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	(249538,24349,'ReportText','<p dir=\"LTR\" align=\"LEFT\"><em>Saudi Arabia is undergoing significant reform but, beyond the maelstrom of political speculation and conjecture, what are the practical and legal implications of the anti-corruption drive for investors?</em></p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia has seen tumultuous reform in the last 12 months as Crown Prince Mohammed bin Salman has sought to propel Saudi Arabia towards Vision 2030. International attention has been riveted to the government’s surging anti-corruption drive since a number of high-profile individuals were detained on corruption charges towards the end of 2017. Much of this attention, however, has been tangential, without providing clear insight into what impact such radical measures will have on the country’s legal framework and business climate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Favourable Forecast? The Business Outlook on Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The extent and boldness of the recent measures taken in Saudi Arabia are indicative of the government’s resolve to eliminate corruption in the system. The Kingdom has been signatory to the United National Convention Against Corruption (UNCAC) since 2004, though it only ratified the agreement in 2013. The events that have garnered so much international attention are only the latest in a long-term initiative to address corrupt practices in the business sector. Between 2012 and 2017, Saudi Arabia has improved its score on the Transparency International Corruption Perceptions Index (CPI) from 44 to 49. Whilst this score still reflects significant room for improvement, it also charts measurable progress in a region that continues to face drastic change, and provides impetus for the more recent measures that clearly demonstrate the elevated priority of anti-corruption reform.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order for the Kingdom to benefit from its drive for sustainability and prosperity, however, its determination to eradicate corruption must be symbiotic with its ability to assure investor confidence. The zero-tolerance approach that has surfaced over the past year has the potential to greatly improve the integrity of Saudi Arabia’s business market, but lingering concerns surround residual corruption with certain businesses continuing to question the feasibility and longevity of trading in the Kingdom.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The United Nations Conference on Trade and Development (UNCTD) World Investment Report 2018 suggests that, in the short term at least, the anti-corruption drive has done little to improve investor confidence and may even have exacerbated feelings of uncertainty. Inward Foreign Direct Investment (FDI) flows have fallen by more than 80% between 2016 and 2017. Whilst this trend cannot be entirely attributed to the anti-corruption sweep that happened late in the final quarter of the year, it is certainly likely to have been a contributory factor in unsettling investor confidence. From a long-term perspective, however, efforts to level the playing field in Saudi Arabia may bring fairer weather to businesses as the obstacles associated with pervasive corruption are gradually eliminated from the system.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia is far from being alone in its fight against corruption; it is one of the most prevalent and pressing issues facing systems across the globe, and countries with endemic corruption problems face an almost insurmountable challenge to attract foreign investment. At this nascent stage, it would be premature to speculate as to how other Middle Eastern countries will respond to the Kingdom’s efforts, but the most desirable outcome would be for neighbouring countries to become emboldened in their own anti-corruption efforts. The UAE already stands as the regional outlier in anti-corruption efforts, with a CPI 2017 ranking of 21st in the world, comparable to many leading international jurisdictions. The combined efforts of both Saudi Arabia and the UAE could be instrumental in forging a clear path to greater transparency for other afflicted countries in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Staying Dry: Legal Safeguards Against Corruption In The Kingdom</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The primary anti-corruption provisions are provided by the anti-bribery law issued by Royal Decree No. M/36 of 29-Dhu al-Hijjah-1412 (corresponding to 30 June 1996) (the \"Anti-Bribery Law\"). More recently, a decree was issued setting out rules relating to gifts for public officials (Decree No. 60 dated 18 Safar 1437H (corresponding to 1 December 2015) (the \"Rules on Gifts to Officials\" or the \"Rules\").</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Bribery of Public Officials</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law is primarily focused on public servants. In order to maintain maximum protection for its public sector, the definition is intentionally broad, extending to personnel of joint stock companies, along with their board members and directors. It may also capture private sector individuals who are working on government-related projects, such as consultants to government projects, including temporary employees, experts appointed by the government or judiciary, or even employees of private companies contracted to provide public services. Employees of joint stock companies are also subject to the Anti-Bribery Law, as well as employees of companies and sole proprietorships engaged in banking services.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law broadly defines a bribee as any public servant who solicits, accepts or receives for himself or for others, a gift or payment of any sort, or a promise thereof, as consideration for any act that impinges on the integrity of office. Defences against such practices are fortified by the absence of any exemption, caveat or even significant qualifying criteria for the type of act that could invoke bribery provisions. Any act can be considered corrupt, regardless of its legitimacy, whether it is a positive act or an omission, whether it has been done in the absence of a prior agreement, and even where it involves using the influence attached to a public office to gain benefit, rather than the performance of a relevant duty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Given the traditionally prominent role of the government in the national economy, the Anti-Bribery Law does provide relatively wide protection, despite the obvious lack of corresponding safeguards applicable to the private sector. Privatisation targets encapsulated by Vision 2030, however, necessitate more complete protection and new measures that target both the public and private sector are a requirement going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Penalties and Enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Under the Anti-Bribery Law, penalties for the offences set out above can reach maximum penalties of imprisonment for a term not exceeding ten years and/or a fine not exceeding one million riyals (about USD 275,000).</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Along with the specific penalties applicable to public servants who accept a bribe, it should be noted that the Anti-Bribery Law provides for the person offering the bribe (whether it is accepted or not), and any accomplice, to be susceptible to corresponding punishments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To protect a culture of respect for public officials, conviction on bribery offences also leads to dismissal and a bar from public office for a minimum of five years. In an attempt to prevent perpetrators from benefitting from the proceeds of crime, the Anti Bribery Law provides that any money, benefit or privilege derived from committal of the offence be confiscated wherever possible.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Gifts and Hospitality</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">No exemptions are provided for gifts and hospitality in the Anti-Bribery Law. Any benefit or privilege obtained by the bribee, regardless of its type or designation, whether material or otherwise, shall be considered a (prohibited) gift or promise. This has led to confusion in the past, as conventional business practices that would be widely accepted in other systems appeared to invoke the strict anti-bribery restrictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This matter was somewhat elucidated with the passing of the Rules on Gifts to Officials. Pursuant to these Rules, an official may accept gifts, given at visits and official occasions or at receptions of official guests, in accordance with custom and the courtesy protocols of such visits and occasions, though they cannot be cash and must be conventional in the context in which it is given. Crucially, businesses must be cognisant that generally, when reviewing the appositeness of a gift, the authorities will consider a number of contextual factors, including the proximity of the gift-giving to any relevant business deal, common courtesy practices of the firm in question, proportionality of the gift to conventional customs, and the appropriateness of the benefit given.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Though further provisions on the permissibility of certain types of gifts are outlined in the Rules, gifts and hospitality continue to be point of concern for business and can prove problematic in a culture where generosity is an ever-present feature of relations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Exposure for Corporate Entities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Significantly, where the manager or any employee of a private company is convicted of any offence under the Anti-Bribery Law, and the offence was committed for the benefit of such company, the law provides for a fine not exceeding ten times the value of the bribe and/or a ban from entering into public procurement or project contracts of at least 5 years. The briber can be exempted from punishment if he informs the authorities prior to the discovery of the offence, and this may provide some means by which corporate entities can limit their exposure upon becoming aware of any apparent offences under the Anti-Bribery Law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparing for the Tempest: Bolstering Defences Ahead Of Reform</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a strategic perspective, since bribery is rarely an isolated issue, responses need to be thorough and comprehensive; part of an overarching coordinated national strategy that provides protection across an entire economic system and all branches of government. In order to ensure that such strategies are effective and aligned across institutions and businesses, they require constant monitoring and enforcement by a dedicated and independent authority, Where these institutions also act as the recipient in a sound and efficient reporting mechanism, the presence of a clear and trustworthy process increases the confidence of international investors.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Aside from the well-publicised arrests, Saudi Arabia’s corruption reform has extended to measures in other parts of its anti-corruption framework that have more sustainable implications for how it will address corrupt practices in future. These bold new mechanisms also enhance the country’s invigorated anti-corruption culture, which marks an abrupt departure from its previous presumed reticence on corruption matters.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Newly-formed Supreme Committee for Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The formation of the Supreme Committee is indicative of the greater strategic importance of anti-graft efforts to the country’s wider reform programme. Chaired by the Crown Prince and comprised of high-ranking officials from various sectors of governance, including security, finance and existing anti-corruption bodies, the Committee acts as a mechanism that will immediately elevate corruption instances to the remit of the highest echelons of government. In so doing, the Kingdom is sending a strong message that it will no longer turn a blind eye to practices that compromise its financial system or rule of law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The new Supreme Committee will have vastly advanced investigative and prosecutorial powers, including the capacity to issue arrest warrants and order interim measures such as issuing travel bans and asset freezing orders. This is a critical limitation of the existing National Anti-Corruption Commission, more commonly known as Nazaha, which was established in 2012 and has limited capacity, despite its function as the primary recipient of reports of corrupt activity. The new committee will not replace Nazaha, which will continue to target the protection of national integrity, investigate instances of graft in government contracts and refer any incidents to the relevant authorities and public prosecution as and when necessary.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">By coordinating the activities of both the Supreme Committee and Nazaha, the efficacy of existing measures will be boosted by covering a wider scope of prosecutorial powers, increased authority with which to pursue perpetrators, and greater scrutiny through public awareness.