United Arab Emirates: UAE Chapter On Sanctions

Overview

1.1 Describe your jurisdiction's sanctions regime

The United Arab Emirates ("UAE") has a complex sanctions regime based on a variety of sources. Sanctions are based on diverse interests, including political, economic and national security interests. Due to the rapidly changing nature of such interests, sanctions are susceptible to significant and constant changes. Sanctions in the UAE are usually imposed at a federal level, through a variety of methods, including, by way of example:

a. Adding sanctioned persons to local lists and the UN sanctions list: This is effected by issuing local terrorism lists ("Local Lists") and a sanctions list ("Sanctions List") pursuant to Cabinet Decision No. 20 of 2019 on the Regulation of Terrorism Lists and Implementation of Security Council Resolutions Related to the Prevention and Suppression of Terrorism and Cessation of Proliferation of Weapons and its Financing, and the Relevant Decisions ("Sanctions Regulation").

b. Issuing specific laws addressing specific sanctions against a country or persons: This is effected by issuing federal laws specifically targeting certain entities and persons, such as Federal Law No. 15 of 1972 concerning the Boycott of Israel ("Israel Boycott Law").

c. Others: Where sanctions are issued by inter-governmental organisations ("IGOs") of which the UAE is a member, these sanctions are implemented by adding the sanctioned persons to the Sanctions List and/or issuing internal circulars to the relevant governmental entities. In addition to the above methods, multiples laws and regulations are regularly issued to additionally impose restrictions and require that persons in the UAE, particularly in financial and regulated industries, undertake implementation measures such as reporting requirements and client due diligence, in order to ensure compliance with UAE and international sanctions such as those of the UN, Office of Foreign Assets Control ("OFAC") and European Union ("EU"), as applicable.

1.2 What are the relevant government agencies that administer or enforce the sanctions regime?

The UAE administers sanctions through different governmental entities, depending on the implementation measures required for the imposition of the relevant sanctions. Two main governmental authorities often used in the implementation of sanctions are the Executive Office of the Committee for Goods and Materials subject to Import and Export Control ("Office") and UAE central bank ("Central Bank"):

1. Office: Federal Law No. 13 of 2007 concerning the Commodities subject to the Monitoring of Imports and Exports ("Commodities Law") authorises the restriction or ban on import, export or re-export of goods deemed a threat to the UAE's foreign policy.

2. Central Bank: The Central Bank is a fundamental authority that handles the compliance with sanctions as applicable to financial institutions in the UAE. Its authorities include the prohibition of transactions with sanctioned persons and the freezing of funds of sanctioned persons.

2 Legal Basis/Sanctions Authorities

2.1 What are the legal or administrative authorities for imposing sanctions?

The Supreme Council, the Supreme Council for National Security and UAE Cabinet are the ultimate governmental entities responsible for imposing sanctions. The Supreme Council for National Security proposes sanctions pursuant to Article 2 of the Sanctions Regulation. As illustrated under our answer to question 1.1 above, sanctions are often imposed by way of lists issued pursuant to the Sanctions Regulations, as well as other Federal Laws and Cabinet Decisions. The UAE may, in certain circumstances, implement sanctions issued by IGOs of which it is a member or otherwise by distributing circulars or making announcements to that effect.

2.2 Does your jurisdiction implement United Nations sanctions? Describe that process. Are there any significant ways in which your jurisdiction fails to implement United Nations sanctions?

The UAE implements United Nations ("UN") sanctions issued by the UN Sanctions Committee. Federal Law No. 20 of 2018 on the Criminalisation of Money Laundering and Combating the Financing of Terrorism and the Financing of Unlawful Organisations ("AMLCFT Law") requires "Prompt application of the directives when issued by the competent authorities in the state for implementing the decisions by the UNSC under Ch. 7 of UN Convention for the Prohibition and Suppression of the Financing of Terrorism and Proliferation of weapons of mass destruction, and other directives".

