12.2 Customer Due Diligence, Beneficial Owners and Enhanced Due Diligence
Key Takeaways
Customer due diligence must be completed before or during the establishment of the business relationship, not left until the transfer date.
Under Cabinet Decision No. 109 of 2023 a beneficial owner is a natural person who owns or controls 25% or more of a company's capital or voting rights, directly or through a chain.
Where no one meets the ownership test, look for control by other means, such as the right to appoint or dismiss most directors, and then a senior managing official.
Politically exposed persons need senior management approval, verified source of wealth and source of funds, and enhanced ongoing monitoring.
Customer due diligence and transaction records must be kept for at least five years under the UAE AML rules.
12.2 Customer Due Diligence, Beneficial Owners and Enhanced Due Diligence
Customer due diligence (CDD) means knowing who you are dealing with, who ultimately owns or controls them, where the money comes from and why the transaction makes sense. The UAE rules require a risk-based approach: more checks for higher-risk clients and deals.
1. Risk-based approach
| Risk factor | Lower-risk indicators | Higher-risk indicators |
|---|---|---|
| Customer | UAE resident salaried buyer with a mortgage from a UAE bank | Politically exposed person; company with nominee shareholders; reluctance to give information |
| Geography | Funds from a UAE bank account | Links to countries under FATF "call for action" or increased monitoring, or to sanctioned jurisdictions |
| Product and payment | Mortgage-financed purchase at market value | Cash, virtual assets, third-party payers, rapid off-plan flips, prices far from market |
| Delivery channel | Face-to-face with original IDs | Remote onboarding through intermediaries or powers of attorney |
2. What CDD collects
Timing: CDD is completed before or during the establishment of the business relationship, in practice before Form A, Form B or Form F is signed, not at the trustee centre.
Individuals:
- Full name, nationality, date of birth and ID: Emirates ID for residents, passport for non-residents.
- Address and occupation or business.
- Source of funds for this transaction (for example a UAE bank account or a mortgage) and, for higher risk, source of wealth (how the client built their overall wealth).
- Screening against sanctions lists.
Companies and other legal arrangements:
- Trade licence or certificate of incorporation, memorandum and articles, register of shareholders and directors.
- Authority of the signatory (board resolution or POA) and CDD on that person.
- Identification of the beneficial owners (below), with the ownership chain documented.
3. Beneficial owners (Cabinet Decision No. 109 of 2023)
Article 5 of Cabinet Decision No. 109 of 2023 defines the beneficial owner of a legal person as whoever owns or exercises ultimate control over it:
- Ownership test: a natural person who owns, directly or indirectly, 25% or more of the capital or holds 25% or more of the voting rights, including through a chain of ownership or control.
- Control by other means: if no one meets the ownership test, a natural person who controls the company in another way, such as the right to appoint or dismiss most of the directors.
- Senior managing official: if no natural person can be identified under the first two tests, the person holding the senior management position is treated as the beneficial owner.
Worked example. A buyer company is owned 60% by Company A and 40% by Company B. Company A is 100% owned by Mr Khalid. Company B is owned 50/50 by Mr Tariq and Mr Ziad.
| Person | Indirect share | Beneficial owner on the 25% test? |
|---|---|---|
| Mr Khalid | 100% × 60% = 60% | Yes |
| Mr Tariq | 50% × 40% = 20% | No, unless he controls the company by other means |
| Mr Ziad | 50% × 40% = 20% | No, unless he controls the company by other means |
The brokerage records the whole chain, verifies Mr Khalid as beneficial owner, and asks whether anyone exercises control by other means; under a risk-based approach it may also verify the 20% holders if the structure is complex or high risk. Giving false or misleading beneficial-owner information is itself an offence under the 2025 law.
4. Enhanced due diligence (EDD)
EDD applies where the risk is higher. Common triggers and measures:
| Trigger | Measures |
|---|---|
| Politically exposed person (PEP), family member or close associate | Senior management approval before establishing or continuing the relationship; reasonable measures to establish source of wealth and source of funds; enhanced ongoing monitoring |
| Customer or funds linked to high-risk countries | Extra checks on the purpose of the deal and the funds; heightened scrutiny of payments |
| Complex or opaque structures (offshore layers, nominees, trusts) | Full ownership chart to natural persons; documentary proof of each layer |
| Unusual payments (cash, virtual assets, third parties) | Ask for the commercial reason; consider REAR and STR obligations |
Being a PEP is not a ban on buying property; it means the firm must take extra steps and senior management must sign off.
5. Ongoing monitoring and records
- Ongoing monitoring: keep checking that payments, parties and amounts fit what the firm knows about the client, and update CDD when something changes.
- If CDD cannot be completed: do not proceed, and consider whether a suspicious transaction or activity report is needed.
- Records: keep identification documents, CDD and EDD files, beneficial-owner analysis, contracts (Forms A, B, F and I), payment evidence and copies of reports for at least five years, ready to produce to the Ministry of Economy, the FIU or the courts.
A Cayman company buying a Palm Jumeirah penthouse is owned 60% by Company A and 40% by Company B. Company A is wholly owned by Mr Khalid; Company B is owned equally by Mr Tariq and Mr Ziad. No one has special control rights. Under the 25% test in Cabinet Decision No. 109 of 2023, who is a beneficial owner?
Only the company's registered agent in the Cayman Islands
Mr Khalid only, who holds 60% indirectly; Mr Tariq and Mr Ziad each hold 20% indirectly, below the 25% threshold
Mr Khalid and Mr Tariq only
All three, because every indirect shareholder is a beneficial owner
A serving foreign cabinet minister wants to buy three waterfront villas for AED 45,000,000 with personal funds. What must the brokerage do before establishing the relationship?
Refuse, because politically exposed persons may not own property in Dubai
Check only the passport, because ministers have diplomatic immunity from AML rules
Apply enhanced due diligence: obtain senior management approval, take reasonable measures to establish source of wealth and source of funds, and monitor the relationship more closely
Refer the client to the Ministry of Foreign Affairs and then apply standard checks
A brokerage closes the sale of a commercial building and receives its commission. For how long must it keep the CDD file, contracts and payment evidence?
Two years from the listing agreement
At least five years
Seven years, but only for deals above AED 10,000,000
Ten years, after which the files go to the Dubai Courts archive
Sections you finish are checked off in the contents.