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specialised Anti-corruption Units Within the Public Prosecution Department</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As an additional measure, the Saudi government announced as recently as March 2018 that it had established new specialised anti-corruption units within the Public Prosecution. Cases prosecuted by these units would be carried out under the direct oversight of the Attorney General, once again demonstrating the paramount importance of corruption-related cases. Though it is unclear when the dedicated units will become operational, in creating this new advanced capacity the Saudi government has improved its ability to investigate and prosecute corrupt activity and, in so doing, will add an extra deterrent against illicit practices.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Whistleblower Culture</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Whistleblower protection is a significant point of departure in many regimes across the globe. Whilst some Western systems, such as the US, actively promote whistleblowing activity through substantial financial incentives, most countries in the Middle East have thus far been slow to introduce formal protection for whistleblowers, preferring instead to rely on a positive reporting duty and conscionable actions by citizens.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In this context, Saudi Arabia’s more proactive approach appears as an outlier. Article 17 of the Anti-Bribery Law provides for rewards for information substantiating an offence. Any person who is not a briber, or an accomplice, and who provides incriminating information substantiating any offence set out in Anti-Bribery Law, shall receive a reward not less than five thousand riyals (about USD 1,350) and not more than half of the money confiscated. There may be scope for a higher reward to be approved in appropriate circumstances.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, King Salman’s recent order in May 2018 to provide whistle blower protection is progressive in its outlook and signifies Saudi Arabia’s willingness to accede to international standards of rights and transparency when it comes to prosecuting corruption crimes. If Saudi Arabia is mindful of the risks posed by the potential for spurious claims and introduces adequate measures to prevent abuse of the reporting system, whistle blower protection is yet a further measure that will likely serve to reinforce the culture of zero tolerance that Saudi Arabia is attempting to cultivate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Impending Amendments to the Anti-Bribery Law</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 2 July 2018, Saudi Arabia’s Shoura (Consultative) Council approved draft amendments to the Anti-Bribery Law. The changes, which are yet to be implemented, are reportedly aimed at providing enhanced protection to public utilities through sound prosecution procedures and severe punishment for offences, as well as further enshrining the principles and commitments contained in the United Nations Convention Against Corruption (UNCAC). At present, the extent and exact nature of the amendments are unknown, but once officially passed into law, they have the potential to radically modernise Saudi Arabia’s anti-bribery legislation. This critical development warrants close attention over the coming months as the process to implementation progresses, and could assist investors in assessing the long-term outlook for Saudi Arabia’s economic integrity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Weather Eye on the Horizon: Is Further Change an Inevitability?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Anti-corruption measures are an ancillary part of the legal reform process in KSA, but do not represent the totality of the country’s ongoing transition. New money-laundering laws passed in October 2017 are emblematic of the Kingdom’s resolve to eradicate illicit practices from its system. Corruption is symptomatic of countries where there is weak rule of law, but Saudi Arabia’s legal fortifications will go a long way to stamping out the nexus of criminal behaviour that facilitates and drives corruption trends. These are important contributory factors that should be considered by foreign investors when making an assessment of Saudi Arabia’s economic security.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The changes that have already been implemented will only improve the prognosis of anti-corruption in Saudi Arabia. The continued momentum garnered from these initiatives will drive awareness of corruption problems, aided by the combined activity of Nazaha and the newly formed Supreme Committee for Anti-Corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This is a pivotal time for Saudi Arabia and the long-term outlook is positive – there is already evidence of widespread reform to protect the Kingdom’s economic stability and integrity and address systemic weaknesses. Simultaneously, the changes that have been gradually introduced by Saudi Arabia’s General Investment Authority (SAGIA) since 2015 to liberalise the national economy and provide space for full foreign ownership in key sectors, are creating new incentive for foreign investors to tap into the largest market in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Equally, investors must strike the appropriate balance between caution and enthusiasm when encountering new opportunities in the market. Corruption challenges are persistent and pervasive and will require sustained redress for the foreseeable future. Though it is yet undetermined what new mechanisms and measures may be deployed in the Kingdom in future, it is likely that subsequent steps taken to quash illicit practices will have considerable consequences for domestic and foreign investors alike. This will require that foreign investors understand the legal framework and secure their interests against inevitable shifts in the Saudi market as reform measures revolutionise the domestic business culture.</p>\r\nOverall, however, Saudi Arabia’s recent multifaceted approach to reform has created the perfect storm for investors and, with an impending multitude of investment projects, businesses have a prime opportunity to invest at the leading edge of FDI, assured that corrupt practices are not operating with impunity.|<p dir=\"LTR\" align=\"LEFT\"><em><img class=\"alignleft size-full wp-image-8012\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/DG.jpg\" alt=\"\" width=\"1536\" height=\"417\" />Saudi Arabia is undergoing significant reform but, beyond the maelstrom of political speculation and conjecture, what are the practical and legal implications of the anti-corruption drive for investors?</em></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia has seen tumultuous reform in the last 12 months as Crown Prince Mohammed bin Salman has sought to propel Saudi Arabia towards Vision 2030. International attention has been riveted to the government’s surging anti-corruption drive since a number of high-profile individuals were detained on corruption charges towards the end of 2017. Much of this attention, however, has been tangential, without providing clear insight into what impact such radical measures will have on the country’s legal framework and business climate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Favourable Forecast? The Business Outlook on Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The extent and boldness of the recent measures taken in Saudi Arabia are indicative of the government’s resolve to eliminate corruption in the system. The Kingdom has been signatory to the United National Convention Against Corruption (UNCAC) since 2004, though it only ratified the agreement in 2013. The events that have garnered so much international attention are only the latest in a long-term initiative to address corrupt practices in the business sector. Between 2012 and 2017, Saudi Arabia has improved its score on the Transparency International Corruption Perceptions Index (CPI) from 44 to 49. Whilst this score still reflects significant room for improvement, it also charts measurable progress in a region that continues to face drastic change, and provides impetus for the more recent measures that clearly demonstrate the elevated priority of anti-corruption reform.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order for the Kingdom to benefit from its drive for sustainability and prosperity, however, its determination to eradicate corruption must be symbiotic with its ability to assure investor confidence. The zero-tolerance approach that has surfaced over the past year has the potential to greatly improve the integrity of Saudi Arabia’s business market, but lingering concerns surround residual corruption with certain businesses continuing to question the feasibility and longevity of trading in the Kingdom.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The United Nations Conference on Trade and Development (UNCTD) World Investment Report 2018 suggests that, in the short term at least, the anti-corruption drive has done little to improve investor confidence and may even have exacerbated feelings of uncertainty. Inward Foreign Direct Investment (FDI) flows have fallen by more than 80% between 2016 and 2017. Whilst this trend cannot be entirely attributed to the anti-corruption sweep that happened late in the final quarter of the year, it is certainly likely to have been a contributory factor in unsettling investor confidence. From a long-term perspective, however, efforts to level the playing field in Saudi Arabia may bring fairer weather to businesses as the obstacles associated with pervasive corruption are gradually eliminated from the system.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia is far from being alone in its fight against corruption; it is one of the most prevalent and pressing issues facing systems across the globe, and countries with endemic corruption problems face an almost insurmountable challenge to attract foreign investment. At this nascent stage, it would be premature to speculate as to how other Middle Eastern countries will respond to the Kingdom’s efforts, but the most desirable outcome would be for neighbouring countries to become emboldened in their own anti-corruption efforts. The UAE already stands as the regional outlier in anti-corruption efforts, with a CPI 2017 ranking of 21st in the world, comparable to many leading international jurisdictions. The combined efforts of both Saudi Arabia and the UAE could be instrumental in forging a clear path to greater transparency for other afflicted countries in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Staying Dry: Legal Safeguards Against Corruption In The Kingdom</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The primary anti-corruption provisions are provided by the anti-bribery law issued by Royal Decree No. M/36 of 29-Dhu al-Hijjah-1412 (corresponding to 30 June 1996) (the \"Anti-Bribery Law\"). More recently, a decree was issued setting out rules relating to gifts for public officials (Decree No. 60 dated 18 Safar 1437H (corresponding to 1 December 2015) (the \"Rules on Gifts to Officials\" or the \"Rules\").</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Bribery of Public Officials</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law is primarily focused on public servants. In order to maintain maximum protection for its public sector, the definition is intentionally broad, extending to personnel of joint stock companies, along with their board members and directors. It may also capture private sector individuals who are working on government-related projects, such as consultants to government projects, including temporary employees, experts appointed by the government or judiciary, or even employees of private companies contracted to provide public services. Employees of joint stock companies are also subject to the Anti-Bribery Law, as well as employees of companies and sole proprietorships engaged in banking services.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law broadly defines a bribee as any public servant who solicits, accepts or receives for himself or for others, a gift or payment of any sort, or a promise thereof, as consideration for any act that impinges on the integrity of office. Defences against such practices are fortified by the absence of any exemption, caveat or even significant qualifying criteria for the type of act that could invoke bribery provisions. Any act can be considered corrupt, regardless of its legitimacy, whether it is a positive act or an omission, whether it has been done in the absence of a prior agreement, and even where it involves using the influence attached to a public office to gain benefit, rather than the performance of a relevant duty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Given the traditionally prominent role of the government in the national economy, the Anti-Bribery Law does provide relatively wide protection, despite the obvious lack of corresponding safeguards applicable to the private sector. Privatisation targets encapsulated by Vision 2030, however, necessitate more complete protection and new measures that target both the public and private sector are a requirement going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Penalties and Enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Under the Anti-Bribery Law, penalties for the offences set out above can reach maximum penalties of imprisonment for a term not exceeding ten years and/or a fine not exceeding one million riyals (about USD 275,000).