The Sanctions Regulations sets out the implementation framework of sanctions passed by the UN Sanctions Committee ("Sanctions List"). This framework includes the imposition of direct obligations on the Office (Article 10), financial institutions and Designated NonFinancial Businesses and Professions ("DNFBPs") (Article 19) to implement the Sanctions List. DNFBPs consist of anyone conducting one or more of the commercial or professional activities listed in the implementing regulation of the AMLCFT Law, which include certain real estate brokers and agents, merchants of precious metals and precious stones, lawyers and providers of corporate services. The framework in the Sanctions Regulations further imposes an obligation on:

(1) the Office to circulate the Sanctions List to the concerned governmental entities as soon as updated; and

(2) the Central Bank and other UAE financial regulators to ensure financial institutions and DNFBPs comply with the Sanctions List. For instance, where applicable, the Sanctions List may be distributed to the Federal Authority for Nuclear Regulation which issues multiple regulations to control the export and import of nuclear material, nuclear-related items and nuclear-related dual-use items, and requires special authorisations for the conduct of certain activities. Similar obligations are imposed on financial institutions and DNFBPs pursuant to the AMLCFT Law.

The UAE has issued implementation reports with respect to its application of UN sanctions on certain countries, including North Korea, Somalia, Sudan, Iran and Libya. These reports are publicly accessible on the UN's website and set out specific actions undertaken by the UAE. It is worth noting that in certain cases, sanctions imposed by the UN may have already been implemented by the UAE on other grounds and included in Local Lists, e.g. as a result of its membership in the Terrorist Financing Targeting Centre ("TFTC").

2.3 Is your country a member of a regional body that issues sanctions? If so: (a) does your country implement those sanctions? Describe that process; and (b) are there any significant ways in which your country fails to implement these regional sanctions?

The UAE is a member of three main regional bodies that issue sanctions – the Arab League, the TFTC and the Gulf Cooperation Council ("GCC"):

a. Arab League: The UAE implements sanctions adopted by the Arab League on an ad hoc basis. It has, for instance, implemented sanctions against the Republic of Syria, including by imposing a travel ban on transactions with Syria's central bank, a freeze to all Syrian government assets, and an end to commercial exchanges with the Syrian government.

b. TFTC: Members of the TFTC consist of the United States and certain GCC countries. The UAE implements all sanctions designated by the TFTC by issuing the Terrorism Lists referred to above. TFTC-designated sanctions are also available on the US's treasury government website.

c. GCC: The UAE is a member of the GCC, which consists of six member states. The Charter of the GCC sets up a framework that would permit the joint establishment of foreign policies and therefore issuance of sanctions. Although the GCC has, in the past, made announcements with respect to its members' stance on foreign policy, it has not, at the date hereof, issued any sanctions as such.

2.4 Does your jurisdiction maintain any lists of sanctioned individuals and entities? How are individuals and entities: a) added to those sanctions lists; and b) removed from those sanctions lists?

The UAE maintains two main lists of sanctioned individuals and entities:

a. Local Lists: These lists consist of local terrorism lists ("Local Lists") issued pursuant to Federal Law No. 7 of 2014 on combating terrorism offences ("Anti-Terrorism Law") and the Sanctions Regulations. Decisions of listing, removal and relisting on Local Lists enter into effect when issued by the UAE Cabinet and published in the Official Gazette. Such decisions are also published in audio-visual and print media of the UAE, in both Arabic and English.

b. Sanctions List: This list consists of the Sanctions List issued by the UN Security Council. Addition and removal from the Sanctions List is effected by the UN Security Council. The UAE may, in certain circumstances, circulate lists issued by IGOs of which it is a member or otherwise by distributing circulars or making announcements to that effect.

2.5 Is there a mechanism for an individual or entity to challenge its addition to a sanctions list?

The mechanisms available for an individual or entity to challenge its addition to a sanctions list are set out under the Sanctions Regulation:

a. Local Lists: In accordance with Article 6 of the Sanctions Regulation, a grievance can be filed to the Ministry of Justice. If the grievance is rejected or not responded to within 60 days, the complainant may appeal before the court concerned with state security crimes.

b. Sanctions List: In accordance with Article 15 of the Sanctions Regulation, the Office shall post on its official website the procedures of submission of applications for removal from the Sanctions List. The procedure varies depending on the nature of the sanction.

2.6 How does the public access those lists?

Changes to the Local Lists are published in the Official Gazette as well as in audio-visual and print media in both Arabic and English. The Sanctions List is available on the UN's website.

2.7 Does your jurisdiction maintain any comprehensive sanctions or embargoes against countries or regions?

In addition to the sanctions referred to above, the UAE currently maintains comprehensive sanctions and embargoes against Qatar and Israel. a. Qatar: On 4 June 2017, the UAE imposed an economic and diplomatic embargo on Qatar which is still in effect. In addition to including key Qatari individuals in its Local Lists, the UAE undertook the following measures, among others: UAE officials' announcement: The UAE authorities have announced that it imposed an embargo on Qatar and imposed sanctions on the Qatari government and certain Qatari companies and citizens.

