The Abuse of Legal Persons and Arrangements in Illicit Activities

Over the past two years, the UAEFIU has issued a number of strategic analysis reports on the abuse of legal persons in money laundering, trade-based money laundering (TBML), professional money laundering (PML), and foreign proceeds of crime, as well as the abuse of dealers in precious metals and stones in illegal activities, among others. This report extended the previous strategic analysis work to identify further typologies and patterns related to the possible abuse of legal persons and arrangements in illegal activities. The findings of this report were based on 14 hypotheses drawn from the UAE National Risk Assessment (NRA), the Legal Persons and Arrangements Risk Assessment, and patterns observed globally and published in other jurisdictions' case studies.

Analysis of a sample of STRs/SARs considered underlying incidents of the possible involvement of foreign legal persons associated with local entities (in line with the FATF's latest guidance on recommendation 24), as well as incidents of potential foreign politically exposed person (PEP) involvement. Furthermore, it considered when difficulty in identifying the ultimate beneficial owner was observed or a complex structure was employed to disguise the ultimate beneficial owner information.

The following typologies and their associated risk indicators constitute the key findings of the analysis, wherein risk mitigation is required:

1. The possible abuse of legal persons as front or shell entities for illegal activities.
2. The possible abuse of offshore structures in illegal activities.
3. The abuse of legal persons in fraudulent activities.
4. The possible involvement of professional intermediaries (DNFBPs) in facilitating the abuse of legal persons in the UAE.
5. The possible abuse of legal persons for cross-border movement of funds.
6. The abuse of legal persons for conducting unlicensed hawaladar activities.
7. The abuse of legal persons in trade-based money laundering (TBML).
8. The possible abuse of legal persons to launder the proceeds of tax evasion.
9. The possible abuse of legal persons in proliferation financing.
10. The possible abuse of legal persons in sanction circumvention.

Click here to view the full report.