Implementing Targeted Sanctions in the UAE

UAE law, particularly Cabinet Decision No. 74 of 2020, mandates absolute compliance, requiring regulated entities to freeze funds and cease the provision of services to any listed individual or entity immediately and without delay. Failure to implement these measures results in severe penalties, underscoring that this process is a matter of national and global security.

The Required Sanctions Lists in the UAE

All regulated entities in the UAE, including DNFBPs and financial institutions, must continuously screen against the two core lists managed and updated by the Executive Office for Control and Non-Proliferation (EOCN):

1. UN Consolidated List: The list of individuals and entities designated by the United Nations Security Council (UNSC), primarily relating to terrorism and the financing of proliferation of weapons of mass destruction. As a UN member state, the UAE is obligated to enforce these decisions.

2. UAE Local Terrorist List (Local Lists): The list of individuals and entities designated by the UAE Cabinet under the Anti-Terrorism Law.

Beyond these two core legal mandates, many larger Financial Institutions (FIs) and DNFBPs with international operations extend their screening scope to include:

• OFAC (U.S. Office of Foreign Assets Control): Crucial for maintaining access to the U.S. financial system.

• EU (European Union) & HMT (His Majesty’s Treasury – UK): Essential for maintaining relationships with European banks and counterparties.

Targeted vs. Sectoral Sanctions: Nuance in Compliance

Sanctions are not monolithic; they require precise interpretation by the MLRO:

The key takeaway is that a “hit” on the UAE/UN lists demands immediate, non-communicated action and reporting (via a Fund Freeze Report – FFR on GoAML), while a sectoral hit requires strategic legal assessment.

Beyond the Sanction Hit: When Risk Outweighs Prohibition

Sanctions screening is a binary test: either the client is listed and engagement is forbidden, or they are not. However, compliance cannot end there.

In a Risk-Based Approach (RBA), the MLRO must ensure the screening process is complemented by broader risk management. For instance, a client may not be sanctioned, but:

• Their UBOs are former PEPs from a high-corruption jurisdiction.

• They operate exclusively in a country subject to major sectoral sanctions (e.g., trade restrictions).

• They receive funds from an entity owned by a close associate of a sanctioned person.

In these instances, while there is no legal prohibition to freeze assets, the firm’s Customer Risk Rating (CRR) must be elevated to High Risk. The MLRO may then mandate extreme Enhanced Due Diligence (EDD), or, if the risk remains unmitigatable, choose to terminate the relationship via a Derisking strategy to protect the firm’s overall integrity.