The embargo includes:

(1) the blocking of all air and land links;

(2) restrictions in respect to some lending activities and exportation of some products; and

(3) the processing of certain payments in Qatari riyals. Circular: A circular was issued by the Federal Transport Authority – Land & Maritime, to all UAE "ports and ship agents", ordering all UAE ports not to:

i. receive any Qatari-flagged vessel or vessel owned by Qatari companies or individuals;

ii. load or unload any cargo of Qatari origin in any port or water of the UAE; and

iii. allow ships to load any cargo of UAE origin to the state of Qatar.

Israel: In 1972, the UAE imposed a boycott on Israel. The scope of the boycott imposed was initially wide and included secondary and tertiary sanctions.

2.8 Does your jurisdiction maintain any other sanctions?

In addition to the above-mentioned sanctions, the UAE, in particular the Central Bank and regulated financial institutions in the UAE, also takes into consideration sanctions imposed by the EU and OFAC.

2.9 What is the process for lifting sanctions?

The process for lifting sanctions varies depending on the method of imposition as well as the nature of such sanction. With respect to the Local Lists, the Supreme Council for National Security periodically reviews the same in coordination with the Ministry of Justice and submits recommendations to the Ministry of Presidential Affairs. The latter then submits the application to the UAE Cabinet, including its opinion. With respect to sanctions issued by IGOs, sanctions are added and removed by the relevant IGO. The removal of such sanctions is then implemented by the UAE through different means, which may vary depending on the method by which the relevant sanction was imposed.

2.10 Does your jurisdiction have an export control regime that is distinct from sanctions?

Although the export control regime of the UAE is distinct from sanctions, it plays an important role in enforcing sanctions where the same is with respect to the export or import of sanctioned products from sanctioned countries/persons. This is particularly illustrated by the significant role accorded to the Office with respect to implementing the Sanctions List, as well as the Commodities Law, which includes banning the import, export or re-export of goods deemed a threat to the UAE's foreign policy (sanctions are often used as an instrument of foreign policy).

2.11 Does your jurisdiction have blocking statutes or other restrictions that prohibit adherence to other jurisdictions' sanctions or embargoes?

The UAE does not have blocking statutes or other restrictions prohibiting adherence to other jurisdictions' sanctions or embargoes.

2.12 Does your jurisdiction impose any prohibitions or threaten any sanctions consequences for transactions that do not have a connection to that jurisdiction (sometimes referred to as "secondary sanctions")?

Under the Israel Boycott Law, the UAE imposed secondary and tertiary sanctions on Israel. However, in 1995, Cabinet Resolution 462/17M of 1995 was issued, reducing the scope to only primary sanctions. This Resolution was not publicised in the Gazette and to date, the Israel Boycott Law has not been amended.

3 Implementation of Sanctions Laws and Regulations

3.1 What parties and transactions are subject to your jurisdiction's sanctions laws and regulations? For example, do sanctions restrictions apply based on the nationality of the parties involved? Or the location where the transactions take place?

The parties and transactions subject to UAE's sanctions laws and regulations depend on the nature of and reasons for the sanctions. Certain sanctions are more narrowly targeted than others. With respect to sanctions targeted at specific individuals and organisations (e.g. under Local Lists), restrictions would not apply based on their nationality but rather identity or affiliations. With respect to more comprehensive sanctions targeted at governments, such sanctions often apply based on the nationality of persons involved, such as in the case of Qatar and Israel. Sanctions can also apply on the location where the transaction takes place; this is particularly relevant where sanctions are targeting trade with a certain country or the country imposing the sanction refuses to recognise or accept deals involving the currency of a certain country, as is the case with Iran and Qatar.

3.2 Are parties required to block or freeze funds or other property that violate sanctions prohibitions?

Financial institutions and customs departments in the UAE are, in certain circumstances, required to block or freeze funds or other property that violate sanctions. Article 5 of the AMLCFT Law specifically accords the governor of the Central Bank or his delegate the right to freeze suspicious funds. Furthermore, Article 2 of the Commodities Law accords the customs departments the right to ban or restrict the import/export of commodities in case the "foreign policy of the State so requires". Pursuant to Article 12 of the Sanctions Regulation, "no physical or moral person shall be allowed to make the Funds in its possession or under its managements, or any financial services or other, available directly or indirectly to or in favour of any person or organisation listed on the Sanctions List...".