</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Along with the specific penalties applicable to public servants who accept a bribe, it should be noted that the Anti-Bribery Law provides for the person offering the bribe (whether it is accepted or not), and any accomplice, to be susceptible to corresponding punishments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To protect a culture of respect for public officials, conviction on bribery offences also leads to dismissal and a bar from public office for a minimum of five years. In an attempt to prevent perpetrators from benefitting from the proceeds of crime, the Anti Bribery Law provides that any money, benefit or privilege derived from committal of the offence be confiscated wherever possible.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Gifts and Hospitality</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">No exemptions are provided for gifts and hospitality in the Anti-Bribery Law. Any benefit or privilege obtained by the bribee, regardless of its type or designation, whether material or otherwise, shall be considered a (prohibited) gift or promise. This has led to confusion in the past, as conventional business practices that would be widely accepted in other systems appeared to invoke the strict anti-bribery restrictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This matter was somewhat elucidated with the passing of the Rules on Gifts to Officials. Pursuant to these Rules, an official may accept gifts, given at visits and official occasions or at receptions of official guests, in accordance with custom and the courtesy protocols of such visits and occasions, though they cannot be cash and must be conventional in the context in which it is given. Crucially, businesses must be cognisant that generally, when reviewing the appositeness of a gift, the authorities will consider a number of contextual factors, including the proximity of the gift-giving to any relevant business deal, common courtesy practices of the firm in question, proportionality of the gift to conventional customs, and the appropriateness of the benefit given.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Though further provisions on the permissibility of certain types of gifts are outlined in the Rules, gifts and hospitality continue to be point of concern for business and can prove problematic in a culture where generosity is an ever-present feature of relations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Exposure for Corporate Entities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Significantly, where the manager or any employee of a private company is convicted of any offence under the Anti-Bribery Law, and the offence was committed for the benefit of such company, the law provides for a fine not exceeding ten times the value of the bribe and/or a ban from entering into public procurement or project contracts of at least 5 years. The briber can be exempted from punishment if he informs the authorities prior to the discovery of the offence, and this may provide some means by which corporate entities can limit their exposure upon becoming aware of any apparent offences under the Anti-Bribery Law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparing for the Tempest: Bolstering Defences Ahead Of Reform</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a strategic perspective, since bribery is rarely an isolated issue, responses need to be thorough and comprehensive; part of an overarching coordinated national strategy that provides protection across an entire economic system and all branches of government. In order to ensure that such strategies are effective and aligned across institutions and businesses, they require constant monitoring and enforcement by a dedicated and independent authority, Where these institutions also act as the recipient in a sound and efficient reporting mechanism, the presence of a clear and trustworthy process increases the confidence of international investors.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Aside from the well-publicised arrests, Saudi Arabia’s corruption reform has extended to measures in other parts of its anti-corruption framework that have more sustainable implications for how it will address corrupt practices in future. These bold new mechanisms also enhance the country’s invigorated anti-corruption culture, which marks an abrupt departure from its previous presumed reticence on corruption matters.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Newly-formed Supreme Committee for Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The formation of the Supreme Committee is indicative of the greater strategic importance of anti-graft efforts to the country’s wider reform programme. Chaired by the Crown Prince and comprised of high-ranking officials from various sectors of governance, including security, finance and existing anti-corruption bodies, the Committee acts as a mechanism that will immediately elevate corruption instances to the remit of the highest echelons of government. In so doing, the Kingdom is sending a strong message that it will no longer turn a blind eye to practices that compromise its financial system or rule of law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The new Supreme Committee will have vastly advanced investigative and prosecutorial powers, including the capacity to issue arrest warrants and order interim measures such as issuing travel bans and asset freezing orders. This is a critical limitation of the existing National Anti-Corruption Commission, more commonly known as Nazaha, which was established in 2012 and has limited capacity, despite its function as the primary recipient of reports of corrupt activity. The new committee will not replace Nazaha, which will continue to target the protection of national integrity, investigate instances of graft in government contracts and refer any incidents to the relevant authorities and public prosecution as and when necessary.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">By coordinating the activities of both the Supreme Committee and Nazaha, the efficacy of existing measures will be boosted by covering a wider scope of prosecutorial powers, increased authority with which to pursue perpetrators, and greater scrutiny through public awareness.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specialised Anti-corruption Units Within the Public Prosecution Department</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As an additional measure, the Saudi government announced as recently as March 2018 that it had established new specialised anti-corruption units within the Public Prosecution. Cases prosecuted by these units would be carried out under the direct oversight of the Attorney General, once again demonstrating the paramount importance of corruption-related cases. Though it is unclear when the dedicated units will become operational, in creating this new advanced capacity the Saudi government has improved its ability to investigate and prosecute corrupt activity and, in so doing, will add an extra deterrent against illicit practices.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Whistleblower Culture</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Whistleblower protection is a significant point of departure in many regimes across the globe. Whilst some Western systems, such as the US, actively promote whistleblowing activity through substantial financial incentives, most countries in the Middle East have thus far been slow to introduce formal protection for whistleblowers, preferring instead to rely on a positive reporting duty and conscionable actions by citizens.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In this context, Saudi Arabia’s more proactive approach appears as an outlier. Article 17 of the Anti-Bribery Law provides for rewards for information substantiating an offence. Any person who is not a briber, or an accomplice, and who provides incriminating information substantiating any offence set out in Anti-Bribery Law, shall receive a reward not less than five thousand riyals (about USD 1,350) and not more than half of the money confiscated. There may be scope for a higher reward to be approved in appropriate circumstances.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, King Salman’s recent order in May 2018 to provide whistle blower protection is progressive in its outlook and signifies Saudi Arabia’s willingness to accede to international standards of rights and transparency when it comes to prosecuting corruption crimes. If Saudi Arabia is mindful of the risks posed by the potential for spurious claims and introduces adequate measures to prevent abuse of the reporting system, whistle blower protection is yet a further measure that will likely serve to reinforce the culture of zero tolerance that Saudi Arabia is attempting to cultivate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Impending Amendments to the Anti-Bribery Law</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 2 July 2018, Saudi Arabia’s Shoura (Consultative) Council approved draft amendments to the Anti-Bribery Law. The changes, which are yet to be implemented, are reportedly aimed at providing enhanced protection to public utilities through sound prosecution procedures and severe punishment for offences, as well as further enshrining the principles and commitments contained in the United Nations Convention Against Corruption (UNCAC). At present, the extent and exact nature of the amendments are unknown, but once officially passed into law, they have the potential to radically modernise Saudi Arabia’s anti-bribery legislation. This critical development warrants close attention over the coming months as the process to implementation progresses, and could assist investors in assessing the long-term outlook for Saudi Arabia’s economic integrity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Weather Eye on the Horizon: Is Further Change an Inevitability?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Anti-corruption measures are an ancillary part of the legal reform process in KSA, but do not represent the totality of the country’s ongoing transition. New money-laundering laws passed in October 2017 are emblematic of the Kingdom’s resolve to eradicate illicit practices from its system. Corruption is symptomatic of countries where there is weak rule of law, but Saudi Arabia’s legal fortifications will go a long way to stamping out the nexus of criminal behaviour that facilitates and drives corruption trends. These are important contributory factors that should be considered by foreign investors when making an assessment of Saudi Arabia’s economic security.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The changes that have already been implemented will only improve the prognosis of anti-corruption in Saudi Arabia. The continued momentum garnered from these initiatives will drive awareness of corruption problems, aided by the combined activity of Nazaha and the newly formed Supreme Committee for Anti-Corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This is a pivotal time for Saudi Arabia and the long-term outlook is positive – there is already evidence of widespread reform to protect the Kingdom’s economic stability and integrity and address systemic weaknesses. Simultaneously, the changes that have been gradually introduced by Saudi Arabia’s General Investment Authority (SAGIA) since 2015 to liberalise the national economy and provide space for full foreign ownership in key sectors, are creating new incentive for foreign investors to tap into the largest market in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Equally, investors must strike the appropriate balance between caution and enthusiasm when encountering new opportunities in the market. Corruption challenges are persistent and pervasive and will require sustained redress for the foreseeable future. Though it is yet undetermined what new mechanisms and measures may be deployed in the Kingdom in future, it is likely that subsequent steps taken to quash illicit practices will have considerable consequences for domestic and foreign investors alike. This will require that foreign investors understand the legal framework and secure their interests against inevitable shifts in the Saudi market as reform measures revolutionise the domestic business culture.</p>\r\nOverall, however, Saudi Arabia’s recent multifaceted approach to reform has created the perfect storm for investors and, with an impending multitude of investment projects, businesses have a prime opportunity to invest at the leading edge of FDI, assured that corrupt practices are not operating with impunity.\r\n\r\n<img class=\"size-full wp-image-8011 aligncenter\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/676.jpg\" alt=\"\" width=\"843\" height=\"366\" />'),
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	(249545,24350,'PostTitle','The Calm After the Storm: Saudi Arabia’s Anti-Corruption Tornado and the Investor Impact'),
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	(249547,24350,'PostDate','2018-07-31 17:39:00'),
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	(249551,24350,'UserAgent','Mozilla/5.0 (Macintosh; Intel Mac OS X 10_11_6) AppleWebKit/537.36 (KHTML, like Gecko) Chrome/67.0.3396.99 Safari/537.36'),
	(249552,24350,'CurrentUserID','8'),
	(249553,24350,'CurrentUserRoles','a:2:{i:0;s:13:\"administrator\";i:1;s:10:\"superadmin\";}'),
