United Arab Emirates

By Charles Laubach and Abdus Samad | 4 December 2018

The Authors

Charles Laubach
Partner
claubach@afridi-angell.com
Tel: +971 4 330 3900Charles has practiced as a legal consultant in the UAE since 1986. Charles has an active practice advising corporate clients on corruption and FCPA compliance matters, as well as on general corporate and commercial matters. His numerous publications on the subject include the UAE chapter in Anti-Corruption Regulation 2016, published by Getting the Deal Through. He is a member of the Pennsylvania and DC Bars.
Abdus Samad
Abdus Samad
Associate
asamad@afridi-angell.com
Tel: +971 4 330 3900Abdus advises foreign and local clients on general corporate, commercial and other matters related to the conduct of business in the region including corporate investments, restructuring, setting up companies and joint ventures in the UAE, and the acquisition and sale of business. Abdus has also been involved in banking and finance transactions, and advises clients on banking related products and services.

The UAE federal government has recently issued a raft of important legislation, addressing and in many ways updating areas of law that are key to businesses in the jurisdiction. Amongst this legislation is Federal Decree-Law 14 of 2018 concerning the central bank and the organisation of financial institutions and activities (the “New Banking Law”) and Federal Decree-Law 20 of 2018 concerning anti-money laundering and anti-terrorism financing (the “New AML Law”). Both the New Banking Law and the New AML Law repeal and replace the previous legislation on their respective subjects.

Importantly, the New Banking Law and the New AML Law have together enhanced the protection afforded to confidential information under UAE law, in particular where financial and legal service providers and their customers and clients are concerned.

Confidentiality under UAE law
While it has long been the case that confidential information was given protection, such protection was spread across various pieces of legislation. For example, it has been generally accepted that UAE law includes an obligation on the part of a bank or a financial institution to hold information concerning its customers as confidential. This was understood to form part of customary banking practice in the UAE and was confirmed through certain guidance issued by the Central Bank. Similarly, obligations of confidentiality were placed on other service providers through sector specific legislation on the matter (see for example, Dubai Law 11 of 2013 concerning obligations of insurance companies in the Emirate of Dubai and Federal Law 23 of 1991 concerning the licensing of advocates). A general obligation of confidentiality was also contained in the UAE Penal Code (being Federal Law 3 of 1987, as amended).

Each of the New Banking Law and the New AML Law improves on this position and places customer confidentiality on statutory footing.

Confidentiality under the New Banking Law
Article 120 of the New Banking Law provides that all data and information concerning accounts, deposits and safe deposit boxes (along with transactions concerning these facilities) of a customer shall be considered confidential and must not be directly or indirectly disclosed to any third party, in each case without the prior written consent of the customer. The obligation to keep such data and information confidential is stated to continue for an indefinite period, notwithstanding the termination of the relationship between the account holder and the bank or financial institution. Importantly, Article 120(4) stipulates that the obligation of confidentiality extends to all “agencies” and “persons” and other entities that by virtue of their profession or employment have access to such information.

Though the clarity provided by the Banking Law with regards to customer confidentiality is welcome, it remains to be seen how this obligation will affect the exchange of credit information (for example, in the context of disclosure of financial information to a UAE credit rating agency). It also remains to be seen whether there will be clearly prescribed sanctions and/or penalties for breach of such obligations.

The Banking Law provides that the Central Bank will issue further rules on this matter and it is anticipated that these rules will provide the required granularity to the confidentiality obligations set forth in the New Banking Law.

Confidentiality under the New AML Law
Like the New Banking Law, the New AML Law contains guidance with respect to confidentiality. Importantly, Article 15 of the New AML Law contains an exception to the obligation of a bank or financial institution covered by the New Banking Law to hold customer information confidential. In summary, such a bank or financial institution must issue a notification in the prescribed form to the designated unit within the Central Bank, where it has reasonable grounds to suspect a transaction or funds concerns a crime. In such case, the bank or financial institution must inform the designated unit within the Central Bank of its suspicion “without delay” and must include an appropriate level of detail on the account or transaction concerned, and without regard to the confidentiality of such information. It remains to be seen how banks and financial institutions will balance their obligations of confidentiality (as now enshrined within the New Banking Law) against their obligations of disclosure under the New AML Law. The obligation to report suspicious transactions is also imposed on Designated Non-Financial Businesses and Professions, a category that will be detailed in the implementing regulations contemplated by the new AML Law. Importantly, it remains to be seen how banks will determine what constitutes “reasonable” grounds. Is mere suspicion adequate?

Interestingly, the New AML Law provides (albeit indirect) recognition to the fact that lawyers (including those licensed as “legal consultants” in addition to those licensed as “advocates”) owe a duty to their clients to treat information received from such clients as confidential. It was previously the case that the confidentiality obligations of a legal consultant had to be derived by analogy to Federal Law 23 of 1991 concerning the licensing of advocates and, in the Emirate of Dubai, from the provisions of the draft code of conduct issued by the Dubai Legal Affairs Department.

Article 15 of the New AML Law stipulates that lawyers, notaries and other legal professionals are exempt from the requirements of disclosure contained in article 15 of the New AML Law, provided such information is received “subject to professional confidentiality”. This exemption is also extended to independent legal auditors. While the introduction of such exemption is welcome, it remains to be seen how the courts and authorities will interpret the requirement for the relevant information to have been received “subject to professional confidentiality” and whether the implementing regulations contemplated by the New AML Law will place limits on this exemption.