3.3 Are there licences available that would authorise activities otherwise prohibited by sanctions?

There are no licences available that would authorise activities otherwise prohibited by sanctions per se. However, special licences may be required to conduct activities more susceptible to the possible breach of sanctions; for example, pursuant to the Commodities Law, strategic goods and dual-use items, such as arms and military hardware, chemical and biological materials, cannot be exported or re-exported without a special licence.

3.4 Are there any sanctions-related reporting requirements? When must reports be filed and what information must be reported?

Multiple laws and regulations, including Article 15 of the AMLCFT Law, impose an obligation on financial institutions and DFNBPs to report to the relevant financial regulator any suspicion or any situation in which they have reasonable grounds to suspect a transaction or funds is related to a money-laundering crime, related predicate offences, financing of terrorism or illegal organisations.

Furthermore, Article 19 of the Sanctions Regulations imposes several reporting obligations on financial institutions and DFNBPs to the relevant financial regulator, including in the following cases: a. where it has frozen funds pursuant to issued sanctions; and b. where any of its former customers or an accidental customer dealt with is a person listed on the Sanctions List.

3.5 How does the government convey its compliance expectations? Are certain entities required to maintain compliance programmes? What are the elements of a compliance programme required (or recommended) by the competent regulator(s)?

The government conveys its compliance expectations by circulating circulars and directives as well as issuing laws and regulations. Article 16 of the AMLCFT Law requires financial institutions and DFNBPs to develop internal policies, controls and procedures to enable them to manage the risks identified and mitigate them. In financial free zones, compliance expectations are comprehensive and included in "Rulebooks". Furthermore, Article 20 of the Sanctions Regulations imposes an obligation on financial regulators to take all measures to ensure financial institutions and DFNBPs comply with UN sanctions and apply administrative sanctions upon violation of such compliance. A common compliance policy required is the implementation of client due diligence and onboarding clearances to ensure that customers of such institutions are not subject to any sanctions.

4 Enforcement Criminal Enforcement

4.1 Are there criminal penalties for violating economics sanctions laws and/or regulations?

There are criminal penalties for violating economic sanction laws and/or regulations where such violation also constitutes a crime under Federal Law No. 3 of 1987 on the issuance of the Penal Code ("Penal Code") or other applicable laws, such as the Anti-Terrorism Law, Commodities Law, and AMLCFT Law. Article 20 of the Sanctions Regulations provides that any violation thereof is subject to the penal and administrative sanctions set forth under the AMLCFT Law.

4.2 Which government authorities are responsible for investigating and prosecuting criminal economic sanctions offences?

The government authorities responsible for investigating criminal economic sanctions offences differ depending on the nature of the sanctions. As explained above, different government authorities are responsible for implementing different types of sanctions; these very same government authorities must investigate any potential breach by a person under its surveillance. For example, the Central Bank is responsible for investigating any breach of sanctions by financial institutions in the UAE, or the relevant customs department for any breach of sanctions by way of unauthorised exports/imports. These governmental authorities must then report to the executive board of the Supreme Council for National Security, which will further investigate the matter and may file a claim for prosecution of any person found to be in breach of sanctions through the judiciary system.

4.3 Is there both corporate and personal liability?

There is both corporate and personal liability. This is expressly stated, among others, under Article 42 of the Anti-Terrorism Law and Article 4 of the AMLCFT Law. With respect to natural persons, imprisonment may be imposed in addition to or instead of fines.

4.4 What are the maximum financial penalties applicable to individuals and legal entities convicted of criminal sanctions violations?

Pursuant to Article 42 of the Anti-Terrorism Law, a maximum of AED 100 million shall be imposed upon a judicial person who violates criminal sanctions, unless a more severe penalty is imposed under the Penal Code. Article 162 of the Penal Code provides for a fine of not less than AED 1 million where a person imports/exports to an enemy country in time of war. Under the Commodities Law, an individual can be fined up to AED 500,000. Under the Central Bank Law, a financial institution disregarding instructions of the Central Bank not to deal with specific persons will be fined a minimum of AED 500,000 and a maximum of AED 10 million.

