Cabinet Decision 10 of 2019 – CDD Requirements Explained

The United Arab Emirates (UAE) has positioned itself as a global leader in anti-money laundering (AML) and counter-terrorist financing (CFT) compliance. One of the cornerstones of its regulatory framework is Cabinet Decision No. 10 of 2019, which sets out detailed rules for implementing Federal Decree-Law No. 20 of 2018 on AML/CFT.

At the heart of this decision are the Customer Due Diligence (CDD) requirements, which apply not only to banks and financial institutions but also to Designated Non-Financial Businesses and Professions (DNFBPs) such as real estate brokers, dealers in precious metals and stones, lawyers, accountants, and company service providers.

At Sheikh Anwar Accounting and Auditing LLC, Dubai (MOE Registered Auditor – Entry No. 5817), we advise clients across multiple sectors on how to effectively implement CDD obligations to stay compliant with UAE laws and avoid regulatory penalties.

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1. What is Customer Due Diligence (CDD)?

CDD is the process of verifying and understanding a customer’s identity, business activities, and risk profile before and during a business relationship. It is designed to prevent the misuse of financial systems and professional services for money laundering (ML), terrorist financing (TF), and other illicit activities.

Under Cabinet Decision No. 10 of 2019, CDD applies to both new clients and ongoing business relationships.

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2. Key CDD Requirements Under Cabinet Decision No. 10 of 2019

a) Identifying and Verifying Clients

• Obtain official documents such as passports, Emirates IDs, or trade licenses.

• Verify the identity of natural persons and legal entities before establishing a relationship or conducting significant transactions.

b) Identifying the Ultimate Beneficial Owner (UBO)

• Determine the UBO of companies, trusts, and other entities.

• Maintain detailed records of ownership structures to ensure transparency.

c) Understanding the Purpose and Nature of the Business Relationship

• Assess why the customer is engaging in the transaction.

• Understand the nature of the business activities and expected transaction patterns.

d) Ongoing Monitoring

• Continuously monitor transactions to ensure they match the client’s profile.

• Apply Enhanced Due Diligence (EDD) for high-risk clients (e.g., politically exposed persons – PEPs).

e) Cash Transaction Thresholds

• For DNFBPs, CDD is mandatory for cash transactions equal to or above AED 55,000 (or equivalent in foreign currency).

f) Reliance on Third Parties

• Entities may rely on regulated third parties for CDD, but ultimate responsibility rests with the reporting entity.

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3. Risk-Based Approach in CDD

Cabinet Decision No. 10 of 2019 emphasizes the Risk-Based Approach (RBA):

• Low-Risk Clients: Simplified due diligence may apply, but basic identification is still required.

• High-Risk Clients: Enhanced due diligence (EDD) measures must be applied, such as obtaining additional documentation, conducting deeper background checks, and increasing transaction monitoring.

This approach ensures that resources are focused on higher-risk clients and transactions.

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4. Record-Keeping Obligations

• Entities must maintain CDD and transaction records for at least five years.

• Records should be accessible to regulators and auditors upon request.

• Documentation includes copies of identification documents, UBO details, contracts, and correspondence.

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5. Reporting Suspicious Activity

If CDD reveals inconsistencies, unusual behavior, or potential ML/TF risks:

• Businesses are obligated to file Suspicious Transaction Reports (STRs) through the goAML portal managed by the UAE Financial Intelligence Unit (FIU).

• Failure to report suspicious activity can lead to heavy fines and regulatory action.

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6. Penalties for Non-Compliance

Non-compliance with Cabinet Decision No. 10 of 2019 may result in:

• Fines ranging from AED 50,000 to AED 5 million.

• Suspension of licenses for DNFBPs.

• Reputational damage and loss of international business relationships.

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7. How Businesses Can Stay Compliant

To remain compliant, businesses should:

• Develop a comprehensive AML/CFT policy aligned with UAE law.

• Train staff regularly on CDD and red flag indicators.

• Appoint a Money Laundering Reporting Officer (MLRO).

• Conduct periodic internal audits and risk assessments.

• Seek professional advisory services for ongoing compliance monitoring.

At Sheikh Anwar Accounting and Auditing LLC, we support businesses by implementing tailored CDD frameworks, training employees, and ensuring compliance with Cabinet Decision No. 10 of 2019.

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Conclusion

Cabinet Decision No. 10 of 2019 provides clear and structured CDD requirements for financial institutions and DNFBPs in the UAE. These requirements are crucial for protecting businesses against regulatory penalties and safeguarding the UAE’s reputation as a global financial and trade hub.

By implementing robust CDD processes, businesses not only comply with the law but also strengthen their credibility with regulators, clients, and international partners.

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