Beyond Compliance-UAE AML Regulations by CA Bharat Jeswani; Moderated by CA Prabhdeep Singh Baweja

Added: 2026-05-24

[00:00:33]Good morning everyone. Warm welcome to each one of you. Thank you for being here today in our webinar organized by CA speakers forum. Gratitude to each one of you.

[00:00:50]Gratitude, deep gratitude to our speaker CA Bat Jesani who is here with us today and will be taking up this session which is of extreme interest and where we find very limited experts.

[00:01:12]Now coming to the uh AML part, the regulations have globally evolved and if we talk about specifically UEI from the last uh more than two decades, the regulations have been evolving.

[00:01:30]There had been a new law introduced in the last year and it will continue evolving with the changing circumstances.

[00:01:41]when I say about uh AML, there is something uh which I relate to and that is a book the Panama Papers which I had read few years back and also some series and movies on Netflix and there are ample of such series. one of the series if you have to watch it may take you 70 hours. So it's like that.

[00:02:14]But one uh movie which has uh uh which is called laundromat and uh which is less than 2 hours movie is a great movie. Uh you uh will enjoy what is being shown there. You will laugh and you will understand the subject.

[00:02:35]And today I'll not talk much about this subject because we have an expert Bhat who will be talking about this subject and uh it is up to the bhat that what he wishes to share because he knows that what can make a difference to us as an audience and uh Bat is a professionally qualified chartered accountant. He has significantly contributed in the institute of chartered accountants of India in various initiatives from forensic to vast number of subjects. Uh I have met Bhat several times. He has been to this place where I'm sitting today to my home once and he had gifted me his book and I would advise uh uh you to please do read and also request bat uh to share about um uh his books which he has written as he continues with the next 45 minutes of the session. So before I hand over to Bharat, I would request uh Bhat to please say his opening remarks for one or two minutes and >> Yeah.

[00:03:48]>> Yeah. Thank you. Thank you so much sirpur.

[00:03:52]Uh so uh it is a pleasure to be uh discussing with you uh anti-moneyaundering. I have known sir since uh many years. uh I've been uh working now in uh UAE also uh UAE muscat uh we have been also uh trying to planning an office in Singapore. Uh so this is we are mostly working in anti-moneyaundering uh and other financial crimes also. So uh just a very little about my book it is called the frauditor. It is about fraud investigations and international edition was released last year. So uh that is uh being uh uh one where you learn about fraud. There's nothing to do with anti-moneyaundering uh yeah it is about fraud investigations. So I'm very happy to talk about the evolving uh landscape in uh UAE.

[00:04:52]uh one of my mentors uh who is also uh an adviser to my firm uh is a AML director to uh for India for the government of India. He was recently involved in the mutual evaluation of Singapore. So we do have a lot of dialogue with the regulators uh with the UA regulators also and we uh do discuss you know how things are evolving globally. So UA market is very matured.

[00:05:20]So we'll be discussing how you know the expectation is changing for and it will be very useful for uh anybody practicing in this domain or also uh who are ML not practicing maybe in the MLRO uh who are MLRO's or who are employees or who are just intrigued by anti-moneyaundering.

[00:05:40]uh it will be very useful this session because we'll be discussing what the regulator is thinking, what the regulator is expecting and how things are going to change in the next few years. So that is our perspective. I have picked about 10 cases. I'll try to complete all of them. Uh from our own actual case library, we have picked about 10 cases. Uh almost eight of them are from UAE. Uh remaining are from other parts of the world but they are very relevant. So we are trying to uh explain uh some themes and some concepts some expectations uh from through these cases basically we've just taken some extract from these cases. So would be useful.

[00:06:23]>> Yeah.

[00:06:24]Yeah. So before Yeah. Before you move on, I would request everyone each one of us who is present here today, please show your love with the emojis and give a grand welcome to Barat and uh uh so that uh we have a great >> few minutes ahead. Thank you Bat. The screen is all yours now. Thank you.

[00:06:49]>> Thank you. Thank you so much. Thank you all. Thank you sir. I'll just start.

[00:07:02]Okay. So today as I said we'll be discussing uh 10 cases and uh in general what the regulator I'll just before jumping into these cases directly I'll just talk about you know how things are shifting in the AML space. So when when you talk about uh anti-moneyaundering, it has always been known as a very important compliance function uh something that does not add much value for any uh organization. For example, a bank uh fintech organization or real estate company. They are just looking for the bare minimum compliance that is required. Uh and that is how it has been always. uh but slowly uh things are shifting now. Now what is expected out of an entity out of a compliance officer or an MLRO is a little more than the bare minimum compliance. What the regulators are looking for is kind of intelligence and not artificial intelligence. it is they are looking for intelligence, behavioral intelligence, network intelligence, these kind of things which we'll be discussing from uh a reporting entity itself. So when when those uh reporting entities or complying entities they need to be looking at transactions from a different perspective from a more wider lens and uh this is all coming up in the mutual evaluation. So when countries are being evaluated at that point the evaluators are bringing up uh queries like this. They are bringing up uh questions that uh excuse me. Yeah. Yeah. So they're bringing up questions on these lines wherein uh they're talking about how uh Yeah. Sorry. So they are bringing up these questions wherein uh how you know the complying entities are uh being more intelligent. So I'll just start on the jump on the cases. Now with the cases we'll be able to understand all these things much better. So we are talking about a real estate company. Uh so they have to comply in the UAE they also need to comply with uh AML regulation. So somebody came to buy uh three luxury waterfront apartments and uh they were paying 8018 million. Everything seemed very good on paper. So when you look at the client profile, it is a UAE resident quite well known globally. Uh they have an international family office. They are dealing with multiple uh countries and they are they are involved in big deals.