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	(249556,24351,'PostTitle','Overhaul of the UAE Finance Companies Regulations'),
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	(249558,24351,'PostDate','2018-07-31 17:38:26'),
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	(249565,24352,'PostID','7935'),
	(249566,24352,'PostTitle','Overhaul of the UAE Finance Companies Regulations'),
	(249567,24352,'PostStatus','draft'),
	(249568,24352,'PostType','law_update_articles'),
	(249569,24352,'PostDate','2018-07-31 17:39:15'),
	(249570,24352,'PostUrl','http://localhost:8888/tamimi/?post_type=law_update_articles&p=7935'),
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	(249573,24352,'MetaValueNew','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"wp-image-7997  alignright\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"778\" height=\"720\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).');

INSERT INTO `tm_wsal_metadata` (`id`, `occurrence_id`, `name`, `value`)
VALUES
	(249574,24352,'MetaValueOld','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"aligncenter wp-image-7997 \" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"778\" height=\"720\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).'),
	(249575,24352,'MetaLink','content'),
	(249576,24352,'EditorLinkPost','http://localhost:8888/tamimi/wp-admin/post.php?post=7935&amp;action=edit'),
	(249577,24352,'ReportText','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"aligncenter wp-image-7997 \" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"778\" height=\"720\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).|<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"wp-image-7997  alignright\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"778\" height=\"720\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).'),
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	(249584,24353,'PostTitle','Overhaul of the UAE Finance Companies Regulations'),
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	(249586,24353,'PostDate','2018-07-31 17:39:15'),
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	(249593,24354,'PostID','7939'),
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	(249595,24354,'PostTitle','The Calm After the Storm: Saudi Arabia’s Anti-Corruption Tornado and the Investor Impact'),
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	(249597,24354,'PostDate','2018-07-31 17:39:22'),
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	(249604,24355,'PostID','7939'),
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	(249606,24355,'PostTitle','The Calm After the Storm: Saudi Arabia’s Anti-Corruption Tornado and the Investor Impact'),
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	(249608,24355,'PostDate','2018-07-31 17:39:00'),
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	(249615,24356,'PostID','7939'),
	(249616,24356,'PostTitle','The Calm After the Storm: Saudi Arabia’s Anti-Corruption Tornado and the Investor Impact'),
	(249617,24356,'PostStatus','draft'),
	(249618,24356,'PostType','law_update_articles'),
	(249619,24356,'PostDate','2018-07-31 17:39:59'),
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	(249622,24356,'MetaKey','content'),
	(249623,24356,'MetaValueNew','<p dir=\"LTR\" align=\"LEFT\"><em><img class=\"alignleft size-full wp-image-8012\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/DG.jpg\" alt=\"\" width=\"1536\" height=\"417\" />Saudi Arabia is undergoing significant reform but, beyond the maelstrom of political speculation and conjecture, what are the practical and legal implications of the anti-corruption drive for investors?</em></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia has seen tumultuous reform in the last 12 months as Crown Prince Mohammed bin Salman has sought to propel Saudi Arabia towards Vision 2030. International attention has been riveted to the government’s surging anti-corruption drive since a number of high-profile individuals were detained on corruption charges towards the end of 2017. Much of this attention, however, has been tangential, without providing clear insight into what impact such radical measures will have on the country’s legal framework and business climate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Favourable Forecast? The Business Outlook on Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The extent and boldness of the recent measures taken in Saudi Arabia are indicative of the government’s resolve to eliminate corruption in the system. The Kingdom has been signatory to the United National Convention Against Corruption (UNCAC) since 2004, though it only ratified the agreement in 2013. The events that have garnered so much international attention are only the latest in a long-term initiative to address corrupt practices in the business sector. Between 2012 and 2017, Saudi Arabia has improved its score on the Transparency International Corruption Perceptions Index (CPI) from 44 to 49. Whilst this score still reflects significant room for improvement, it also charts measurable progress in a region that continues to face drastic change, and provides impetus for the more recent measures that clearly demonstrate the elevated priority of anti-corruption reform.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order for the Kingdom to benefit from its drive for sustainability and prosperity, however, its determination to eradicate corruption must be symbiotic with its ability to assure investor confidence. The zero-tolerance approach that has surfaced over the past year has the potential to greatly improve the integrity of Saudi Arabia’s business market, but lingering concerns surround residual corruption with certain businesses continuing to question the feasibility and longevity of trading in the Kingdom.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The United Nations Conference on Trade and Development (UNCTD) World Investment Report 2018 suggests that, in the short term at least, the anti-corruption drive has done little to improve investor confidence and may even have exacerbated feelings of uncertainty. Inward Foreign Direct Investment (FDI) flows have fallen by more than 80% between 2016 and 2017. Whilst this trend cannot be entirely attributed to the anti-corruption sweep that happened late in the final quarter of the year, it is certainly likely to have been a contributory factor in unsettling investor confidence. From a long-term perspective, however, efforts to level the playing field in Saudi Arabia may bring fairer weather to businesses as the obstacles associated with pervasive corruption are gradually eliminated from the system.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia is far from being alone in its fight against corruption; it is one of the most prevalent and pressing issues facing systems across the globe, and countries with endemic corruption problems face an almost insurmountable challenge to attract foreign investment. At this nascent stage, it would be premature to speculate as to how other Middle Eastern countries will respond to the Kingdom’s efforts, but the most desirable outcome would be for neighbouring countries to become emboldened in their own anti-corruption efforts. The UAE already stands as the regional outlier in anti-corruption efforts, with a CPI 2017 ranking of 21st in the world, comparable to many leading international jurisdictions. The combined efforts of both Saudi Arabia and the UAE could be instrumental in forging a clear path to greater transparency for other afflicted countries in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Staying Dry: Legal Safeguards Against Corruption In The Kingdom</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The primary anti-corruption provisions are provided by the anti-bribery law issued by Royal Decree No. M/36 of 29-Dhu al-Hijjah-1412 (corresponding to 30 June 1996) (the \"Anti-Bribery Law\"). More recently, a decree was issued setting out rules relating to gifts for public officials (Decree No. 60 dated 18 Safar 1437H (corresponding to 1 December 2015) (the \"Rules on Gifts to Officials\" or the \"Rules\").</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Bribery of Public Officials</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law is primarily focused on public servants. In order to maintain maximum protection for its public sector, the definition is intentionally broad, extending to personnel of joint stock companies, along with their board members and directors. It may also capture private sector individuals who are working on government-related projects, such as consultants to government projects, including temporary employees, experts appointed by the government or judiciary, or even employees of private companies contracted to provide public services. Employees of joint stock companies are also subject to the Anti-Bribery Law, as well as employees of companies and sole proprietorships engaged in banking services.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law broadly defines a bribee as any public servant who solicits, accepts or receives for himself or for others, a gift or payment of any sort, or a promise thereof, as consideration for any act that impinges on the integrity of office. Defences against such practices are fortified by the absence of any exemption, caveat or even significant qualifying criteria for the type of act that could invoke bribery provisions. Any act can be considered corrupt, regardless of its legitimacy, whether it is a positive act or an omission, whether it has been done in the absence of a prior agreement, and even where it involves using the influence attached to a public office to gain benefit, rather than the performance of a relevant duty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Given the traditionally prominent role of the government in the national economy, the Anti-Bribery Law does provide relatively wide protection, despite the obvious lack of corresponding safeguards applicable to the private sector. Privatisation targets encapsulated by Vision 2030, however, necessitate more complete protection and new measures that target both the public and private sector are a requirement going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Penalties and Enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Under the Anti-Bribery Law, penalties for the offences set out above can reach maximum penalties of imprisonment for a term not exceeding ten years and/or a fine not exceeding one million riyals (about USD 275,000).</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Along with the specific penalties applicable to public servants who accept a bribe, it should be noted that the Anti-Bribery Law provides for the person offering the bribe (whether it is accepted or not), and any accomplice, to be susceptible to corresponding punishments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To protect a culture of respect for public officials, conviction on bribery offences also leads to dismissal and a bar from public office for a minimum of five years. In an attempt to prevent perpetrators from benefitting from the proceeds of crime, the Anti Bribery Law provides that any money, benefit or privilege derived from committal of the offence be confiscated wherever possible.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Gifts and Hospitality</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">No exemptions are provided for gifts and hospitality in the Anti-Bribery Law. Any benefit or privilege obtained by the bribee, regardless of its type or designation, whether material or otherwise, shall be considered a (prohibited) gift or promise. This has led to confusion in the past, as conventional business practices that would be widely accepted in other systems appeared to invoke the strict anti-bribery restrictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This matter was somewhat elucidated with the passing of the Rules on Gifts to Officials. Pursuant to these Rules, an official may accept gifts, given at visits and official occasions or at receptions of official guests, in accordance with custom and the courtesy protocols of such visits and occasions, though they cannot be cash and must be conventional in the context in which it is given. Crucially, businesses must be cognisant that generally, when reviewing the appositeness of a gift, the authorities will consider a number of contextual factors, including the proximity of the gift-giving to any relevant business deal, common courtesy practices of the firm in question, proportionality of the gift to conventional customs, and the appropriateness of the benefit given.