Middle East & AfricaRegional Compliance & Ethics Conference

04 February 2021

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11 February 2021 Borys Dackiw (Partner) Samir Safar-Aly, LL.M. (Senior Associate)

Middle East & Africa Regional Compliance & Ethics ConferenceEmerging Sanctions and AML Risks for the Middle East and Africa

© 2019 Baker & McKenzie LLP

Presenters

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Borys DackiwPartner, Abu Dhabi

Co-Chair of Compliance & Investigations EMEA

Samir Safar-Aly, LL.M.Senior Associate, Dubai

Financial Crime, Sanctions & Investigations

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Agenda

1Overview of International Trade Sanctions and Export Controls

2US Trade Sanctions (OFAC) and Export Controls (BIS)

3OFAC and BIS Enforcement Actions against Pharmaceutical / Medical Devices Companies

4Regional & Local Sanctions, the Al-Ula Declaration and the Abraham Accords

5 AML Risks

Overview of Trade Sanctions1

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Overview of Trade Sanctions and Export Controls

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Supra-national(e.g. EU, Arab

League)

National(e.g. US, UK, UAE, Saudi Arabia)

International(e.g. UN)

Sanctions

Prohibit or restrict dealings with those who are targeted (e.g. countries, governments, individuals, companies, charities, armed forces, industries)

Scope depends on party imposing, party targeted, relevant foreign policy objectives

Licenses may be available on humanitarian (Ag/Med) and other grounds

Export Controls

Controls on cross-border movements of strategic or other “controlled” products (military or dual-use items, software, encryption and other technologies, communications equipment)

Medicines / medical devices generally not restricted

Apply independently of sanctions, but often overlap (e.g. when destination or end-user is subject to sanctions)

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Current US and EU Sanctions Targets

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Afghanistan

Lebanon

Burma

Zimbabwe

Egypt

Tunisia

Libya

Somalia

Guinea and Guinea-Bissau

Sudan and South Sudan

Iraq

Iran

Belarus

North Korea

Syria

Burundi

China

BalkansArmenia andAzerbaijan

Cuba

Cyprus*

Haiti*

Venezuela

Saudi Arabia

Central African Republic

Russia

Ukraine

UAE

Kuwait

Yemen

Crimea & Sevastopol

DR Congo

Mali

Maldives

Nicaragua

EU and US

EU only

US only (*arms embargo only)

US Anti-Boycott only

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Current UAE, Saudi and Arab League Sanctions Targets

Israel

Arab League (22 states) (excluding Egypt, Jordan, the UAE, Bahrain, Sudan and Morocco)

UAE, Saudi, Bahrain and Egypt

Qatar

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Now Repealed

Revoked by the UAE, Bahrain,

Sudan and Morocco


UAE, Saudi Arabia & Arab League Sanctions Target Groupings

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Comprehensively Sanctioned Countries

Israel: imposed by the Arab League (22 states, including the GCC + Egypt, Lebanon, Jordan, Algeria, Tunisia, Morocco, Libya, Iraq, Syria, etc.)*

Qatar: imposed by UAE, KSA, Bahrain and Egypt - “Quartet” (NOW REPEALED)

* Egypt, Jordan, the UAE, Bahrain, Sudan and Morocco have since signed peace accords with Israelnote: no comprehensive sanctions against Iran (current UAE and KSA position)

Restrictions on Bank Transfers

UAE banks increasingly reluctant to process incoming and outgoing payments relating to Iran, and remittances are highly scrutinized – screening under Anti-Money Laundering and Anti-Terrorism Laws

AML laws require filing of Suspicious Activities Reports (SARs) with the UAE Central Bank Financial Intelligence Unit

Use of payment channels outside the formal banking system (cash, exchange houses, Halawa network, barter)

Restricted Persons and Terrorist Lists Enforced by the UAE and Saudi Arabia

UN Security Council Consolidated Sanctions List (UNSC Resolutions) UAE Terrorist Lists adopted by UAE Cabinet of Ministers* KSA National List maintained by the Presidency of State Security US / EU Specially Designated Nationals (“SDNs”) Lists (selectively applied by

