The UAE has two financial free zones designated as Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC). There is an independent financial regulator for each zone. In ADGM, it is the Financial Services Regulatory Authority (FSRA), while in DIFC, it is the Dubai Financial Services Authority (DFSA). Both regulators are tough enforcers of rules that are designed to fight money laundering (ML), terrorist financing (TF) and the proliferation of weapons of mass destruction (CPF).
The FSRA and DFSA have recently levied fines against firms for not complying with AML and related requirements.
FSRA’s Action in ADGM
In December 2024, the FSRA smacked a brokerage firm in ADGM with a penalty worth USD 504,000 (1.85 million dirhams). The penalty was imposed after an extensive review of the firm revealed the firm to have significant shortcomings in its AML systems. For nearly six years, the firm also failed to adequately identify and report suspicious activities. It had inadequate policies and procedures for customer due diligence, risk assessment, record-keeping, and transaction monitoring. While there was no evidence of actual money laundering, the FSRA found that the firm’s weak controls could have allowed such activities. The firm elected to settle early and received a discount on its penalty for cooperating and beginning improvements early.
DFSA’s Action in DIFC
The DFSA imposed a fine of USD 25,000 (AED 91,813) on a trading and investment firm in DIFC in January 2025. The firm had not reported suspicious activity, in particular “wash trades”. These are phony transactions where the buyer and the seller are the same person. Wash trades create a false impression of market activity and can improperly influence market prices. In this instance, the trade led to a 27% transient rise in the price of a stock. This is a form of market manipulation. The fine is provisional as the company has appealed to the DFSA’s decision.
Key Takeaways
There are two key aspects to be aware of:
Type of Violations: The ADGM firm did not commit money laundering but was fined significantly for the lack of strong systems. In contrast, the DIFC trader’s actions directly affected the market by not reporting illegal trades.
Enforcement Approach: The ADGM firm agreed to the findings of the FSRA and took corrective action which resulted in a 30% discount on the fine. The DIFC trader chose to challenge the fine, so if their appeal fails, they will not receive any such reduction.
This proves that both the FSRA and DFSA are committed to financial regulation. ADGM and DIFC incorporated companies should ensure the robustness of their AML frameworks. UAE regulators expect full cooperation, and non-compliance can result in hefty fines, even if no crime is committed.
Reference: UAE Enforcement Updated