4.5 Are there other potential consequences?

Other potential consequences for breach of sanctions, where such breach constitutes crimes under the Anti-Terrorism Law or Penal Code, include imprisonment and capital punishment. The Commodities Law also provides for imprisonment for up to one year. Public prosecution may be involved if the issue relates to a crime punishable by law, such as felonies. The AMLCFT Law lists out potential consequences for breaches thereof, including:

• 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 for the violation;
• arresting managers, board members and supervisory and executive management members who are proven to be responsible for the violation for a period to be determined by the supervisory authority or requesting their removal; and
• cancelling the licence of the violator. Certain companies involved in money laundering and proliferation of dual-use/dangerous materials have had their trade licences revoked due to breach of the AMLCFT Law, Sanctions Regulations, Commodities Law as well as the Non-Proliferation Treaty and other UN resolutions.

4.6 Are there civil penalties for violating economics sanctions laws and/or regulations?

There are civil penalties for violating economics sanctions laws and regulations. These penalties depend on the nature of the violation in question. Persons violating custom laws may find themselves fined or their assets seized and/or destroyed. Persons effecting wire transfers in breach of sanctions may, in certain cases, find access to their bank accounts blocked until an investigation is conducted by the Central Bank or other competent financial regulator.

4.7 Which government authorities are responsible for investigating and enforcing civil economic sanctions violations?

The government authority responsible for investigating and enforcing civil economic sanctions depends on the nature of the sanction that was breached. For instance, with respect to breach of custom laws, the relevant customs department is responsible, and with respect to breach of the Central Bank's rules, the Central Bank is responsible.

4.8 Is there both corporate and personal liability?

There is both corporate and personal liability for civil economic sanctions violations. The laws and procedures applicable where civil economic sanctions are violated include the blocking of transactions and imposition of administrative fines by the competent authorities.

4.9 What are the maximum financial penalties applicable to individuals and legal entities found to have violated economic sanctions?

Administrative penalties may apply where persons are found to have violated economic sanctions; the penalty amount differs depending on the severity of the violation. With respect to customs offences, persons may be fined varying amounts depending on the offence and the value of the related goods.

4.10 Are there other potential consequences?

There is no limitation in principle to other potential consequences for a violation of civil economic sanctions. Other potential consequences may vary depending on the nature of the violation and required measures to avoid a breach of sanctions, including the seizing and destruction of assets and freezing of bank accounts.

4.11 Describe the civil enforcement process, including the assessment of penalties. Are all resolutions by the competent authorities public?

Assessment of penalties depends on the breach itself. Where the latter includes a transaction, the penalty can be linked to the value of the transaction. Should a matter be brought before the courts, the penalty assessment can also be left to the discretion of the judge. Not all resolutions by the competent authorities are public; certain penalties are imposed at their discretion and are based on the gravity of the violation.

4.12 Describe the appeal process. Have companies challenged penalty assessments in judicial proceedings?

The appeal process for sanction penalties does not usually take place in judicial proceedings but rather consists of the submission of grievances and other administrative proceedings. Depending on such proceedings, it may be possible in certain cases to raise a claim and to appeal a decision before the courts. The UAE does not have a binding precedent system, therefore information regarding cases in the UAE is not always publicly available.

4.13 Are criminal and civil enforcement only at the national level? Is there parallel state or local enforcement?

Criminal and civil enforcement are at both the national and Emirati level. While the Central Bank administers its applicable laws at a national level, customs laws are often administered at an Emirati level; for example, with respect to Dubai by the Dubai Customs and with respect to Abu Dhabi by the Abu Dhabi Customs.

4.14 What is the statute of limitations for economic sanctions violations?

Under Federal Law No. 5 of 1985 regarding civil transactions ("Civil Code"), the statute of limitation for civil claims is 15 years, unless otherwise expressly provided in a statute. With respect to money laundering or financing terrorism or crimes by illegal organisations, Article 29 provides that criminal cases are not subject to the statute of limitations and the sanctions shall not lapse with time or with the lapse of any related civil legal cases due to the statute of limitations.

5 General

5.1 If not outlined above, what additional economic sanctions-related measures are proposed or under consideration?

Additional economic sanctions-related measures are regularly proposed and under consideration; however, such information is not usually shared with the public until officially issued or announced. In other exceptional situations, the UAE may announce its intention to impose or comply with certain sanctions, such as its latest announcement to comply with existing and upcoming US sanctions on Iran.

5.2 Please provide information for how to obtain relevant economic sanctions laws, regulations, administrative actions, and guidance from the Internet. Are the materials publicly available in English?

Many economic sanctions laws are available on the websites of the governmental entities issuing the same, sometimes both in English and Arabic. Economic sanctions laws and regulations can also be found in the Official Gazette of the UAE.

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