UAE/Saudi Arabia)

*note: includes Iranian and Qatari nationals, organizations, charities and foundations, but not exclusively

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US Trade Sanctions (OFAC) and Export Controls (BIS) Considerations2


US Trade Sanctions – US Office of Foreign Assets Control (OFAC)

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Administered by US Treasury Department’s Office of Foreign Assets Control (OFAC)through a system of general and special licenses

Where an OFAC general license is available, the general license may be used withoutmaking any submission to OFAC, but the terms and conditions of the general licenseand any related restrictions must be satisfied.

Where an OFAC specific (individual) license is required this requires submitting a licenseapplication to OFAC describing the parties, products and other elements of the proposedtransaction. OFAC specific license applications often take many months to process.

Who may apply for and rely on OFAC licenses (“Covered Persons”)?

Generally available to US Persons only

Non-US Persons may apply for / rely on OFAC general and specific licenses to theextent that their exports are of ‘items subject to US jurisdiction’

Overlap with US export controls

Applied in parallel with US export / re-export controls administered by the US CommerceDepartment’s Bureau of Industry and Security (BIS) and the US State Department(overlapping and shared jurisdiction among the agencies).

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Jurisdictional Scope of US Sanctions

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US Persons*

Non-US persons causing

violations by US-Persons**

*US Persons include non-US branches of US companies and their employees (regardless of nationality), all persons physically within the US, and US citizens and permanent resident aliens (‘green card’ holders, wherever located or employed).For purposes of Iran and Syria US Persons also included non-US entities owned or controlled by US Persons (e.g. foreign subsidiaries)

**Non-US Persons may also have liability for causing a US Persons to violate sanctions (e.g. US dollar payments, ordering goods from the US for supply to SDNs or to Iran under secondary sanctions).


US Trade Sanctions – Basic Prohibitions and Reach

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Prohibits US Persons from nearly all forms of involvement that involves a sanctioned country or person applies to direct and indirect transactions (agents, distributors other intermediaries) “facilitation” by US persons also prohibited (planning, policies, approvals, negotiations)

Sanctions certain activities by non-US persons “US Persons” include foreign branches and (Iran, Cuba only) foreign subsidiaries. “Causing” violations by US Persons

e.g. clearing US dollar transactions through the US financial system e.g. indirect transactions (agents or other concealment)

“Secondary sanctions” (inc. collateral designation risk for dealing with certain SDNs orcompanies 50% or more owned by SDNs)

Non-US persons may also be subject to OFAC’s jurisdiction if they re-export goods,technology or services ‘subject to US jurisdiction’ (i.e. manufactured in or exported fromthe US or exceeding de minimis US content) (>10% in the case of Iran and Syria) to asanctioned country or person (government, organization or individual) appearing on anSDN list.

Limited licenses may apply (humanitarian, agricultural / medical products / medicines)

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US Trade Sanctions: Who is a ‘US Person’?

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Entities organized under US laws and their non-US branches

Iran and Cuba sanctions also apply to non-US entities owned or controlled by US Persons (e.g. foreign subsidiaries)

Employees (regardless of nationality) of above entities

US citizens and permanent resident aliens (“Green Card” holders) wherever located or employed

Any individual or entity physically in the United States, even temporarily


Long-Arm / Extraterritorial Reach of US Jurisdiction

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Applies to foreign branches of US companies and foreign subsidiaires (controlled) of US companies (Iran sanctions only)

Certain transactions by non-US persons (agents, distributors, consultants) may trigger penalties and other sanctions:

“Causing” violations by US Persons (e.g. US Dollar transactions; involvement of US citizens)

”Secondary sanctions” (Iran only)

Employees (regardless of nationality) of above entities

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Largest Fines in US Sanctions Violations

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Company Industry Fine Year(s)