[00:10:03]uh they are quite uh their consultants are known uh so they are it's not like uh they are not professionally advised uh and they have a offshore holding uh structure which is quite common with ultra high netw worth individuals. So everything when you look at the profile it was quite a very regular uh real estate deal when you are going for an 18 million dirham deal these are all very common so the client was high value you sophisticated professionally managed and everything was fully documented uh when the compliance team asked for uh all the documents everything was provided to them audited financial statements records you know everything, bank statements, everything that is required for compliance, all of that was very much provided and uh so everything was there. Now the institution Okay, sorry just uh just a second.

[00:11:36]Sorry, just a second. Just my screen just somehow started behaving.

[00:11:52]Okay.

[00:12:02]Sorry. Can you still see my screen?

[00:12:05]>> Yeah. Yeah. Yeah. It's visible. Uh Barat, it looks fine.

[00:12:09]>> Okay. Okay. Okay. So uh when you look at uh you know everything it is uh the everything all the documents are in place uh so when you have all the documents know it is normally any institution any uh organization they'll become very comfortable because they you have that is what you know matters documents are the most important uh uh thing when you're complying. So they have all the documents and everything is there. Uh but then when you look deeper when there are further analysis goes on there you realize that you know funds are coming from multiple legal entities.

[00:12:50]Now 18 million dirhams they are not coming from one single ent entity they are coming from multiple entities uh in very small blocks. So that is what is happening. uh it is coming from not just one country, it is coming from all different countries and uh other than that they have a very uh layered structure. They have too many holding companies.

[00:13:19]uh normally it is uh expected to have some kind of a holding company and uh uh one subsidiary probably one trust one offshore account all that is quite common but they have a very complex structure. So when you look at that one one every single transaction small values coming in from different uh countries different organizations. So it one single transaction does not trigger anything. But when you look at look at it from uh you know bird eye view you'll see that everything is uh very complex. Uh it is not uh justified and that is what happens in this case.

[00:14:01]So u it is not what normally when you're looking at AML compliance you're looking checking the sanctions list you're checking if there is any adverse media if there is any illegal trigger. None of that is happening. what is happening is not mentioned in the law. Uh like the fragmented funding is not illegal. Uh it is the too much of layering which is there in their case that is also again not illegal. So there is a lot of complexity involved in this structure which is not required for this. So that is something that an AML team should question an AML function should question but uh it normally does not. So this is where uh we are moving now. So uh when there is currently if you proceed with this transaction and you do not report this transaction then there would not be a compliance issue at the moment. Reason being that you have all the documentation there is no sanctions issue. there is no uh KYC lapse. None of that is there. So there will not be an issue at the moment. But when some things when things go south and when the regulator comes knocking at that time uh they would be expecting much more from you. They won't be satisfied with the documents that you will be sharing with them. That is what is happening. So uh here as you see you have everything in place. The document is there but there is some behavioral anonymity there is some behav there is something which is not uh does not feel right. Okay. So but what happens in this case what happened in this case that uh you know this happens a lot uh with deals. So the relationship manager will come up it will tell you that you know the client is quite well known. It is very this these kind of complex structures are very common when it comes to ultra high netw worth individuals. It's very common. They have we already have the sufficient documentation that is required for compliance. uh and uh you know we cannot just uh get leave this very important relationship this very important deal just because uh an analyst in the firm feels that you know there is some lapse probably there is some behavioral anomaly something like that is happening just based on that we cannot let go of this important transaction. So this is what the relationship manager or the sales side will be talking about. This is what happened in this case also. And then uh the risk aspect where why is there so much fragmented funding coming? Why is there so complex layering that is happening in this case that is just thrown out of the window that goes outside the window. So this is what most uh you know how uh things like this these happen in the real uh world wherein you know uh somebody would uh the sales side will dominate of course the deal will dominate above the compliance the profits will definitely dominate above the simple costs. So that is how that is what happened in this case and uh once the sales team sets in then they have to start the other compliance team they need to get comfortable with whatever they have. So they then start to justify as to you know uh these transactions just because they have to otherwise they'll have to uh leave their job. So that is what the there was there were so many questions that were unanswered that why so many entities are funding that two in different countries why is there so much of layering why is there a fragmented movement uh why this economic behavior does not uh make sense I mean the wealth justification and all that does not make sense with this kind of a purchase. So all those things uh were the questions that were then left unasked and uh they went with the compliance. Uh in this case documentation was not a problem at all. every document was available but they didn't build they didn't try to understand what was very obvious what was very uh evident to them and uh obviously because they want to proceed with the deal which is which happens a lot in uh real estate uh transactions.