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Though further provisions on the permissibility of certain types of gifts are outlined in the Rules, gifts and hospitality continue to be point of concern for business and can prove problematic in a culture where generosity is an ever-present feature of relations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Exposure for Corporate Entities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Significantly, where the manager or any employee of a private company is convicted of any offence under the Anti-Bribery Law, and the offence was committed for the benefit of such company, the law provides for a fine not exceeding ten times the value of the bribe and/or a ban from entering into public procurement or project contracts of at least 5 years. The briber can be exempted from punishment if he informs the authorities prior to the discovery of the offence, and this may provide some means by which corporate entities can limit their exposure upon becoming aware of any apparent offences under the Anti-Bribery Law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparing for the Tempest: Bolstering Defences Ahead Of Reform</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a strategic perspective, since bribery is rarely an isolated issue, responses need to be thorough and comprehensive; part of an overarching coordinated national strategy that provides protection across an entire economic system and all branches of government. In order to ensure that such strategies are effective and aligned across institutions and businesses, they require constant monitoring and enforcement by a dedicated and independent authority, Where these institutions also act as the recipient in a sound and efficient reporting mechanism, the presence of a clear and trustworthy process increases the confidence of international investors.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Aside from the well-publicised arrests, Saudi Arabia’s corruption reform has extended to measures in other parts of its anti-corruption framework that have more sustainable implications for how it will address corrupt practices in future. These bold new mechanisms also enhance the country’s invigorated anti-corruption culture, which marks an abrupt departure from its previous presumed reticence on corruption matters.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Newly-formed Supreme Committee for Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The formation of the Supreme Committee is indicative of the greater strategic importance of anti-graft efforts to the country’s wider reform programme. Chaired by the Crown Prince and comprised of high-ranking officials from various sectors of governance, including security, finance and existing anti-corruption bodies, the Committee acts as a mechanism that will immediately elevate corruption instances to the remit of the highest echelons of government. In so doing, the Kingdom is sending a strong message that it will no longer turn a blind eye to practices that compromise its financial system or rule of law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The new Supreme Committee will have vastly advanced investigative and prosecutorial powers, including the capacity to issue arrest warrants and order interim measures such as issuing travel bans and asset freezing orders. This is a critical limitation of the existing National Anti-Corruption Commission, more commonly known as Nazaha, which was established in 2012 and has limited capacity, despite its function as the primary recipient of reports of corrupt activity. The new committee will not replace Nazaha, which will continue to target the protection of national integrity, investigate instances of graft in government contracts and refer any incidents to the relevant authorities and public prosecution as and when necessary.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">By coordinating the activities of both the Supreme Committee and Nazaha, the efficacy of existing measures will be boosted by covering a wider scope of prosecutorial powers, increased authority with which to pursue perpetrators, and greater scrutiny through public awareness.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specialised Anti-corruption Units Within the Public Prosecution Department</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As an additional measure, the Saudi government announced as recently as March 2018 that it had established new specialised anti-corruption units within the Public Prosecution. Cases prosecuted by these units would be carried out under the direct oversight of the Attorney General, once again demonstrating the paramount importance of corruption-related cases. Though it is unclear when the dedicated units will become operational, in creating this new advanced capacity the Saudi government has improved its ability to investigate and prosecute corrupt activity and, in so doing, will add an extra deterrent against illicit practices.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Whistleblower Culture</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Whistleblower protection is a significant point of departure in many regimes across the globe. Whilst some Western systems, such as the US, actively promote whistleblowing activity through substantial financial incentives, most countries in the Middle East have thus far been slow to introduce formal protection for whistleblowers, preferring instead to rely on a positive reporting duty and conscionable actions by citizens.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In this context, Saudi Arabia’s more proactive approach appears as an outlier. Article 17 of the Anti-Bribery Law provides for rewards for information substantiating an offence. Any person who is not a briber, or an accomplice, and who provides incriminating information substantiating any offence set out in Anti-Bribery Law, shall receive a reward not less than five thousand riyals (about USD 1,350) and not more than half of the money confiscated. There may be scope for a higher reward to be approved in appropriate circumstances.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, King Salman’s recent order in May 2018 to provide whistle blower protection is progressive in its outlook and signifies Saudi Arabia’s willingness to accede to international standards of rights and transparency when it comes to prosecuting corruption crimes. If Saudi Arabia is mindful of the risks posed by the potential for spurious claims and introduces adequate measures to prevent abuse of the reporting system, whistle blower protection is yet a further measure that will likely serve to reinforce the culture of zero tolerance that Saudi Arabia is attempting to cultivate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Impending Amendments to the Anti-Bribery Law</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 2 July 2018, Saudi Arabia’s Shoura (Consultative) Council approved draft amendments to the Anti-Bribery Law. The changes, which are yet to be implemented, are reportedly aimed at providing enhanced protection to public utilities through sound prosecution procedures and severe punishment for offences, as well as further enshrining the principles and commitments contained in the United Nations Convention Against Corruption (UNCAC). At present, the extent and exact nature of the amendments are unknown, but once officially passed into law, they have the potential to radically modernise Saudi Arabia’s anti-bribery legislation. This critical development warrants close attention over the coming months as the process to implementation progresses, and could assist investors in assessing the long-term outlook for Saudi Arabia’s economic integrity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Weather Eye on the Horizon: Is Further Change an Inevitability?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Anti-corruption measures are an ancillary part of the legal reform process in KSA, but do not represent the totality of the country’s ongoing transition. New money-laundering laws passed in October 2017 are emblematic of the Kingdom’s resolve to eradicate illicit practices from its system. Corruption is symptomatic of countries where there is weak rule of law, but Saudi Arabia’s legal fortifications will go a long way to stamping out the nexus of criminal behaviour that facilitates and drives corruption trends. These are important contributory factors that should be considered by foreign investors when making an assessment of Saudi Arabia’s economic security.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The changes that have already been implemented will only improve the prognosis of anti-corruption in Saudi Arabia. The continued momentum garnered from these initiatives will drive awareness of corruption problems, aided by the combined activity of Nazaha and the newly formed Supreme Committee for Anti-Corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This is a pivotal time for Saudi Arabia and the long-term outlook is positive – there is already evidence of widespread reform to protect the Kingdom’s economic stability and integrity and address systemic weaknesses. Simultaneously, the changes that have been gradually introduced by Saudi Arabia’s General Investment Authority (SAGIA) since 2015 to liberalise the national economy and provide space for full foreign ownership in key sectors, are creating new incentive for foreign investors to tap into the largest market in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Equally, investors must strike the appropriate balance between caution and enthusiasm when encountering new opportunities in the market. Corruption challenges are persistent and pervasive and will require sustained redress for the foreseeable future. Though it is yet undetermined what new mechanisms and measures may be deployed in the Kingdom in future, it is likely that subsequent steps taken to quash illicit practices will have considerable consequences for domestic and foreign investors alike. This will require that foreign investors understand the legal framework and secure their interests against inevitable shifts in the Saudi market as reform measures revolutionise the domestic business culture.</p>\r\nOverall, however, Saudi Arabia’s recent multifaceted approach to reform has created the perfect storm for investors and, with an impending multitude of investment projects, businesses have a prime opportunity to invest at the leading edge of FDI, assured that corrupt practices are not operating with impunity.\r\n\r\n<img class=\"wp-image-8011 alignleft\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/676.jpg\" alt=\"\" width=\"1094\" height=\"475\" />'),
	(249624,24356,'MetaValueOld','<p dir=\"LTR\" align=\"LEFT\"><em><img class=\"alignleft size-full wp-image-8012\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/DG.jpg\" alt=\"\" width=\"1536\" height=\"417\" />Saudi Arabia is undergoing significant reform but, beyond the maelstrom of political speculation and conjecture, what are the practical and legal implications of the anti-corruption drive for investors?</em></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia has seen tumultuous reform in the last 12 months as Crown Prince Mohammed bin Salman has sought to propel Saudi Arabia towards Vision 2030. International attention has been riveted to the government’s surging anti-corruption drive since a number of high-profile individuals were detained on corruption charges towards the end of 2017. Much of this attention, however, has been tangential, without providing clear insight into what impact such radical measures will have on the country’s legal framework and business climate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Favourable Forecast? The Business Outlook on Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The extent and boldness of the recent measures taken in Saudi Arabia are indicative of the government’s resolve to eliminate corruption in the system. The Kingdom has been signatory to the United National Convention Against Corruption (UNCAC) since 2004, though it only ratified the agreement in 2013. The events that have garnered so much international attention are only the latest in a long-term initiative to address corrupt practices in the business sector. Between 2012 and 2017, Saudi Arabia has improved its score on the Transparency International Corruption Perceptions Index (CPI) from 44 to 49. Whilst this score still reflects significant room for improvement, it also charts measurable progress in a region that continues to face drastic change, and provides impetus for the more recent measures that clearly demonstrate the elevated priority of anti-corruption reform.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order for the Kingdom to benefit from its drive for sustainability and prosperity, however, its determination to eradicate corruption must be symbiotic with its ability to assure investor confidence. The zero-tolerance approach that has surfaced over the past year has the potential to greatly improve the integrity of Saudi Arabia’s business market, but lingering concerns surround residual corruption with certain businesses continuing to question the feasibility and longevity of trading in the Kingdom.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The United Nations Conference on Trade and Development (UNCTD) World Investment Report 2018 suggests that, in the short term at least, the anti-corruption drive has done little to improve investor confidence and may even have exacerbated feelings of uncertainty. Inward Foreign Direct Investment (FDI) flows have fallen by more than 80% between 2016 and 2017. Whilst this trend cannot be entirely attributed to the anti-corruption sweep that happened late in the final quarter of the year, it is certainly likely to have been a contributory factor in unsettling investor confidence. From a long-term perspective, however, efforts to level the playing field in Saudi Arabia may bring fairer weather to businesses as the obstacles associated with pervasive corruption are gradually eliminated from the system.