1 BNP Paribas S.A. Financial Services $8.96 Billion 2014

2 HSBC Bank Financial Services $2.29 Billion 2012

3 ZTE Corporation Telecommunications $2.19 Billion 2017/18

4 Standard Chartered Bank Financial Services $2.07 Billion 2012/14/19

5 Commzerbank AG Financial Services $1.45 Billion 2015

6 Société Générale SA Financial Services $1.33 Billion 2018

7 UniCredit SpA Financial Services $1.3 Billion 2019

8 Credit Agricole Corporate and Investment Bank Financial Services $787 Million 2015

9 ING Bank N.V. Financial Services $619 Million 2012

10 Bank of Tokyo - Mitsubishi UFJ Financial Services $574 Million 2013/14

Includes civil penalties paid by banks to NY regulators (e.g., NYDFS, DANY)


Penalties and Other Risks

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Listing as Restricted Party

Reputation / Relation with Business Partners

Unlimited Fines

Disqualification of Directors

Prison,Extradition

CSR Concerns

Revocation of Licences

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OFAC General Licenses: Medicine / Medical Devices (Ag/Med)

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Examples of activities that would generally be "ordinarily incident" to a licensed export:

Examples of activities that would generally NOT be "ordinarily incident" to a licensed export (i.e., activities not covered by the license):

Product registration

Negotiating and entering into contracts

Preparing invoices and others sales documents

Making shipping arrangements

Processing payments received for the sale

Activities related to the promotion or marketing of medical devices

Compensating distributors with respect to disputes or termination

Product returns or other imports of medical devices

Exports of Agricultural Commodities, Medicine and Medical Devices (Ag/Med) Transactions ‘Ordinarily Incident and Necessary’ to licensed activities

While the term "ordinarily incident" is not defined, it is generally understood for OFACpurposes to refer to activities that are customarily an integral part of exporting the items to the country in question.


Long-Arm Reach of US Jurisdiction

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Export Controls

Apply to any exports, reexports, and transfers (in-country) of “US-origin items,” regardless of the nationality of the persons involved:

US jurisdiction follows the item outside the US and sticks with it

Apply to all destinations – not just sanctioned countries

Exports from the US Reexports from third countries of 100% US origin items Exports of non-US origin items with more than de minimis controlled

US content

Exports of certain non-US origin items with no US content but based on US technology (limited)

Export control administered by the US Commerce Department’s Bureau of Industry and Security (“BIS”)

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Licensing Criteria for Export / Re-export of Medicines and Medical Devices: Jurisdictional Reach of US Regulations

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• Based on the definition of medicine / device in Section 201 of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 321)

• If non US person involved then US export controls will still apply to exports / re-exports of “items subject to US jurisdiction” (see above)

• EAR99 medicines / medical devices (i.e. not on the EAR’s Commerce Control List) that are not on the List of Medical Devices Requiring Specific Authorization (Iran only) (e.g. diagnostic medical imaging equipment and certain laboratory equipment, including bioreactors and decontamination showers and systems) may be exported under an OFAC general license (subject to certain conditions).

Is the medicine / medical device subject to US jurisdiction?

Is there US person involvement?

Is the medical device classified as

EAR99?

Is your product a medicine or

medical device?

• Includes exports from the United States, US origin items, non-US made items incorporating greater than de minimis levels of US origin content, or certain non-US goods directly produced from certain US technology or software


Jurisdictional Summary for EAR99 Medical Devices

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Syria

Non-US device ≤ 10% US content ≠ US jurisdiction

Non-US device > 10% US content (including EAR99 US content) = USjurisdiction

“General inventory” exception for EAR99 US items/content does NOT applyto Syria

Iran / Sudan

Non-US device < 10% US content ≠ US jurisdiction

Non-US device > 10% EAR99 US content ≠ US jurisdiction

Non-US device > 10% non-EAR99 US content = US jurisdiction

Note that “general inventory” exception for re-exports by non-US persons ofEAR99 items / content ONLY applies to Iran

Exports to Iran, Syria and Sudan

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3 OFAC and BIS Enforcement Actions against Pharmaceutical / Medical Devices Companies


OFAC and BIS Enforcement Actions Against Pharmaceutical / Medical Devices Companies

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Sanctions Enforcement Actions

Approximately 11 sanctions enforcement actions by OFAC against actors in the medical / pharmaceutical sector

Settlements / fines have increased from USD 2,315 in 2008 against LI-COR, Inc. up to the USD 7.6 million against Alcon Laboratories.