[00:18:44]Okay. So later you know all these things uh they would obviously show up at some point. Uh we can hope that they don't but there is a very high exposure risk risk exposure that uh we will uh we are dealing with. So uh what was the failure here? There was you know there was a lot of layering. So there was ownership opacity who was controlling what was which we need to know whenever we are doing a real estate deal we need to know how what kind of ownership is there fragmented funding which did not make any sense as to why funding is coming from different jurisdictions from different entities uh for a purchase of an asset uh which will be belonging to one uh entity uh there was a lot of behavioral inconsistency which was again as I mentioned the source of wealth uh did not justify the purchase. Uh there was one very major weakness. What this case is about what this theme is about is the commercial pressure and the commercial pressure set in uh that is where all the problems uh they began. Uh there was a documentation comfort bias uh which is always there. So when the commercial pressure sets in at that time these documents are the ones that save you they will be like okay we have the documents so we are complying so let's go ahead with the deal. So this is uh what is happening currently but this is again going to be changing the regulator is not going to be satisfied with the document. They are going to ask you more questions. Did you invest? Did you uh understand the things you know that that will be coming in. So uh in this case we are understanding how the source of funds were but we are not very clear about the source of wealth.

[00:20:47]We are ignoring the source of wealth here and we are proceeding that is what has happened. uh so that what this is this is what I'm saying uh sophisticated regulator which is UAE regulator is very sophisticated it has matured and it is uh one of the very intelligent regulators also so they will be asking these questions you know did did you genuinely understand the structure what behavioral interpretation was there uh Was there any commercial pressure influencing the comfort? Uh was escalation current culturally discouraged? Uh was ownership opacity meaningfully challen? All these things will be asked because you know all these things are very obvious. Uh they are coming in. Uh so with the current uh expectation of the regulator, one cannot just get away saying that you know okay we have all the documents uh so uh we are complied. that is not going to work uh in UAE. So that is what is changing. That is what is shifting. You need to be more intelligent. You need to be uh gathering evidence and you need to be prepared. Regulatory defensibility is changing. Yeah.

[00:22:06]So the modern AML supervision not just in UAE, we have also studied Singapore market that is even more matured. there they are the it very much evaluates the quality of institutional judgment and not the documents. So uh a good inst some institution that wants to you know avoid any kind of penalties in future will be having uh all these documents in place processes in place and not just the documents they will also be asking these intelligent questions and uh then taking the decisions based on those uh answers.

[00:22:48]So what this case was it was not about any documentation missing because all the documents were there there was no sanction issue there was no technical non-compliance it was basically weak behavioral interpretation commercially softened scrutiny and lack of narrative intelligence. So what you can see uh but you did not want to accept because that would have thrown away the deal which happens in many real estate cases. It also happens with banks where they don't want to uh throw away a customer uh a client uh because uh they have some uh shady information about that client but they are uh fully they have all the documents they are fully document compliant. So the banks are also very uh uh pessimistic when they want to throw away any kind of clients who are having you know all the documents in place but maybe some shady uh information which is not public. Okay.

[00:23:53]So next let's go to golden jewelry precious metals again uh here also. So I'll be discussing as I realize that I just have 1 hour and so I'll be discussing the themes and uh broadly the cases uh I'll be sharing this presentation with uh praadep sir uh so it can be made available to everyone.

[00:24:16]I'll anyway I'll be also sharing it on LinkedIn. I do share my presentations whenever I speak at forums. So I do share my presentations for the benefit of everyone. So you can you know deep dive uh later I'll be just focusing on the broad strategic uh themes. So uh this is the next case. A gold trading company uh international exports rapid business growth uh multiple African and Asian trade corridors high volume transaction activity multi-bank relation everything looks good on paper very fast growing commercially successful operationally sophisticated everything is good. Okay. Uh when you look at uh the documents there is licensing is there documents are complete uh there is no sanction issue there is no uh counterparties all the counterparties appear legitimate uh transaction volumes uh are aligned with business everything is uh good when you look at this uh uh gold and jewelry business okay problem is sophisticated AML cases is rarely obvious illegality problem is hidden in uh you know some behavior which later show up the behavior problems they show up later it is not uh in the beginning that you see all that okay now what what is the problem that uh arises we'll be looking into it everything looks within the limits you know when systems are monitoring the transactions there's nothing wrong transactions are within thresholds uh sanction screening is clean invoices are all acceptable. Uh there's nothing wrong with any transaction. So this is what uh traditionally uh what we are monitoring and uh any entity or any criminal enterprise they are well aware of what we are monitoring. So they will they will of course uh escape any kind of uh scrutiny in the traditional monitoring system. So that is what we are monitoring. Later on these behavioral inconsistencies were emerging. Okay. Uh one unusually thin margins. Now what is the problem with that? Why are you doing business if you are making so little which is not uh close to the industry average? That is one. Second you are dealing with a lot of high-risk trade corridors. Uh your trading is very complex. It is not direct onetoone. you are going through multiple jurisdictions and uh payments are coming from uh other parties. So there is multiple unrelated settlement entities.

[00:26:58]There are inconsistent counterparties that emerge. So somebody who is in the business of uh chocolates is buying jewelry uh for trading. So something like that emerges does not make sense.

[00:27:11]uh then your parties are not uh in the same country probably you are just started you have started dealing with different other countries that are again uh high-risk uh high privacy uh low tax jurisdictions all of that is happening with you. So this now individually if you look at that you know there is if there is a thin margin in a business not a problem uh sometimes you are dealing with high-risk trade corridors or uh there is some structuring that is there all that is oneoff transaction it is all okay but when you look at all this cumulatively that is a very big uh problem you can see what is happening here so this is what should happen one entity another entity should be buying.

[00:28:00]But here we are seeing there's so many multiple entities so much of it is going on from so there is a visual discrepancy that the cru there is a core structural weakness uh legitimate trade transactions do not uh go like that.