Despite further guidance pending, these legislative developments highlight the importance of confidentiality for businesses that receive and deal with confidential information. It also helps to bring into focus the high level of importance placed by UAE policy makers on matters of confidentiality and privacy. Businesses in the UAE would be well advised to take note of these developments and to stay alert for further developments in this field.

Afridi & Angell

Founded in 1975, Afridi & Angell is a leading full-service UAE law firm. The firm provides comprehensive and authoritative legal advice and innovative business solutions in banking and finance; corporate and commercial law; dispute resolution; projects; construction and real estate; employment; energy; project finance; transport; as well as doing business in Iran, the UAE and the DIFC. We advise local and regional clients ranging in size and sophistication from start-ups to some of the region’s largest public and private companies, governments and quasi-government institutions. We work extensively with entrepreneurs and investors from the region and beyond, and have attracted numerous international clients looking for the right counsel to protect and expand their interests.Afridi & Angell is a selected member of top legal networks and associations, most notably Lex Mundi, the world’s leading network of independent law firms, and World Services Group.

www.afridi-angell.com

Tags: AML, Banking
Related Articles by Firm
Clasis Law (India) Newsletter August 2015
Analysis of the revocation of a company's drug patent and other key court rulings and updates on corporate and commercial matters
Foreign Banks Allowed to Operate in Myanmar
After more than 50 years of banning, the Central Bank of Myanmar has issued the first final licenses allowing four foreign banks to operate in Myanmar.
Tanzanian Draft National Energy Policy of 2015
Highlights on the ongoing and upcoming industry developments with focus on the transition of the energy sector since the introduction of the Big Results Now! campaign
Mineral Rights Available in Tanzania
Overview of the mineral rights available in Tanzania, with specific focus on the various categories of mineral rights
The Legal Framework of the Aviation Sector in Tanzania
As attention turns to Tanzania’s trade and energy opportunities, the spotlight has fallen upon the nation’s infrastructure. This update focuses on the capabilities and issues of the Tanzanian aviation sector.
Oil price volatility - Offshore oil storage
Are there any legal concerns with tankers being used for floating storage?
Oil price volatility - risks and opportunities in 2015
While many companies can weather the oil price slide and volatility, some industry players face a real risk of insolvency.
India: Union Budget 2015
A bullet-point overview of changes in Direct Tax, Indirect Tax and Goods and Service Tax in India in light of Finance Minister Arun Jaitley’s first full-year Budget…
Prohibition against transfer of personal data outside Hong Kong
Section 33 of the Personal Data (Privacy) Ordinance (PDPO) prohibits the transfer of personal data to places outside Hong Kong, except in circumstances specified in the PDPO.
Security of payment under FIDIC contracts: more secure, for now
The High Court of Singapore recently handed down an important judgment in relation to the enforceability of Dispute Adjudication Board (DAB) decisions under the FIDIC forms of contract.
Insurance Laws (Amendment) Bill passed as Ordinance in India
The long-awaited Insurance Laws (Amendment) Bill has become a provisional law in India. The Bill amends the Insurance Act (1938), the General Insurance Business (Naturalisation) Act (1972), and the Insurance Regulatory and Development Act (1999).
SICC: now open for business
On Monday 5 January 2015, the Singapore International Commercial Court ("SICC") was officially opened...
Myanmar insurance update
Clyde & Co partner Michael Horn recently visited Myanmar's commercial capital Yangon and reports on the current state of the insurance market...
Launch of the online mining cadastre transactional portal
Plus, a summary of the key mineral rights available in Tanzania; and, a look at the manner in which mineral rights can be transferred.
Restrictions imposed on holders of mineral rights
This briefing looks at some of the restrictions imposed on holders of mineral rights in Tanzania by the Mining Act 2010
Draft local content policy for the oil & gas industry in Tanzania
The first draft of the long-awaited local content policy for the oil & gas industry in Tanzania has now been published by the Ministry of Energy and Minerals ...
Tanzania: Revocation of mining licences
The Tanzanian government recently announced the cancellation of a total of 174 mining licences. This mining update examines the key continuing obligations imposed by the Mining Act upon mining licence holders.
Mining Development Agreements
In this month’s mining briefing we look at Mining Development Agreements (MDAs) and the role that they play in the mining sector in Tanzania.
The Tanzanian railway system: current legal framework
The railway system of mainland Tanzania has a total track length of 3,676 kilometers (km) with two separate networks, run by two separate organisations ...
Related Articles
Federal Penal Code amendments
The amendments are designed to make the UAE's Penal Code consistent with other recent federal legislation and current federal enforcement policies.
Investments for the environment
In a recent report released by the leading international body for assessment of climate change, the UN Intergovernmental Panel on Climate Change (UN IPCC), established a target global warming limit of 1.5°C ...
Infrastructure investment in emerging markets — mitigating the risks
Infrastructure projects in emerging markets attract investors on the back of potential returns that can outstrip yields in mature markets ...
Related Articles by Jurisdiction
New services by Dubai Rental Disputes Centre
The Rental Good Conduct Certificate service is a first-of-its-kind initiative in the world.
Just deserts
Director of legal for the Arabian Real Estate Investment Trust, Adam Malouf discusses his career path and the challenges of his current role.
Latest Articles
Australia courts Asian markets — and capital
Deepening financial and trade ties are solidifying the country's role in the region.
Federal Penal Code amendments
The amendments are designed to make the UAE's Penal Code consistent with other recent federal legislation and current federal enforcement policies.
Clifford Chance discusses its Singapore innovation lab
We speak to Kai Niklas-Schneider, managing partner of Clifford Chance, about its newly launched Create+65 Innovation Lab in Singapore.