• Alcon Laboratories, Inc. - USD 7.6m (2016)• American Optisurgical, Inc. - USD 404,000 (2013)

US Export Control Enforcement Action

• U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) USD 8.1m settlement with Alcon (2016)

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Alcon Laboratories, Inc. (Texas) and Alcon Pharmaceuticals Ltd. (Switzerland)

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Alleged ViolationsSale and export of medical end-use surgical and pharmaceutical products from the US to distributors in Iran and Sudan without OFAC authorization in breach of Iran Transactions and Sanctions Regulations [452 occasions] and Sudan Sanctions Regulations [61 occasions]

Settlement Date July 2016

Settlement Amount

Sanctions-Related Allegations / Settlement with US Treasury Department's Office of Foreign Assets Control ("OFAC"):

USD 7.6 million

against a maximum statutory civil monetary penalty of $138.9 million and a base penalty of $16.9 million

Period of Alleged Violations

August 2008 - December 2011

Aggravating Factors • reckless disregard for U.S sanctions requirements (virtually no compliance program) • senior management knew of the conduct• sophisticated multinational

Mitigating Factors

• harm to U.S. Sanctions program objectives limited because the exports involved medical end-use products that were licensable and were previously and subsequently licensed by OFAC for Alcon

• no prior OFAC sanctions history • took remedial action including robust compliance program, enhanced trade compliance

training, enhanced compliance procedures • substantially cooperated with OFAC’s investigations


Alcon Laboratories, Inc. (Texas) and Alcon Pharmaceuticals Ltd. (Switzerland)

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Violations

Exporting and re-exporting various types of US-origin medical devices and equipment from the US to Iran and Syria, via third countries, including France and Switzerland, with knowledge that these transfers were in breach of the Iran Transactions and Sanctions Regulations and constituted conduct prohibited by the Export Administration Regulations ("EAR").

Date of Order June 2016

Assessed Penalty

US Export-Control Violations: Concurrent Settlement with the US Commerce Department's Bureau of Industry and Security ("BIS")

USD 8.1 million

Period of Infringing Conduct

April 2008 – April 2012

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American Optisurgical, Inc. (2013)

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Alleged ViolationsExports of unlicensed medical goods and services to Iran, or to a third country with knowledge (or reason to know) that they were intended for Iran and failure to reply to two administrative subpoenas [36 transactions valued at USD 202,765]

Settlement Date February 2013

Settlement Amount

USD 404,000

Period of Alleged Violations

May 2005 – April 2010

Aggravating Factors

• wilful and reckless conduct • senior management was directly involved • actively participated in concealing the ultimate destination of exports• continued to export unlicensed medical goods to Iran after receipt of two Administrative

Subpoenas• commercially sophisticated entity

Mitigating Factors

• exports likely would not the subject of prior OFAC enforcement action• have been licensed by OFAC under existing licensing policy


US Restricted Parties Lists: Sanctions and Export Controls

US Government maintains a number of lists designating certain individuals and entities as restricted parties with whom US entities and individuals may not do business, or who may be prohibited from receiving US items irrespective of whether a US entity or individual is involved

Restricted parties include, for example, those identified with narcotics trafficking, terrorism, weapons proliferation, or sanctioned country governments (e.g., banks connected to terrorist or weapons proliferation financing, charities linked to terrorist organizations, distribution companies and pharmacies serving as money laundering fronts for narcotics cartels, and commercial enterprises owned or controlled by sanctioned country governments)

The EU maintains similar lists (as does the UAE and Saudi)