[00:28:15]This is this is something which is uh you know structured. So that is what is happening here.

[00:28:24]So when you are this is the first question that comes in why is there so much uh there is settlement fragmentation there are unstable counterparties there is routing inconsistency economic behavior that is lacking any kind of commercial sense. So uh these are the questions that come up and what how does that you know entity reply that uh this is what happens in our business. We are normally operating in low margins which is not true but they are claiming that it is what happens. We are in a wholesale business and it is what happens. Uh when you are dealing with African trade corridors there is a lot of structuring there that that is what they are saying. uh third party settlements are very common in our uh business. So these are just uh you know explanations that uh a business is giving uh trying that they won't be reported and uh they won't be questioned further. But uh another the final thing is that the client is generating sufficient revenue.

[00:29:35]So that is uh you know something for your bank or any organization that you know we are doing so much revenue so that is you don't you don't have to ask us so many questions that is very common that also happens. So this is basically trade based money laundering which is happening here. Uh and it can be seen.

[00:29:55]Uh what the common thing about TBML is that it hides under the very legitimate trade. So when it so millions of transactions happening every day uh it is very hard to find uh you know illegitimate or uh transactions that involve money laundering. So that is what is happening here. There's a lot of uh the moneyaundering happening here but it is hiding uh behind a regular trade. Okay.

[00:30:33]So these were the weaknesses that were identified. Uh economic logic, why were you doing this business at such thin margins did not make sense. Why other parties were settling uh payments? Why were we operating in such a high uh corridor risk and uh all these things?

[00:30:53]Why why were there uh so many issues with uh these transactions? All of them came up. uh as I said none of these individually uh come up prove any criminality but uh they create a behavioral discomfort. So when you look at them all of them together they create uh problem that is also one thing which is a regulator is expecting slowly they want you to look at uh transactions not as just transactions but they want you to look at it as networks. They want you to understand it from the perspective of a network as in uh you have to connect the dots. You have to see how uh relationships are moving, how the funds are uh circular trading. Uh so they are not just going to uh you know uh when they ask you you know do you understand corridor risk? So they are trying to say that are you mapping the settlement relationships deeply as in somebody is buying uh somebody else is making the payment. Is there an understanding as to who is making the payment and the person who is buying is there some kind of pattern? All these things uh they want you to understand the behaviors from a network perspective as to how many things are happening together. uh are you looking at the network intelligence? Are you understanding the behaviors? So the regulator is moving towards uh increasingly they are moving towards the commercial understanding of transactions. So if you are looking at the transaction just from uh one perspective uh as in the money is coming okay so there are low margins. Okay. No what what is the problem if there are low margins? What is the problem if a third party settling? So if you're looking at it from one transaction at a time that is a very big problem. You have to look at it from a complete network perspective. That is what the uh expectation is. Okay. So you cannot just rely on uh simple transaction thresholds which are there in all the monitoring systems, transaction monitoring systems.

[00:33:10]You need to have behavioral monitoring.

[00:33:13]uh you don't have to see if the procedure is uh the invoice is you know acceptable. You have to see if that trade makes sense. It has an economic rational. It it is uh something that one would do. Uh don't don't normalize you know complex uh third party settlements.

[00:33:31]You have to see if those settlements uh they show up if they are related to the party that is purchasing or those settlement parties are related to some criminal network or they are regularly involved in these kind of settlements.

[00:33:47]All these things need to be understood.

[00:33:49]So uh focus on operational justification and uh uh you need to just cannot just focus on that. You need to have a rigorous corridor risk analysis. all kind of risk analysis has to be done. So I'm sure uh when I'm discussing this you are wondering as to you know uh what all we are we expected to be investigators now by the regulator. Are we supposed to be uh the people who are just uh doing their job uh doing the job of the regulator? And the answer is in a way yes we are required to do but there are slowly there are tools that are coming in there are uh resources that are coming in that will help you do that. Uh currently just based on the law you could still survive with the paper compliance wherein you have the documentation you can survive you it is quite defensible but it is uh a matter of time things are changing and uh with the latest you know uh cases that come up in the public domain or as we are also engaging with the regulator we are also uh having those scrutiny When we are uh responding to scrutinies, we see that there is a lot of uh you know intelligence expectation uh that is coming in where you have to look at the transactions from a network perspective from you have to look at the behaviors and not just comply with the documents. All that is slowly coming in and regulators have started expecting. So when all this is fine till uh you know everything goes on uh everything is in place but once the problem arises it is afterwards that is uh we we can't then then when you know when scrutiny starts and then the regulator comes knocking at that time all these things uh they matter at the moment you are we can comply with paper but I think AML functions need to build this uh build these kind of systems and these kind of tools so that they are uh future ready they are prepared for the regulator.

[00:36:11]Okay. So let's discuss another big wealth management client uh quickly.

[00:36:17]This was another case wherein uh there was a ultra high netw worth individual dealing with you know very common international they had very international structures uh significant assets politically connected uh having being a long-term relationship with the wealth management company uh so all of it was all uh there very important relationship uh he was it was never viewed as a risky. It was he was viewed as an important uh relationship. So when you view somebody as an important relationship you automatically your risk bias your perspective towards that client changes. So slowly what we saw that you know there was uh lot of ownership opacity uh lack of economic sense there was layered fund movement uh multiple intermediaries few frequent offshore restructuring crossber transfers all these uh obvious red flags uh that you see uh with a client uh when they are dealing So what was suggested was you know let's go for enhanced due diligence let's escalate this and you know let's go for a deeper source of wealth understanding uh but this is again very similar to our first case wherein you know uh when you want to uh when it affects the relationship with the big client all these things comes comes up you know that you know all these high net worth structure uh all these you know commercially sensitive clients. You cannot just get into uh their pockets and you cannot do their audit so easily.

