suspicious transaction refers to any transaction, attempted transaction, or funds for which an (licensed financial institutions) LFI has reasonable grounds to:

• Suspect as constituting the proceeds of crime ;
• Being related to the crimes of money laundering and related offences, the financing of terrorism or illegal organisations; and
• Being intended to be used in an activity related to such crimes.

The legal basis of STR reporting is based on the :

• Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering (AML) and Combatting the Financing of Terrorism (CFT) and Financing Illegal Organisations;
• Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation for Decree-Law No. (20) of 2018 on AML and CFT and Financing of Illegal Organisations; and
• Cabinet Decision No. (74) of 2020 Regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions on the Suppression and Combating of Terrorism, Terrorist Financing, Countering the Proliferation of Weapons of Mass Destruction and its Financing and Relevant Resolution.

CONFIDENTIALITY AND PROHIBITION AGAINST “TIPPING OFF”

When reporting suspicious activity or transactions to the FIU, (licensed financial institutions) LFIs are obliged to maintain confidentiality regarding both the information being reported and specific to the act of reporting itself, and to make reasonable efforts to ensure that the information and data reported are protected from access by any unauthorized person.

There is a statutory obligations under the legal and regulatory framework in force in the UAE.

IDENTIFICATION

The first line of defense plays a critical role in the management of customer and third-party risk and the timely escalation of potentially suspicious activity. The first line of defense is well-placed to identify suspicious transactions and assess that information once deemed reasonable—collected through interactions with a customer—now appears suspicious. Employees within the first line of defense include relationship managers, business executives, and back-office operations functions.

The second line of defense (e.g., compliance employees) provides policy, advice, guidance, assurance, oversight, and challenge to the first line of defense. While employees in Financial Crime Operations Units (possibly in the first line of defense) can investigate suspicious transactions and document the resultant investigation, the ultimate filing of the STR should be made by the Compliance Officer or the money laundering reporting officer (MLRO) (in the second line of defense). The second line of defense is charged with overseeing the investigations program.

The third line of defense identifies gaps, deficiencies, and weaknesses in operational controls owned or overseen by an LFI’s business, operations, and compliance functions.

A transaction monitoring program should take into account the AML/CFT risks of the (licensed financial institutions) LFI’s customers, prospective customers, counterparties, businesses, products, services, delivery channels, and geographic markets in addition to helping prioritize high-risk alerts. Monitoring systems typically include employee identification or referrals, transaction-based (manual) systems, surveillance (automated) systems, or a combination of these, including an intelligence-led transaction monitoring approach.

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Please note that this memo is for information purposes only and should not be construed as an advice. It does not necessarily cover every aspect of the
topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.

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