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US Sanctions Restricted Parties Lists

OFAC/Treasury Department

• Specially Designated Nationals & Blocked Persons List ("SDN List") http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx

• Foreign Sanctions Evaders List ("FSE List"): http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/fse_list.aspx

• Sectoral Sanctions Identifications List ("SSI List"): http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/ssi_list.aspx

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US Export Control Restricted Parties Lists

State Department• Debarred Parties List (International Traffic in Arms Regulations) --

http://www.pmddtc.state.gov/compliance/debar_intro.html• Nonproliferation Sanctions Lists --

http://www.state.gov/t/isn/c15231.htm• Sanctioned Entities List (Iran Sanctions Act regime) --

http://www.state.gov/e/eb/tfs/spi/iran/entities/index.htm

Commerce Department • Denied Parties List • Entity List• Unverified List

See http://www.bis.doc.gov/index.php/policy-guidance/lists-of-parties-of-concern

Depending on the list, the relevant restrictions can vary (e.g., a total ban on exports to the party, a special license requirement to export to the party for certain items, etc.)

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Making Sense of Screening and Relevance for Non-US Persons

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US laws and regulations do not contain specific provisions setting out obligations to screen

But screening is required in practice to mitigate risk and OFAC guidance focuses on a ‘risk-based approach’

As a general matter, it is prudent to screen all parties with respect to which information is gathered in the ordinary course of business for commercial or other purposes

Screening should include: customers, business partners (including agents and distributors) and suppliers • Others: shipping lines (vessels, airlines), freight forwarders, port owners and operators

and agents A risk-based approach is recommended

• implement adequate screening procedures (subscription-based services; direct inquiries to counterparty) at outset of a relationship and review / update periodically for designations and change in ownership

• if this raises any "red flags", need to escalate and discharge those "red flags"• maintain records of screening / due diligence that can be produced on audit or in the

event of an investigation

4 Regional & Local Sanctions, the Al-Ula Declaration and the Abraham Accords

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Regional & Local Sanctions

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Regional NationalExtra-territorial

International


The Qatar Restrictions (1)

Scope of the Qatar Restrictions: (i) severing diplomatic relations; (ii) imposing restrictions on the movement of goods and people; (iii) prohibition on dealings with individuals, organizations listed on the updated terrorist watch list, and (iv) enhanced due diligence on transactions with certain Qatari banks.

Does not prohibit doing business with Qatar generally.

From a policy perspective the UAE, Saudi Arabia and Bahrain are aligned in their actions and announced positions. Egypt has taken a broadly consistent approach, but has not aligned entirely. Other states have implemented certain measures but with very limited impact on trade with Qatar (e.g. Jordan revokes broadcasting license of Al Jazeera).

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UAE Cabinet Resolution No. 18 of 2017 Endorsing the List of Designated Terrorist Organizations and Individuals (Cabinet Resolution 18) on 9 June 2017

Cabinet Resolution 18 designated 59 individuals and 12 entities that were either Qatari, Qatari-based or Qatari-linked, as 'Designated Terrorist Organizations and Individuals‘

UAE Central Bank (UAECB) issued two Notices - Notice 156 and Notice 157.

Notice 156 required those regulated by the UAECB to immediately check existing clients accounts and instruments against the designations made under Cabinet Resolution 18, and to inform the UAE Central Bank accordingly.

Notice 157 required all UAECB regulated entities to implement Enhanced Due Diligence measures (as defined under the UAE's AML Law and AML Implementing Regulations) for any accounts or transactions involving the following six Qatari Banks: (i) Qatar Islamic Bank, (ii) Qatar International Islamic Bank, (iii) Barwa Bank, (iv) Masraf al Rayan, (v) Qatar National Bank, and (vi) Doha Bank. Notice 157 also required weekly update reports on its implementation to be sent to the UAECB.

Two Financial Free Zones – Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) also implemented the same measures.