[00:38:08]Uh don't escalate this. All these things pressures they come in. So uh I think I'll just skip this case because it is very similar to the first one. Uh so this is what happens is uh what happens is when you are uh in real world what you're dealing is the deals are more important than compliance and that makes perfect sense. Uh businesses are there for profit. They are not there to comply with the regulator. But when the regulator would come in knocking they can you know uh threaten the survival of that very business once. So uh uh there is a lot of uh you know uh blind spots are there when you are dealing with uh powerful relationships.

[00:38:59]Okay. So this is again very similar.

[00:39:03]Okay. Let's we have gotten to case four which is good uh which is of an exchange house. So in this case uh again this case is also talking about how you want to look at transactions from the perspective of uh not just single transactions because sometimes what happens is single transaction they appear very normal everything appears completely compliant but when you look from a bird eye view when you look at from uh uh 3D perspective at that point you see that you know uh all of this is is not making sense. So that is what uh this case is about. When you look at these transactions, everything is uh in place you know uh there are no velocity triggers. Transaction size is proper there is no sanctions that is happening.

[00:39:56]Nothing is happening here. So uh when you're looking it from uh you know uh traditional method there is no problem happening here. uh but when you look it from a network perspective you will realize that uh there is some pattern.

[00:40:18]There are some uh there is some commonal common things happening in the timing of these transactions in the clustering geographically uh in the senders and the receivers that is all these things they come up. So what was happening here is there are multiple senders and they were going through multiple jurisdictions at different times and they were finally reaching the same few beneficiaries. So that was also this was what was happening here was a mule network activity and a lot of or maybe it could be a layering uh of money layering of funds basically coordinated structuring all of this was happening in this case but you cannot see this uh when you are looking at uh it from a simple you know one transaction at a time perspective but when you are actually looking at it from a network perspective Ive so we have recently worked with uh exchange house and there we have implemented this uh system wherein they can analyze their all their transactions from a network uh perspective. So uh that is quite required that saves a lot of uh saves them from a lot of exposure from a lot of risk. So that is what uh helps them.

[00:41:44]Okay. Uh so this is what uh we are the we I'm sorry I'm saying we this is what the regulator is going to expect.

[00:41:54]They're going to expect behavioral ecosystems network understanding network contextual intelligence. Basically this case is about how you look at the network and you look at the bigger picture. So this is uh going to be an expectation. uh you cannot be just focusing on one single transaction and uh what you will be looking at is contextual understanding of multiple transactions and trying to identify you know what kind of patterns uh would be there all of that would be uh important okay uh you cannot uh have those you know same rule based threshold based systems anymore you need to have contextual information need to have network intelligence. Uh and you cannot just rely on isolated transactions.

[00:42:45]Okay?

[00:42:46]Because criminals they are operating in networks. They are very sophisticated.

[00:42:52]They are using uh they are well aware of threshold based systems, rulebased systems. So they would obviously be very easily be able to bypass those systems.

[00:43:01]Uh and uh I I also understand what you might be thinking that we will be uh you know uh we are not again we are not those investigators who will be you know who are running behind the criminals trying to uh stop the criminals from laundering money through our entity. But what happens is that this justification uh is not going to work uh as I see in the near future. Again I'm telling you so far uh documentary compliance is working fine but you need to be prepared. You need to build these kind of systems. uh because it is not just the compliance you know it is not just one thing the it is also uh if such things happen and uh they come out later then it hurts our reputation it adds a lot of cost of investigation and then uh remediation all these things uh take up a lot of energy lot of cost lot of uh resources so uh that is also something uh that we need to look into other than that any which way the regulator is also evolving and uh this is going to be an expectation. It it has already started becoming an expectation in our uh recent cases and our this is something that the regulator is uh expecting it started expecting.

[00:44:29]So uh all these things again can you identify those behavioral inconsistencies? Can you understand relationships? Can you see networks? Uh all those things will be coming in. It was rulebased. Now, now behaviors are coming in, relationships are coming, networks and patterns, all these things are slowly the evolution of AML in UAE and the world. So, it is there. So, uh since crime is basically they are surviving on networks, uh those who are investigating they also need to come up with uh networks. Okay.

[00:45:05]So, we'll talk about beneficial ownership. Many of our consultants are involved in uh corporate services wherein they will be making uh uh building entities. So it is okay to have a structure uh with nominee directors or uh you know offshore holding but it is our also our responsibility to look at it if it is unusually opaque. if the if the structure is unusually opaque. So that is one thing that uh uh corporate service providers they need to look at.

[00:45:43]I think many chartered accountants uh are providing these services in the UAE.

