United Arab Emirates

UAE tightens real estate investment rules; brokers to report cash deals worth Dh55k and above

UAE tightens real estate investment rules; brokers to report cash deals worth Dh55k and above


Muzaffar Rizvi

Published: Mon 8 Aug 2022, 2:41 PM

Last updated: Mon 8 Aug 2022, 6:50 PM

The UAE on Monday announced new reporting requirements for certain real estate transactions to strengthen its regulatory framework for anti-money laundering and countering the financing of terrorism.

In partnership with the UAE Financial Intelligence Unit (FIU), the Ministry of Economy (MoE) and the Ministry of Justice (MoJ), said all real estate agents, brokers, and law firms are obliged to file reports to the FIU for purchase and sale transactions of freehold real estate properties in the UAE that include any of the below three methods of payment, whether for a portion or the entirety of the property value:

1. Single or multiple cash payment(s) equal to or above Dh55,000

2. Payments that include the use of a virtual asset

3. Payments where the fund(s) used in the transaction were derived from a virtual asset

The reporting mechanism requires real estate agents, brokers, and law firms to obtain and record the identification documents of the parties to the applicable transaction, among other relevant documents related to the transaction. The rules apply to both individuals and corporate entities that are parties to the above real estate transactions.

The UAE is one of the first countries to implement such a mechanism for real estate transactions involving virtual assets, marking the latest example of the UAE’s sustainable and evolving approach to the global fight against money laundering and terrorist financing.

The decision was made following multiple meetings and discussions amongst the MoE, MoJ, FIU, and other competent authorities in the UAE, including the Executive Office for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).

Developing regulatory framework

Abdulla bin Touq Al Marri, Minister of Economy, said that the adoption of the highest standards of transparency and governance, in addition to the necessary regulations to ensure economic and financial stability while combating malpractice within the business community, are all priorities of the Ministry of Economy and its partners in local, federal, and private sector entities.

Al Marri noted that the real estate sector is one of the key sectors for investment and a vital pillar of the country’s economic development. Therefore, he noted, the UAE is keen to adopt procedures and regulations that promote sound financial practices in the sector in line with the highest international standards.

“The new requirements, with regards to the reporting rules of both the real estate and legal sectors, ensure the development of their regulatory frameworks, leaving little or no room for manipulation or illegal practices that could negatively impact the work environment and the economy and investment within these sectors,” Al Marri said.

The relevant private sector entities have been informed about the specific requirements in regulatory circulators issued by the MoE and MoJ. Additionally, to ensure preparedness, UAE authorities have collaborated to host three separate workshops with real estate agents and brokers, as well as law firms, helping to guide them through the new reporting requirements and enhance their familiarization with the FIU’s goAML system.

Drive against money laundering

Abdullah Sultan bin Awwad Al Nuaimi, Minister of Justice, said the introduction of reporting rules for certain transactions in the real estate sector is another example of how the UAE is coordinating across the government and with the private sector to strengthen the national framework for anti-money laundering and countering the financing of terrorism.

“By working closely together to provide a clear regulatory framework and effective reporting tools, the UAE is able to take quick action to protect the economy from known and emerging risks,” he said.

The MoE and MoJ play a key role in the UAE’s framework for AML/CFT as the supervisory authorities for designated non-financial businesses and professions (DNFBPs), including real estate agents and brokers and law firms, respectively.

DNFBPs include a wide range of sectors that are mostly exposed to the risks of money laundering and misuse of commercial transactions and the funds traded by them for the purposes of money laundering or other illegal practices, given the nature of the services they provide and the products they deal with. The MoE and MoJ apply a proactive, risk-based supervisory approach in line with UAE legislation and the international standards set by the Financial Action Task Force (FATF).

Ali Faisal Ba’Alawi, head of the UAE FIU, said these new measures will improve the quality of financial intelligence available to the FIU and will be used to trace the suspicious movement of funds or investments as part of our fight against money laundering and terrorism financing.

“Importantly, the requirements further strengthen the stability and integrity of the UAE’s real estate sector and provides all stakeholders with greater transparency in a sector that is a key contributor to the UAE’s economy,” he said.

A step in right direction

Saad Maniar, senior partner at Crowe, said real estate is one of the key contributor to the economic growth and the latest move may bring temporary slowdown, which is the need of the time to control inflation. At the same time, he said new law will help combat malpractices and ensure a long-term sustainable growth.

“With such move, the UAE raising the bar of regulatory compliance and it is a step in the right direction to strengthen the stability of the financial system,” Maniar told Khaleej Times.


Only clean money welcome

Atik Munshi, managing partner, FinExpertiza UAE, said real estate is one of the few sectors which absorbs large amounts of funds and some of such funds could be illicit or laundered.

“Plugging the inlets and outlets through proper screening and documentation is a way to ensure that only clean money is utilised in these real estate transactions. The UAE government has very smartly involved and laid the onus on some of the DNFBP’s like real estate brokers and law firms so an indirect reporting chain is created as an early warning signal,” Munshi told Khaleej Times on Monday.

“This compliance technique will strengthen not only the reporting quality but also significantly enhance UAE’s reputation as a jurisdiction which has a non tolerance policy towards money laundering. Cash and digital money are few tools normally used for such laundering and this regulation is expected to curb their illicit entry,” he said.

With inputs from Wam


source: khaleejtimes

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