Have not seen a reversal of these measures

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Local Sanctions – UAE (1)

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Federal Law No. 7 of 2014 on Combating Terrorism Offences

Cabinet Resolution No. (35) of 2014 on Terrorist Watch Lists Regulations

Cabinet Resolution No. (2) of 2015 Concerning the procedure of grievance from the decisions of inclusion on terrorist lists

UAE Cabinet Decision No. 20 of 2019 regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions on the Suppression and Combating of Terrorism, Terrorist Financing and Proliferation of Weapons of Mass Destruction, and Related Resolutions

Cabinet Resolution No. (74) of 2020 On the Regulations of the Terrorist Lists and implementing the Security Council’s Resolutions concerning the Prevention and Suppression of Terrorism and its Financing and Proliferation of Armaments and the Related Resolutions



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Resolutions

National Terrorist

List

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National Terrorist

List



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Federal Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of

Illegal Organizations (UAE AML Law)

UAE Cabinet Decision No. 10 of 2019 concerning the Implementing Regulation of the UAE AML Law

For CTF offence - A life imprisonment sanction or temporary imprisonment of no less than 10 years and penalty of no less than AED 300,000 (approx. USD 81,700), and no more than AED 10,000,000 (approx. USD 2.7m), is applied to anyone who uses proceeds for terrorist financing (Art. 22(3))

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Local Sanctions – Saudi Arabia (1)

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Permanent Committee for

Counter Terrorism (PCCT)

Presidency of State Security

Permanent Committee for Implementing

Security Council Resolutions in

accordance with Chapter VII of

the United Nations Charter

National List

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Local Sanctions – Saudi Arabia (2)

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KSA Council of Ministers’ Resolution No. (92) of 1439 AH Approving the Law on Combating Terrorism Crimes and its Finance (KSA CTF Law)

KSA Council of Ministers’ Resolution No. (92) of 1439 AH Approving the Law on Combating Terrorism Crimes and its Finance (KSA AML Law)

Terrorism Finance Crime: “Providing funds for the commission of a terrorism crime or for the interest of a Terrorist Organization in any of the forms stated in the Law including the finance of the terrorist's travel and training” (Art. 1(4), KSA CTF Law)

Up to 15 years imprisonment and up to SAR 7 million fine (approx. USD 1.9 million) (Art. 46, KSA CTF Law / Art. 27 KSA AML Law)

Up to SAR 50 million criminal fine (approx. 13.3 million) for legal persons and permanent or temporary restrictions or closusre of license. (Art. 31, KSA AML Law)


Regional Sanctions - GCC

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Terrorist Financing Targeting Center (TFTC)

Feed into National

Lists

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Regional Sanctions – Arab League Boycott

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9 May 1951 - Arab League Council passed Resolution 357 establishing the Central Boycott Office

11 December 1954 - Arab League Council Resolution 849, approving the Unified Law on the Boycott of Israel (Arab League Council Resolution 849)

Arab League Council Resolution 849 contained what is often referred to as the ‘secondary’ and ‘tertiary’ elements of the Israeli Boycott in providing new recommendations prohibiting entities and individuals from or based in Arab League Member States from also dealing with agencies of persons working for Israel, and with foreign companies and organizations with interests, agencies, or branches in Israel.


Arab League Boycott – UAE

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UAE Federal Decree Law No. 15 of 1972 (UAE Israeli Boycott Law)

Adopted the language of the Arab League's Unified Law on the Boycott of Israel (3-tier approach: primary, secondary and tertiary boycott)

UAE amended various other laws and regulations imposing travel restrictions, prohibitions on communications and registration of Israeli-related intellectual property rights

UAE Cabinet Resolution No. 462/17M (1995)

Followed announcement in 1994 by the Gulf Cooperation Council (GCC) to enforce only the ''primary" elements of the Israeli Boycott

Remained a criminal offence to deal: (a) in goods or services from Israel or of Israeli origin; and/or (b) with the State of Israel, its citizens and companies.