[00:45:49]So uh you need to look at these uh small things you know uh there are common signitories uh there is too much of opacity uh there is no min there is minimal operational footprint uh there is uh you know rapid transaction activity money is coming in quickly going out these are all type of red flags that are there which you need to look at so it is okay again as I said we cannot just rely on the documentation. If things are very obvious that you know these red flags which uh you can see which you can understand but you are not uh uh reacting to them. You are not uh so that that is something which the regulator does not expect from you. The regulator expects you to report such kind of inconsistencies and uh to react to such kind of inconsistencies. So it is there is a very thin line actually what is you know legally correct what is uh what kind what else is possible what kind of opacity is possible there is a very thin line so uh does it have an economic substance why are so many unrelated entities overlapping here why are there so many nominee why is there so much structuring happening so you need to question that whenever you are building any entity you need to question that and you just have to See is there a commercial sense that is making uh making sense in that case. All those things you need to look at. Okay.

[00:47:27]Uh not just the documents. A traditional approach is just you know getting the information getting the documents. You need to see who is effectively controlling is who has influence uh does it make any sense to have such a complex structure. All those things you need to uh see you know why was there so much opacity uh does the commercial sense make sense in this case all those things you need to question okay so there is as I said it's a very thin line there is sometimes there's a legitimate complexity sometimes it is a sophisticated opacity so you are uh dealing in a very gray area uh so it is upon you to see how do you you know respond to such situations. Uh what the regulator is looking at is that you are being a professional you are well aware of how things are happening and uh you are quite capable of understanding these patterns and uh if you ignore them that can be a problem. That is what the reg even if you have all the documents uh it could still be a problem because the regulator is expecting much.

[00:48:41]So uh you have all the data uh but you fail to interpret that data properly that will be a problem with the regulator. Okay. So whenever you are building any entities you need to see you know what are how uh there's economic substance behind it the structure makes sense uh the relationships make sense too much of nominee behavior all those things uh you have to see there's uh unusual irregular unnecessary opacity that also you need to look at okay so this is what as I said historical focus has been on just the documentation But uh the future is about network analysises, behavioral understanding, you know, finding the source of wealth, finding the ultimate beneficial owners, uh all those things are a part of our uh compliance officer's job, MLRO's job or those people who are making those entities.

[00:49:44]All of them, they need to have uh these details in place. So, okay.

[00:49:58]So this is a case where we are talking about an insurance industry. We are talking about a fraud here. So the theme of this case is that we are talking about how fraud and money laundering are not uh completely divergent. So what I have been working in the fraud domain for almost 15 years now and now last four five years I have been in the anti-money laundering. So there is a very major overlap and uh that is what also institutions need to understand. So this case we quickly go through this. Uh the basic idea is you know uh when there were so many policies being uh you know given and policies being claimed everything was on paper it was all fine. Uh structurally there was nothing wrong uh properly documented.

[00:50:56]Later on when you look at it from an intelligent perspective, from uh investigator perspective, you realize that you know they are uh overlapping beneficiaries, there are overlapping vendors, there is some geographic concentration, there is some common intermediary uh similar document all these things come up when you look at it from an in investigator's lens. Okay. So this is what happens in most organizations. uh we are talking here about an insurance organization claims fraud AML everything is uh set differently so this is what happens uh you are not once those who are managing claims those who are managing AML they are totally separated they don't look at it uh together so here what was happening was money laundering was happening through claims fraud basically so claims were uh being uh overstated uh money was moved using that insurance company and uh basically it was being laundered through that insurance company. So the insurance company could not realize that because they were focusing on the claims uh they were not realizing that money laundering could be happening here. So traditional AML focus they will be you'll be looking at sanctions you're looking at transaction activity thresholds all those things you will be looking at you are not looking at uh you know how these uh this whole system uh of you know can be used for uh money laundering. So even if this claims organization could have understood that you know fraud was happening in those claims uh they could not link it to AML.

[00:52:42]So now nowadays uh it is very important to link your fraud uh department with the AML department for insurance companies for banks NDFCs fintex it's very important so uh this is just about that I think we should quickly move uh I'll just discuss the themes because we are close to the and you can go through this uh uh presentation. This always happens with me. I have I always try to discuss too many cases and then it is it is a lot of content uh because I just want to share more uh more and more uh which is more relevant uh material and I just cannot pick uh I think most of it is very important. So you can you can of course go through the I'll just go through the main theme. Okay. Now this is case seven which is our fintech. The problem with this fintech company that we identified was very simple. It was fintex are growing and digital payment companies are growing very fast and uh their compliance is because they are at a very high speed. They need to they are innovating. They are acquiring customers onboarding customers very quickly. they are building vendors and uh high velocity international transactions. So it is their compliance function does not move uh that fast. Uh they are uh they need more powerful systems that are they have that have high velocity which is a problem in many fintech uh and uh digital payment companies. So uh their systems are not that sophisticated. they are using systems that are being used by NBFC's or smaller banks. Uh so there will be too many false positives, lot of alerts, a lot of investigative effort that goes on. Investigators also they become uh you know tired and they just want to close the transactions. that is the problem and uh they just want to operationally close all these transactions and that leads them to a very high exposure. So uh even though most of the countries like I was in Muscat few days back there also we are uh there is a lot of digital push which is happening and fintex and digital payment companies are rising. So all of that is there but they need to also uh be protected from this exposed risk that is coming in and uh our focus has always mostly been on expansion customer acquisition but uh AML discussion obviously a compliance cost that goes gets goes on the back seat but the AML function also needs to evolve at the same pace as uh the other functions are evolving. Uh even though the countries are promoting fintex and digital payments, they will not tolerate the regulator is not going to tolerate these glitches uh when it comes uh through. So the problem here is overwhelming. Basically it is uh because of so many alerts, so many transactions happening, it is becoming overwhelming. That is something uh these fintexs and digital payment they have to look into which is uh going to uh come up with the regulator. They cannot come up with simply that you know we are doing we are we have systems in place.