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia is far from being alone in its fight against corruption; it is one of the most prevalent and pressing issues facing systems across the globe, and countries with endemic corruption problems face an almost insurmountable challenge to attract foreign investment. At this nascent stage, it would be premature to speculate as to how other Middle Eastern countries will respond to the Kingdom’s efforts, but the most desirable outcome would be for neighbouring countries to become emboldened in their own anti-corruption efforts. The UAE already stands as the regional outlier in anti-corruption efforts, with a CPI 2017 ranking of 21st in the world, comparable to many leading international jurisdictions. The combined efforts of both Saudi Arabia and the UAE could be instrumental in forging a clear path to greater transparency for other afflicted countries in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Staying Dry: Legal Safeguards Against Corruption In The Kingdom</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The primary anti-corruption provisions are provided by the anti-bribery law issued by Royal Decree No. M/36 of 29-Dhu al-Hijjah-1412 (corresponding to 30 June 1996) (the \"Anti-Bribery Law\"). More recently, a decree was issued setting out rules relating to gifts for public officials (Decree No. 60 dated 18 Safar 1437H (corresponding to 1 December 2015) (the \"Rules on Gifts to Officials\" or the \"Rules\").</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Bribery of Public Officials</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law is primarily focused on public servants. In order to maintain maximum protection for its public sector, the definition is intentionally broad, extending to personnel of joint stock companies, along with their board members and directors. It may also capture private sector individuals who are working on government-related projects, such as consultants to government projects, including temporary employees, experts appointed by the government or judiciary, or even employees of private companies contracted to provide public services. Employees of joint stock companies are also subject to the Anti-Bribery Law, as well as employees of companies and sole proprietorships engaged in banking services.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law broadly defines a bribee as any public servant who solicits, accepts or receives for himself or for others, a gift or payment of any sort, or a promise thereof, as consideration for any act that impinges on the integrity of office. Defences against such practices are fortified by the absence of any exemption, caveat or even significant qualifying criteria for the type of act that could invoke bribery provisions. Any act can be considered corrupt, regardless of its legitimacy, whether it is a positive act or an omission, whether it has been done in the absence of a prior agreement, and even where it involves using the influence attached to a public office to gain benefit, rather than the performance of a relevant duty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Given the traditionally prominent role of the government in the national economy, the Anti-Bribery Law does provide relatively wide protection, despite the obvious lack of corresponding safeguards applicable to the private sector. Privatisation targets encapsulated by Vision 2030, however, necessitate more complete protection and new measures that target both the public and private sector are a requirement going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Penalties and Enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Under the Anti-Bribery Law, penalties for the offences set out above can reach maximum penalties of imprisonment for a term not exceeding ten years and/or a fine not exceeding one million riyals (about USD 275,000).</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Along with the specific penalties applicable to public servants who accept a bribe, it should be noted that the Anti-Bribery Law provides for the person offering the bribe (whether it is accepted or not), and any accomplice, to be susceptible to corresponding punishments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To protect a culture of respect for public officials, conviction on bribery offences also leads to dismissal and a bar from public office for a minimum of five years. In an attempt to prevent perpetrators from benefitting from the proceeds of crime, the Anti Bribery Law provides that any money, benefit or privilege derived from committal of the offence be confiscated wherever possible.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Gifts and Hospitality</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">No exemptions are provided for gifts and hospitality in the Anti-Bribery Law. Any benefit or privilege obtained by the bribee, regardless of its type or designation, whether material or otherwise, shall be considered a (prohibited) gift or promise. This has led to confusion in the past, as conventional business practices that would be widely accepted in other systems appeared to invoke the strict anti-bribery restrictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This matter was somewhat elucidated with the passing of the Rules on Gifts to Officials. Pursuant to these Rules, an official may accept gifts, given at visits and official occasions or at receptions of official guests, in accordance with custom and the courtesy protocols of such visits and occasions, though they cannot be cash and must be conventional in the context in which it is given. Crucially, businesses must be cognisant that generally, when reviewing the appositeness of a gift, the authorities will consider a number of contextual factors, including the proximity of the gift-giving to any relevant business deal, common courtesy practices of the firm in question, proportionality of the gift to conventional customs, and the appropriateness of the benefit given.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Though further provisions on the permissibility of certain types of gifts are outlined in the Rules, gifts and hospitality continue to be point of concern for business and can prove problematic in a culture where generosity is an ever-present feature of relations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Exposure for Corporate Entities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Significantly, where the manager or any employee of a private company is convicted of any offence under the Anti-Bribery Law, and the offence was committed for the benefit of such company, the law provides for a fine not exceeding ten times the value of the bribe and/or a ban from entering into public procurement or project contracts of at least 5 years. The briber can be exempted from punishment if he informs the authorities prior to the discovery of the offence, and this may provide some means by which corporate entities can limit their exposure upon becoming aware of any apparent offences under the Anti-Bribery Law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparing for the Tempest: Bolstering Defences Ahead Of Reform</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a strategic perspective, since bribery is rarely an isolated issue, responses need to be thorough and comprehensive; part of an overarching coordinated national strategy that provides protection across an entire economic system and all branches of government. In order to ensure that such strategies are effective and aligned across institutions and businesses, they require constant monitoring and enforcement by a dedicated and independent authority, Where these institutions also act as the recipient in a sound and efficient reporting mechanism, the presence of a clear and trustworthy process increases the confidence of international investors.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Aside from the well-publicised arrests, Saudi Arabia’s corruption reform has extended to measures in other parts of its anti-corruption framework that have more sustainable implications for how it will address corrupt practices in future. These bold new mechanisms also enhance the country’s invigorated anti-corruption culture, which marks an abrupt departure from its previous presumed reticence on corruption matters.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Newly-formed Supreme Committee for Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The formation of the Supreme Committee is indicative of the greater strategic importance of anti-graft efforts to the country’s wider reform programme. Chaired by the Crown Prince and comprised of high-ranking officials from various sectors of governance, including security, finance and existing anti-corruption bodies, the Committee acts as a mechanism that will immediately elevate corruption instances to the remit of the highest echelons of government. In so doing, the Kingdom is sending a strong message that it will no longer turn a blind eye to practices that compromise its financial system or rule of law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The new Supreme Committee will have vastly advanced investigative and prosecutorial powers, including the capacity to issue arrest warrants and order interim measures such as issuing travel bans and asset freezing orders. This is a critical limitation of the existing National Anti-Corruption Commission, more commonly known as Nazaha, which was established in 2012 and has limited capacity, despite its function as the primary recipient of reports of corrupt activity. The new committee will not replace Nazaha, which will continue to target the protection of national integrity, investigate instances of graft in government contracts and refer any incidents to the relevant authorities and public prosecution as and when necessary.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">By coordinating the activities of both the Supreme Committee and Nazaha, the efficacy of existing measures will be boosted by covering a wider scope of prosecutorial powers, increased authority with which to pursue perpetrators, and greater scrutiny through public awareness.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specialised Anti-corruption Units Within the Public Prosecution Department</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As an additional measure, the Saudi government announced as recently as March 2018 that it had established new specialised anti-corruption units within the Public Prosecution. Cases prosecuted by these units would be carried out under the direct oversight of the Attorney General, once again demonstrating the paramount importance of corruption-related cases. Though it is unclear when the dedicated units will become operational, in creating this new advanced capacity the Saudi government has improved its ability to investigate and prosecute corrupt activity and, in so doing, will add an extra deterrent against illicit practices.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Whistleblower Culture</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Whistleblower protection is a significant point of departure in many regimes across the globe. Whilst some Western systems, such as the US, actively promote whistleblowing activity through substantial financial incentives, most countries in the Middle East have thus far been slow to introduce formal protection for whistleblowers, preferring instead to rely on a positive reporting duty and conscionable actions by citizens.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In this context, Saudi Arabia’s more proactive approach appears as an outlier. Article 17 of the Anti-Bribery Law provides for rewards for information substantiating an offence. Any person who is not a briber, or an accomplice, and who provides incriminating information substantiating any offence set out in Anti-Bribery Law, shall receive a reward not less than five thousand riyals (about USD 1,350) and not more than half of the money confiscated. There may be scope for a higher reward to be approved in appropriate circumstances.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, King Salman’s recent order in May 2018 to provide whistle blower protection is progressive in its outlook and signifies Saudi Arabia’s willingness to accede to international standards of rights and transparency when it comes to prosecuting corruption crimes. If Saudi Arabia is mindful of the risks posed by the potential for spurious claims and introduces adequate measures to prevent abuse of the reporting system, whistle blower protection is yet a further measure that will likely serve to reinforce the culture of zero tolerance that Saudi Arabia is attempting to cultivate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Impending Amendments to the Anti-Bribery Law</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 2 July 2018, Saudi Arabia’s Shoura (Consultative) Council approved draft amendments to the Anti-Bribery Law. The changes, which are yet to be implemented, are reportedly aimed at providing enhanced protection to public utilities through sound prosecution procedures and severe punishment for offences, as well as further enshrining the principles and commitments contained in the United Nations Convention Against Corruption (UNCAC). At present, the extent and exact nature of the amendments are unknown, but once officially passed into law, they have the potential to radically modernise Saudi Arabia’s anti-bribery legislation. This critical development warrants close attention over the coming months as the process to implementation progresses, and could assist investors in assessing the long-term outlook for Saudi Arabia’s economic integrity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Weather Eye on the Horizon: Is Further Change an Inevitability?