This infographic briefly explains the requirement of Regulated Entities in the UAE to conduct Know Your Employee (KYE) not only to ensure regulatory compliance but to reduce ML/FT and PF risks financial risks, avoid lawsuits and fines, and safeguard customer data. These KYE obligations in the UAE form an important part of an entity’s broader AML/CFT framework.
The Cabinet Decision No. (10) of 2019 requires regulated entities (REs) in the UAE to ensure that employment criteria and inspection procedures are in corporated into their internal AML policies, procedures, and controls. These statutory requirements highlights the importance of KYE obligations in the UAE as a preventive measure against misuse of systems and resources. This requirement of being diligent when hiring and monitoring employees helps REs stay compliant with AML/CFT obligations in the UAE and ensures that the employees of the REs do not end up facilitating ML/FT or PF activities by circumventing control measures in place or misusing the RE and its resources to conduct financial crimes to benefit themselves or their aides who might be high-risk or sanctioned individuals. Employees that need to be scrutinised include but are not limited to, all employees, including senior management, directors, compliance team members, and contractual or part-time employees.
When employees are identified, verified, screened, and given appropriate risk scores, following which they are re-screened and re-assessed from time to time in an ongoing manner, based on the degree of ML/FT and PF risk they pose to the RE, the process of Know Your Employee (KYE) is completed.
Proper implementation of KYE obligations in the UAE helps the REs to identify and report devious employees to the regulator in a timely manner while reducing the risk of the employee facilitating ML/FT or PF activities by acting as a tool on behalf of a high-risk individual or entity that might be sanctioned or might be indulging in predicate offences resulting in illicit proceeds. AML Software and solutions can support this monitoring and risk scoring process efficiently.
When all the employees of an RE are adequately identified and verified, and adequate due diligence measures are applied, the consequential risk of non-compliance with AML obligations reduces significantly, bringing down the risk of incurring fines and penalties due to non-compliance with AML obligations.
Robust KYE helps REs reduce the possibility of being served or charged with a lawsuit by third parties, customers, suppliers, and other stakeholders due to the possibility of illicit activities by employees, such as fraud, embezzlement, or any other white-collar crimes committed by the employee during the course of their employment with the RE.
The strict employee hiring filter parameters help REs ensure that their employees exercise their functions with utmost professional integrity and due care. KYE helps filter out potential and existing employees with past or ongoing criminal records and ensures that the customer data is in safe hands. The AML obligation of REs requires employees of an RE to handle customer data to fulfil customer due diligence obligations. Therefore, when KYE is done with a risk-based approach, the result is a reduced possibility of customer data breaches or security incidents such as customer data theft and the selling of customer data by employees.
The REs in the UAE are required to adhere to AML/CFT obligations. As part of these obligations, they are required to perform KYE measures on their existing and potential employees with a risk-based approach. This helps REs mitigate the ML, FT, and PF risks to the entity from within, i.e., internal ML/FT and PF risks.