[00:56:25]We are doing the monitoring. Uh they need to have stronger systems and simply automation does not help. You need to have uh automation can scale up things quicken things but uh it has to be done intelligently which I've seen in many fintech companies they are just operationally they are just adding up lot of you know uh operate the scaling up automating quickly but they are not uh doing the uh they are not ready.

[00:56:57]Okay. So when your operations are scalable, your compliance also needs to be scalable. Okay. Uh you need to have uh a scalable system. You need to have monitoring specific to your industry.

[00:57:11]All those things need to be present.

[00:57:14]Okay. So I think uh this sanctions gates 8 is about sanctions.

[00:57:21]uh this what we are talking is that it just the basic sanctions that we check is is not going to work anymore. Uh you need to also be ready for sanction proximity risk. So again the sanction screening has to be very intelligent.

[00:57:37]That is uh another expectation. If you see the transaction is being routed through multiple countries and all that is happening uh it is not sufficient.

[00:57:47]You need to have the intelligence uh as to if it doesn't match any sanction but still it is anomalous and it is does not make sense you need to dig deeper and only then you have to conclude the you know uh understanding okay somebody raised hand I think we'll be discussing these uh any questions just after the session please thank you so Uh that is just all about our uh you know sanction screening. Uh case nine I will avoid it is not very important.

[00:58:26]I'll just go to the final case which is about uh AI. So this is the final uh most of the organizations have started uh using artificial intelligence but you cannot get away from the regulator just by saying that you know we have an uh sophisticated AI system. Uh the system should not be opaque. It should be fully auditable fully explainable.

[00:58:56]uh it should and those organizations that are only operating based on AI systems uh will be in trouble. You need to have human interference uh because if you rely too much on artificial then you know the manual intelligence that is declining investigators are not challenging anything. So that is something which is happening. Uh so this is again uh what the theme of this case is that you cannot just go to the regulator and say that you know uh we are uh we have done this and we have an AML system. So uh that is how it is. You need to have uh explainable systems.

[00:59:38]There should be a model governance.

[00:59:39]There should be human involvement. there should be investigators who should be challenging uh the artificial intelligence wherever uh it should be there. So just relying completely on AML is not so defensible. AML has advanced machine intelligence. It has human skeptism and it is also uh regulatory defensible. That is what the AML we are looking at. Okay. Okay. I think uh this is it. Yes.

[01:00:15]>> Thank you. Thank you so much um uh Bat for your deep insights.

[01:00:21]Uh maybe you can stop sharing the screen now if it's not required. Yeah. So uh before uh we move on uh to the questions I would like to invite uh Rajes who is a practitioner here in uh uh UAE from past many years. He's exanker. He is part of one uh sadyama group where I also attend and uh yesterday we met and I thought uh I'll invite uh J to speak for a couple of minutes. He has his own practice in AML and uh Rajes over to you. Thank >> you very much. Am I audible but >> yes yes yes >> yes. Thank you for the wonderful and sweet and short introduction. uh Barat's presentation wonderful he covered 10 cases I think nine cases one case he had to skip um good good nine cases uh all insightful uh and most importantly practical yeah real life cases looks like uh great par so uh you know I would like to just touch upon what he had discussed instead of introducing anything new uh so AML is not a tickbox exercise that's what he started off with saying yes I agree with him 100%. Yeah.

[01:01:44]Uh how businesses should view AML um is is just their rail guards. Yeah. A rail guard would allow the business to go in its right direction without getting you know diverted uh from its main focus. So uh don't take AML as just a tickbox exercise. Uh that's something which I liked in what Barat had mentioned.

[01:02:07]And uh when we say that how far is the board of directors or the company owners are bought into the idea of proper AML risk management I mean that depends upon the moneyaundering reporting officer or the compliance officer as we say yeah and if you have the buyin from the board then AML is something which is smoothly implementable nothing is I I mean it's not a rocket science we all know the framework there is a universal framework just adopt it apply it um you know and get it done away with uh the best way to ensure as a MLRO that we monitor that and get the results up to the board I would recommend do a proper quality assurance on a periodic basis yeah whatever result sets are coming out of your quality assurance take it to the board we have different types of uh you know uh board reporting available just do that get your get the board or the owner of the company. If it's a real estate, small, big, medium, doesn't matter. Just get the board of directors or the owners on your side and um the game is uh you know very simple.

[01:03:19]Um that's that's very important. Yeah.

[01:03:21]With that I and finally uh have the right infrastructure in place for management of your AML. I know Barat spoke about artificial intelligence.

[01:03:31]That was his last slide. Yeah. um artificial intelligence can be as good as what its capability is. Yeah. Um how far it can read the gray area and make that into some decision making proper decision- making uh tool. So with that I'll stop here. Uh fantastic uh Barat all the best to you.

[01:03:52]>> Thank you.

[01:03:53]>> Thank you.

[01:03:53]>> Thank you Rajes. So we don't have much time left. So but we can take one or two questions max. Uh so anyone who has a question can please unmute or raise your hand and uh Bat can answer that anyone.

[01:04:14]Uh Gopal you have you had a question I think.

[01:04:18]>> Yeah. Yes. Uh >> yeah please.