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Anti-corruption measures are an ancillary part of the legal reform process in KSA, but do not represent the totality of the country’s ongoing transition. New money-laundering laws passed in October 2017 are emblematic of the Kingdom’s resolve to eradicate illicit practices from its system. Corruption is symptomatic of countries where there is weak rule of law, but Saudi Arabia’s legal fortifications will go a long way to stamping out the nexus of criminal behaviour that facilitates and drives corruption trends. These are important contributory factors that should be considered by foreign investors when making an assessment of Saudi Arabia’s economic security.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The changes that have already been implemented will only improve the prognosis of anti-corruption in Saudi Arabia. The continued momentum garnered from these initiatives will drive awareness of corruption problems, aided by the combined activity of Nazaha and the newly formed Supreme Committee for Anti-Corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This is a pivotal time for Saudi Arabia and the long-term outlook is positive – there is already evidence of widespread reform to protect the Kingdom’s economic stability and integrity and address systemic weaknesses. Simultaneously, the changes that have been gradually introduced by Saudi Arabia’s General Investment Authority (SAGIA) since 2015 to liberalise the national economy and provide space for full foreign ownership in key sectors, are creating new incentive for foreign investors to tap into the largest market in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Equally, investors must strike the appropriate balance between caution and enthusiasm when encountering new opportunities in the market. Corruption challenges are persistent and pervasive and will require sustained redress for the foreseeable future. Though it is yet undetermined what new mechanisms and measures may be deployed in the Kingdom in future, it is likely that subsequent steps taken to quash illicit practices will have considerable consequences for domestic and foreign investors alike. This will require that foreign investors understand the legal framework and secure their interests against inevitable shifts in the Saudi market as reform measures revolutionise the domestic business culture.</p>\r\nOverall, however, Saudi Arabia’s recent multifaceted approach to reform has created the perfect storm for investors and, with an impending multitude of investment projects, businesses have a prime opportunity to invest at the leading edge of FDI, assured that corrupt practices are not operating with impunity.\r\n\r\n<img class=\"size-full wp-image-8011 aligncenter\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/676.jpg\" alt=\"\" width=\"843\" height=\"366\" />'),
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	(249626,24356,'EditorLinkPost','http://localhost:8888/tamimi/wp-admin/post.php?post=7939&amp;action=edit'),
	(249627,24356,'ReportText','<p dir=\"LTR\" align=\"LEFT\"><em><img class=\"alignleft size-full wp-image-8012\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/DG.jpg\" alt=\"\" width=\"1536\" height=\"417\" />Saudi Arabia is undergoing significant reform but, beyond the maelstrom of political speculation and conjecture, what are the practical and legal implications of the anti-corruption drive for investors?</em></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia has seen tumultuous reform in the last 12 months as Crown Prince Mohammed bin Salman has sought to propel Saudi Arabia towards Vision 2030. International attention has been riveted to the government’s surging anti-corruption drive since a number of high-profile individuals were detained on corruption charges towards the end of 2017. Much of this attention, however, has been tangential, without providing clear insight into what impact such radical measures will have on the country’s legal framework and business climate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Favourable Forecast? The Business Outlook on Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The extent and boldness of the recent measures taken in Saudi Arabia are indicative of the government’s resolve to eliminate corruption in the system. The Kingdom has been signatory to the United National Convention Against Corruption (UNCAC) since 2004, though it only ratified the agreement in 2013. The events that have garnered so much international attention are only the latest in a long-term initiative to address corrupt practices in the business sector. Between 2012 and 2017, Saudi Arabia has improved its score on the Transparency International Corruption Perceptions Index (CPI) from 44 to 49. Whilst this score still reflects significant room for improvement, it also charts measurable progress in a region that continues to face drastic change, and provides impetus for the more recent measures that clearly demonstrate the elevated priority of anti-corruption reform.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order for the Kingdom to benefit from its drive for sustainability and prosperity, however, its determination to eradicate corruption must be symbiotic with its ability to assure investor confidence. The zero-tolerance approach that has surfaced over the past year has the potential to greatly improve the integrity of Saudi Arabia’s business market, but lingering concerns surround residual corruption with certain businesses continuing to question the feasibility and longevity of trading in the Kingdom.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The United Nations Conference on Trade and Development (UNCTD) World Investment Report 2018 suggests that, in the short term at least, the anti-corruption drive has done little to improve investor confidence and may even have exacerbated feelings of uncertainty. Inward Foreign Direct Investment (FDI) flows have fallen by more than 80% between 2016 and 2017. Whilst this trend cannot be entirely attributed to the anti-corruption sweep that happened late in the final quarter of the year, it is certainly likely to have been a contributory factor in unsettling investor confidence. From a long-term perspective, however, efforts to level the playing field in Saudi Arabia may bring fairer weather to businesses as the obstacles associated with pervasive corruption are gradually eliminated from the system.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia is far from being alone in its fight against corruption; it is one of the most prevalent and pressing issues facing systems across the globe, and countries with endemic corruption problems face an almost insurmountable challenge to attract foreign investment. At this nascent stage, it would be premature to speculate as to how other Middle Eastern countries will respond to the Kingdom’s efforts, but the most desirable outcome would be for neighbouring countries to become emboldened in their own anti-corruption efforts. The UAE already stands as the regional outlier in anti-corruption efforts, with a CPI 2017 ranking of 21st in the world, comparable to many leading international jurisdictions. The combined efforts of both Saudi Arabia and the UAE could be instrumental in forging a clear path to greater transparency for other afflicted countries in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Staying Dry: Legal Safeguards Against Corruption In The Kingdom</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The primary anti-corruption provisions are provided by the anti-bribery law issued by Royal Decree No. M/36 of 29-Dhu al-Hijjah-1412 (corresponding to 30 June 1996) (the \"Anti-Bribery Law\"). More recently, a decree was issued setting out rules relating to gifts for public officials (Decree No. 60 dated 18 Safar 1437H (corresponding to 1 December 2015) (the \"Rules on Gifts to Officials\" or the \"Rules\").</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Bribery of Public Officials</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law is primarily focused on public servants. In order to maintain maximum protection for its public sector, the definition is intentionally broad, extending to personnel of joint stock companies, along with their board members and directors. It may also capture private sector individuals who are working on government-related projects, such as consultants to government projects, including temporary employees, experts appointed by the government or judiciary, or even employees of private companies contracted to provide public services. Employees of joint stock companies are also subject to the Anti-Bribery Law, as well as employees of companies and sole proprietorships engaged in banking services.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law broadly defines a bribee as any public servant who solicits, accepts or receives for himself or for others, a gift or payment of any sort, or a promise thereof, as consideration for any act that impinges on the integrity of office. Defences against such practices are fortified by the absence of any exemption, caveat or even significant qualifying criteria for the type of act that could invoke bribery provisions. Any act can be considered corrupt, regardless of its legitimacy, whether it is a positive act or an omission, whether it has been done in the absence of a prior agreement, and even where it involves using the influence attached to a public office to gain benefit, rather than the performance of a relevant duty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Given the traditionally prominent role of the government in the national economy, the Anti-Bribery Law does provide relatively wide protection, despite the obvious lack of corresponding safeguards applicable to the private sector. Privatisation targets encapsulated by Vision 2030, however, necessitate more complete protection and new measures that target both the public and private sector are a requirement going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Penalties and Enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Under the Anti-Bribery Law, penalties for the offences set out above can reach maximum penalties of imprisonment for a term not exceeding ten years and/or a fine not exceeding one million riyals (about USD 275,000).</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Along with the specific penalties applicable to public servants who accept a bribe, it should be noted that the Anti-Bribery Law provides for the person offering the bribe (whether it is accepted or not), and any accomplice, to be susceptible to corresponding punishments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To protect a culture of respect for public officials, conviction on bribery offences also leads to dismissal and a bar from public office for a minimum of five years. In an attempt to prevent perpetrators from benefitting from the proceeds of crime, the Anti Bribery Law provides that any money, benefit or privilege derived from committal of the offence be confiscated wherever possible.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Gifts and Hospitality</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">No exemptions are provided for gifts and hospitality in the Anti-Bribery Law. Any benefit or privilege obtained by the bribee, regardless of its type or designation, whether material or otherwise, shall be considered a (prohibited) gift or promise. This has led to confusion in the past, as conventional business practices that would be widely accepted in other systems appeared to invoke the strict anti-bribery restrictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This matter was somewhat elucidated with the passing of the Rules on Gifts to Officials. Pursuant to these Rules, an official may accept gifts, given at visits and official occasions or at receptions of official guests, in accordance with custom and the courtesy protocols of such visits and occasions, though they cannot be cash and must be conventional in the context in which it is given. Crucially, businesses must be cognisant that generally, when reviewing the appositeness of a gift, the authorities will consider a number of contextual factors, including the proximity of the gift-giving to any relevant business deal, common courtesy practices of the firm in question, proportionality of the gift to conventional customs, and the appropriateness of the benefit given.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Though further provisions on the permissibility of certain types of gifts are outlined in the Rules, gifts and hospitality continue to be point of concern for business and can prove problematic in a culture where generosity is an ever-present feature of relations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Exposure for Corporate Entities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Significantly, where the manager or any employee of a private company is convicted of any offence under the Anti-Bribery Law, and the offence was committed for the benefit of such company, the law provides for a fine not exceeding ten times the value of the bribe and/or a ban from entering into public procurement or project contracts of at least 5 years. The briber can be exempted from punishment if he informs the authorities prior to the discovery of the offence, and this may provide some means by which corporate entities can limit their exposure upon becoming aware of any apparent offences under the Anti-Bribery Law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparing for the Tempest: Bolstering Defences Ahead Of Reform</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a strategic perspective, since bribery is rarely an isolated issue, responses need to be thorough and comprehensive; part of an overarching coordinated national strategy that provides protection across an entire economic system and all branches of government. In order to ensure that such strategies are effective and aligned across institutions and businesses, they require constant monitoring and enforcement by a dedicated and independent authority, Where these institutions also act as the recipient in a sound and efficient reporting mechanism, the presence of a clear and trustworthy process increases the confidence of international investors.