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Israeli Boycott and the Abraham Accords Peace Treaty

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Repeal of the UAE-Israeli Boycott Law

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Abraham Accords Peace Treaty (announced 13 August 2020, but officially signed on 15 September 2020)

Establishes full diplomatic relations between the UAE and Israel Outlines a number of areas of intended cooperation In exchange for Israel’s suspension of further annexation of Palestinian territories Subject to ratification to have the force of law Immediately followed by announcements of multiple MOUs (banking and financial

services, education, maritime, aviation, space, healthcare, and telecommunications sectors/industries)

UAE Federal Decree Law No. 4 of 2020 (published 27 August 2020, released publicly on 15 September, but effective as of August 16, 2020)

Wholesale repeal of the Israeli Boycott Revokes any provisions of any UAE laws that contradict or conflict with the provisions

of the Law Self-enforcing and not prescriptive (all benefits and conditions of UAE laws now apply

equally to Israeli persons) No prohibition on doing business with Israeli companies or persons, including through

distribution and licensing and company formation Import and export of products manufactured in Israel are now allowed Telecommunications links established Travel between the countries permitted Financial transactions (opening bank accounts, bank transfers, lending activities)

initiated

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Arab League Boycott – Saudi Arabia

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KSA Royal Decree Number M/28 dated 25/06/1382H(corresponding to 23 November 1962), amended on 14/01/1404H(corresponding to 31 February 1984) )

Adopted the language of the Arab League's Unified Law on the Boycott of Israel (3-tier approach: primary, secondary and tertiary boycott)

Imprisonment for a period between three to 10 years and fined SAR 5,000 (approx. USD 1,334) to SAR 10,000 (approx. USD 2,667)

KSA Council of Ministers Decision No. 5 of 13 June 1995

Followed announcement in 1994 by the Gulf Cooperation Council (GCC) to enforce only the ''primary" elements of the Israeli Boycott

Remains a criminal offence to deal: (a) in goods or services from Israel or of Israeli origin; and/or (b) with the State of Israel, its citizens and companies.


Key Issues for Israeli-Related Business Dealings

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Risk to employees who are nationals of countries that still enforce the Israeli Embargo or Restrictions

Saudi Arabia, Lebanon Criminal penalties, revocation of professional licenses, etc. The following countries maintain a form of boycott against Israel: Algeria, Bangladesh,

Brunei, Djibouti, Iran, Iraq, Kuwait, Lebanon, Libya, Malaysia, Pakistan, Qatar, Saudi Arabia, Syria and Yemen.

Snap-back? Further annexation of Palestinian Territories

US Anti-Embargo Laws

Prohibit or penalize US companies (and their non-US subsidiaries) from participating in orcooperating with foreign boycotts against countries friendly to the United States (Israel)

U.S. Commerce Department Regulations - apply civil penalties ($305,000 or twicetransaction value) and criminal penalties ($1,000,000 or up to 20 years in prison)

U.S. Treasury Rules - subjects US taxpayers to potentially significant tax penalties Status remains unchanged and continues to apply to the UAE (formal position) In practice - "comply with law" clauses in UAE contracts may not be deemed to constitute

"participation or cooperation with an international boycott" (PCIB) and therefore no longerprohibited, reportable or subject to penalties

Rebuttable presumption, but watch this space!

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5 AML Risks


Gateway Opportunities

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Gateway Risks

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(Map origin: Transparency International, 2018)


UAE AML/CTF Law

Federal Decree Law No. 20 of 2018 on Anti-Money Laundering and Combatting the Financing of Terrorism and Financing of Illegal Organizations (the “UAE AML/CTF Law”)

Art. 2(1) – “Any person, having the knowledge that the funds are the proceeds of a felony or a misdemeanor, and who willfully commits any of the following acts, shall be considered a perpetrator of the crime of Money Laundering:

Transferring or moving proceeds or conducting any transaction with the aim of concealing or disguising their Illegal source

Concealing or disguising the true nature, source or location of the proceeds as well as the method involving their disposition, movement, ownership of or rights with respect to said proceeds