[01:04:20]>> Yes sir. Uh uh if you remember last month we had IFRS 18 >> roughly about 4 weeks back and I had actually discussed that before the holidays that people would go for their annual vacation we should have on FRS 19 and 20 >> so I would just request that in the forthcoming days people going for vacation to arrange for the speakers >> right >> if 20 the regulatory difference I think it's 13 or 14 is going to be replaced with the new IFRS 20 due to the changes So although it's a little technical and maybe like whatever is the draft thing we can have a brief discussion and there has not been much of ons 19 which is on subsidiaries.

[01:05:00]>> Yeah. Yeah. Gopan we can discuss this.

[01:05:03]Do you have any question for this topic today's topic?

[01:05:06]>> No nothing much because uh 6 months back Mr. Barjani was already there in Muskat and we had a CP session also in CVFS.

[01:05:14]>> Very nice if I'm not mistaken.

[01:05:16]>> Yeah. Yeah. Yeah.

[01:05:18]>> Okay. Yes.

[01:05:19]>> So, uh >> I a lot of lot of information uh I think somebody has asked something. Let's be fair except >> uh Dhaval has uh yeah you can uh take it >> with auditors and accountants. Let's be fair and accept that the transaction posting teams are pretty low-level staff and will miss the behavioral aspects of a transaction. Will the regulators penalize the company if they miss this behavior? So see currently as I said currently what we look at is that if you have the documentation in place everything is in place uh you it it is quite defensible your uh transactions are defensible but slowly the expectation is shifting and uh it is it is it is going to obviously evolve uh in with time it is going to be like you know uh very obvious uh anomaly these very obvious laundering typologies if they are happening then the company will be penalized. It will not be uh because it doesn't matter uh who is doing the accounting or who is uh the board and the company is responsible if money laundering is happening. So if there documentation is not in place or if there is some obvious anomaly uh that is present. So the company will be penalized. So it is their responsibility. They have to look into what kind of teams they are hiring, what kind of structures they are using. So that is their company's responsibility and if there is uh something is missed the companies will be penalized and that is again what I'm saying is you're talking here about uh uh you know basic accounting and basic uh problems slowly the regulator is also evolving and they are looking at more from uh every reporting entity that is what is happening all across the world. So that is uh it they have to also evolve. They need to have specialist experts. They need to have as sir suggested you know always regularly get your quality assurance done. Check check check get it checked how you are uh recording transactions how you are monitoring these transactions. All of that should be checked on a regular basis at least annually so that you are not exposed to this these kind of risks.

[01:07:44]>> Thank you. Thank you Bat. Uh so before we close for the day now your final thoughts in one or two minutes. Yeah.

[01:07:56]>> Yeah. Okay. Okay. My thoughts. Okay. So this was >> Yeah. Yeah. Thoughts.

[01:08:00]>> So I really I really enjoyed I always enjoy uh you know uh discussing uh anything that is related to financial crime, money laundering. always excited to share my real cases, share uh all these things and uh I I'm very hopeful that uh everybody learned something at least something new and it would be uh useful to them uh uh in in their uh practice or in their uh employment somehow. This this session would be useful in some way. uh anybody can reach out to me on LinkedIn if they want to discuss anything related to financial crime. uh I am working across the globe now slowly we are building offices our offices coming in uh UAE also uh by August uh it it was supposed to come up earlier but it is a little delayed because of the war situation so uh we'll be coming in there we are working as expert consultant to many firms where they do not have an AML function so we are working as an expert consultant to many firms so if you want to discuss anything. If you have some something uh some engagement, some complex engagement where you need expert opinion, you can always reach out or just you can also just just say hi on LinkedIn. I'm very always open to any kind of discussions.

[01:09:27]So uh and I'm very grateful to prade sir always uh inviting me always uh meeting with me whenever I'm in Dubai or uh when when he is in India at conferences he's a friend of mine and I'm grateful for this invitation for this session also.

[01:09:48]Thank you.

[01:09:48]>> Thank you. Thank you. Thank you Ban. Uh thank you. Uh I would request everyone to please show your love with the emojis to Bhan. We have got a beautiful comment from Dhal. All those who are present here can see but those who are watching live on YouTube won't be able to see. So I'll read out uh this has been an amazing presentation quite different from the usual ones that just list down the mandatory requirements uh by uh noon. Uh it's the first time I've come across such an insightful presentation. I'm personally looking forward for many more such interactions.

[01:10:28]My five stars to you for this. Full respect. Uh Prabhdeep J. Thank you. That were amazing choice.

[01:10:34]>> Thank you. Thank you so much. That's very kind of you. I I will I will definitely share the presentation with Pradep sir and he can then you know share it with all of you uh whoever it and I'll be sharing it on my LinkedIn also. So you can you know uh also it it it will be available on the public domain so you can get that get it there also.

[01:10:53]>> Thank you.

[01:10:53]>> Thank you. Yeah. So uh Gopal we will be coming up with the ifs sessions. There is already one planned on 6th July but we will see what can be done in June. Uh there are a couple of compliance and structuring sessions already placed. We will see how we can adjust in the June one. Thank you Bar. Thank you to everyone. Have a good weekend. Good eat break.

[01:11:14]>> Thank you.

[01:11:15]Yeah, we'll be meeting for internal audit on 30th though it's a break but for internal audit uh session internal audit audit in age of disruption that's what on 30th we are doing. Thanks, Vad.

[01:11:27]Have a good time. Take care. Thank you.