The Supervisory Authorities Sub-Committee and the Financial Intelligence Unit of the UAE have issued a report highlighting the typologies of financial crime, with special focus on the COVID-19 pandemic. This typology report intends to elucidate ML/TF, fraud, bribery and corruption risks in the financial sector.
The report notes that the use of unlicensed money service providers, such as Hawala, for ML has increased in the UAE during the COVID-19 pandemic. Further, the use of professional ML services by criminals may increase during the pandemic as they do not require physical movement of cash or goods. Additionally, e-commerce is being used an ML tool since COVID-19-related lockdowns have boosted this sector. Many financial criminals are using front companies for ML. These are fake digital storefronts that appear legitimate, but do not actually sell the purported products. Others are employing pass-through companies or transaction laundering. This involves illegal businesses using a legitimate merchant’s platform to process criminal proceeds.
The use of virtual currencies is another area where ML may be on the rise during the pandemic. This is because financial criminals ultimately have to convert illegal virtual proceeds into cash or other assets. Moreover, there has been an increase in the use of money mules for ML during the pandemic. Other ML typologies on rise include transactions to high-risk jurisdictions during COVID-19 pandemic, terrorism-financing using COVID-19-themed fundraising and online exploitation. Indeed, cyber fraud risk in general has increased during the pandemic due to greater reliance on digital transactions. Particularly, charity fraud, profiteering off COVID-19-related medical supplies, and contractor/vendor fraud involving COVID-19-related medical supplies have all been commonly reported in this period.
Source: Central Bank of the UAE