Acquiring, possessing or using proceeds upon receipt

Assisting the perpetrator of the predicate offense to escape punishment”

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UAE AML/CTF Law – Penalties (1) Administrative Penalties for AML violations (Art. 14(1)):

Warning

Administrative penalties of no less than AED 50,000 (approx. USD 13,600) and no more than AED 5,000,000 (approx. USD 1.36m) for each violation

Banning the violator from working in the sector related to the violation for the period determined by the supervisory authority

Constraining the powers of the board members, supervisory or executive management members, managers or owners who are proven to be responsible of the violation including the appointment of temporary inspector

Arresting managers, board members and supervisory and executive management members who are proven to be responsible of the violation for a period to be determined by the supervisory authority or request their removal

Arrest or restrict the activity or the profession for a period to be determined by the supervisory authority

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UAE AML/CTF Law – Penalties (2) Criminal Penalties for AML violations (Art. 22(1)):

Imprisonment for a period not exceeding ten years and to a fine of no less than AED 100,000 (approx. USD 27,000), and not exceeding AED 5,000,000 (approx. USD 1.36m), or either one of these two penalties.

But if:

through influence or the power granted to him by profession or professional activities;

through a non-profit organization;

through an organized crime group; or

in case of a repeat offence,

the penalties are increased to a fine of no less than AED 300,000 (approx. 81,700), and no more than AED 10,000,000 (approx. USD 2.7m) (Art. 22(2)).

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KSA AML Law

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Royal Decree (M/20) Dated 5/2/1439H approving the Anti-Money Laundering Law

Art. 2 – “Any person who commits any of the following acts shall be deemed to have committed the crime of money laundering:

1. Converting or transferring funds or conducting any transaction involving the same, knowing that they are the proceeds of a crime, in order to conceal or disguise the illicit source of such funds or in order to help any person involved in the commission of the predicate crime from which such funds are generated in order to go unpunished;

2. Knowingly acquiring, possessing or using funds, that are the proceeds of a crime or are from an illicit source;

3. Concealing or disguising the true nature, source, movement, ownership, location, way of disposition or rights related to the funds, knowing that they are the proceeds of a crime; or

4. Attempting to commit any of the acts set forth in Paragraphs (1), (2) and (3) of this Article or participating in the commission of it through agreement, assistance, incitement, provision of consultation, guidance or advice, facilitation, complicity, covering up or conspiracy.”


KSA AML Law – Penalties

Two to 10 years imprisonment (extends to 15)

Fine of up to SAR 5 million (approx. USD 1.3 million) – extends to SAR 7 million (approx. USD 1.9 million)

Saudi national – Travel ban

Expat – Deported and blacklisted after prison term

Legal persons also have liability

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UAE FATF MER Findings

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The UAE is exposed to significant ML and TFrisks and to proliferation financing. The UAE is considered a cash-intensive economy, which exposes the country to certain inherent ML/TFrisks. As identified in the NRA, the large size and openness of the UAE’s financial sector, large amount of remittances, cash in transactions, the highly active trade in gold and precious metals and stones, as well as the large proportion of foreign residents present in the UAE, and the country’s geographic proximity to countries de-stabilisedby conflict or terrorism, as well as countries subject to UN sanctions, present additional inherent vulnerabilities to ML/TF/PF abuse.

The expansion of the FFZs and CFZs to reposition the country as an international financial centre and major international and regional trading hub also exposed the country to inherent risks such as trade based money laundering and laundering of foreign proceeds of crime.


Saudi FATF MER Findings

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Saudi Arabia faces a high and diverse risk of terrorism financing, linked to terrorism committed both within Saudi Arabia, and to countries experiencing conflicts within the region. The risk of terrorism and terrorist financing within Saudi Arabia is linked to the presence of cells of Al Qaeda, ISIS, affiliates, and other groups.

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Middle East & AfricaRegional Compliance & Ethics Conference

Documents

Transcript of Middle East & AfricaRegional Compliance & Ethics Conference