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Aside from the well-publicised arrests, Saudi Arabia’s corruption reform has extended to measures in other parts of its anti-corruption framework that have more sustainable implications for how it will address corrupt practices in future. These bold new mechanisms also enhance the country’s invigorated anti-corruption culture, which marks an abrupt departure from its previous presumed reticence on corruption matters.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Newly-formed Supreme Committee for Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The formation of the Supreme Committee is indicative of the greater strategic importance of anti-graft efforts to the country’s wider reform programme. Chaired by the Crown Prince and comprised of high-ranking officials from various sectors of governance, including security, finance and existing anti-corruption bodies, the Committee acts as a mechanism that will immediately elevate corruption instances to the remit of the highest echelons of government. In so doing, the Kingdom is sending a strong message that it will no longer turn a blind eye to practices that compromise its financial system or rule of law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The new Supreme Committee will have vastly advanced investigative and prosecutorial powers, including the capacity to issue arrest warrants and order interim measures such as issuing travel bans and asset freezing orders. This is a critical limitation of the existing National Anti-Corruption Commission, more commonly known as Nazaha, which was established in 2012 and has limited capacity, despite its function as the primary recipient of reports of corrupt activity. The new committee will not replace Nazaha, which will continue to target the protection of national integrity, investigate instances of graft in government contracts and refer any incidents to the relevant authorities and public prosecution as and when necessary.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">By coordinating the activities of both the Supreme Committee and Nazaha, the efficacy of existing measures will be boosted by covering a wider scope of prosecutorial powers, increased authority with which to pursue perpetrators, and greater scrutiny through public awareness.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specialised Anti-corruption Units Within the Public Prosecution Department</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As an additional measure, the Saudi government announced as recently as March 2018 that it had established new specialised anti-corruption units within the Public Prosecution. Cases prosecuted by these units would be carried out under the direct oversight of the Attorney General, once again demonstrating the paramount importance of corruption-related cases. Though it is unclear when the dedicated units will become operational, in creating this new advanced capacity the Saudi government has improved its ability to investigate and prosecute corrupt activity and, in so doing, will add an extra deterrent against illicit practices.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Whistleblower Culture</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Whistleblower protection is a significant point of departure in many regimes across the globe. Whilst some Western systems, such as the US, actively promote whistleblowing activity through substantial financial incentives, most countries in the Middle East have thus far been slow to introduce formal protection for whistleblowers, preferring instead to rely on a positive reporting duty and conscionable actions by citizens.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In this context, Saudi Arabia’s more proactive approach appears as an outlier. Article 17 of the Anti-Bribery Law provides for rewards for information substantiating an offence. Any person who is not a briber, or an accomplice, and who provides incriminating information substantiating any offence set out in Anti-Bribery Law, shall receive a reward not less than five thousand riyals (about USD 1,350) and not more than half of the money confiscated. There may be scope for a higher reward to be approved in appropriate circumstances.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, King Salman’s recent order in May 2018 to provide whistle blower protection is progressive in its outlook and signifies Saudi Arabia’s willingness to accede to international standards of rights and transparency when it comes to prosecuting corruption crimes. If Saudi Arabia is mindful of the risks posed by the potential for spurious claims and introduces adequate measures to prevent abuse of the reporting system, whistle blower protection is yet a further measure that will likely serve to reinforce the culture of zero tolerance that Saudi Arabia is attempting to cultivate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Impending Amendments to the Anti-Bribery Law</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 2 July 2018, Saudi Arabia’s Shoura (Consultative) Council approved draft amendments to the Anti-Bribery Law. The changes, which are yet to be implemented, are reportedly aimed at providing enhanced protection to public utilities through sound prosecution procedures and severe punishment for offences, as well as further enshrining the principles and commitments contained in the United Nations Convention Against Corruption (UNCAC). At present, the extent and exact nature of the amendments are unknown, but once officially passed into law, they have the potential to radically modernise Saudi Arabia’s anti-bribery legislation. This critical development warrants close attention over the coming months as the process to implementation progresses, and could assist investors in assessing the long-term outlook for Saudi Arabia’s economic integrity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Weather Eye on the Horizon: Is Further Change an Inevitability?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Anti-corruption measures are an ancillary part of the legal reform process in KSA, but do not represent the totality of the country’s ongoing transition. New money-laundering laws passed in October 2017 are emblematic of the Kingdom’s resolve to eradicate illicit practices from its system. Corruption is symptomatic of countries where there is weak rule of law, but Saudi Arabia’s legal fortifications will go a long way to stamping out the nexus of criminal behaviour that facilitates and drives corruption trends. These are important contributory factors that should be considered by foreign investors when making an assessment of Saudi Arabia’s economic security.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The changes that have already been implemented will only improve the prognosis of anti-corruption in Saudi Arabia. The continued momentum garnered from these initiatives will drive awareness of corruption problems, aided by the combined activity of Nazaha and the newly formed Supreme Committee for Anti-Corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This is a pivotal time for Saudi Arabia and the long-term outlook is positive – there is already evidence of widespread reform to protect the Kingdom’s economic stability and integrity and address systemic weaknesses. Simultaneously, the changes that have been gradually introduced by Saudi Arabia’s General Investment Authority (SAGIA) since 2015 to liberalise the national economy and provide space for full foreign ownership in key sectors, are creating new incentive for foreign investors to tap into the largest market in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Equally, investors must strike the appropriate balance between caution and enthusiasm when encountering new opportunities in the market. Corruption challenges are persistent and pervasive and will require sustained redress for the foreseeable future. Though it is yet undetermined what new mechanisms and measures may be deployed in the Kingdom in future, it is likely that subsequent steps taken to quash illicit practices will have considerable consequences for domestic and foreign investors alike. This will require that foreign investors understand the legal framework and secure their interests against inevitable shifts in the Saudi market as reform measures revolutionise the domestic business culture.</p>\r\nOverall, however, Saudi Arabia’s recent multifaceted approach to reform has created the perfect storm for investors and, with an impending multitude of investment projects, businesses have a prime opportunity to invest at the leading edge of FDI, assured that corrupt practices are not operating with impunity.\r\n\r\n<img class=\"size-full wp-image-8011 aligncenter\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/676.jpg\" alt=\"\" width=\"843\" height=\"366\" />|<p dir=\"LTR\" align=\"LEFT\"><em><img class=\"alignleft size-full wp-image-8012\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/DG.jpg\" alt=\"\" width=\"1536\" height=\"417\" />Saudi Arabia is undergoing significant reform but, beyond the maelstrom of political speculation and conjecture, what are the practical and legal implications of the anti-corruption drive for investors?</em></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia has seen tumultuous reform in the last 12 months as Crown Prince Mohammed bin Salman has sought to propel Saudi Arabia towards Vision 2030. International attention has been riveted to the government’s surging anti-corruption drive since a number of high-profile individuals were detained on corruption charges towards the end of 2017. Much of this attention, however, has been tangential, without providing clear insight into what impact such radical measures will have on the country’s legal framework and business climate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Favourable Forecast? The Business Outlook on Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The extent and boldness of the recent measures taken in Saudi Arabia are indicative of the government’s resolve to eliminate corruption in the system. The Kingdom has been signatory to the United National Convention Against Corruption (UNCAC) since 2004, though it only ratified the agreement in 2013. The events that have garnered so much international attention are only the latest in a long-term initiative to address corrupt practices in the business sector. Between 2012 and 2017, Saudi Arabia has improved its score on the Transparency International Corruption Perceptions Index (CPI) from 44 to 49. Whilst this score still reflects significant room for improvement, it also charts measurable progress in a region that continues to face drastic change, and provides impetus for the more recent measures that clearly demonstrate the elevated priority of anti-corruption reform.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order for the Kingdom to benefit from its drive for sustainability and prosperity, however, its determination to eradicate corruption must be symbiotic with its ability to assure investor confidence. The zero-tolerance approach that has surfaced over the past year has the potential to greatly improve the integrity of Saudi Arabia’s business market, but lingering concerns surround residual corruption with certain businesses continuing to question the feasibility and longevity of trading in the Kingdom.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The United Nations Conference on Trade and Development (UNCTD) World Investment Report 2018 suggests that, in the short term at least, the anti-corruption drive has done little to improve investor confidence and may even have exacerbated feelings of uncertainty. Inward Foreign Direct Investment (FDI) flows have fallen by more than 80% between 2016 and 2017. Whilst this trend cannot be entirely attributed to the anti-corruption sweep that happened late in the final quarter of the year, it is certainly likely to have been a contributory factor in unsettling investor confidence. From a long-term perspective, however, efforts to level the playing field in Saudi Arabia may bring fairer weather to businesses as the obstacles associated with pervasive corruption are gradually eliminated from the system.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Saudi Arabia is far from being alone in its fight against corruption; it is one of the most prevalent and pressing issues facing systems across the globe, and countries with endemic corruption problems face an almost insurmountable challenge to attract foreign investment. At this nascent stage, it would be premature to speculate as to how other Middle Eastern countries will respond to the Kingdom’s efforts, but the most desirable outcome would be for neighbouring countries to become emboldened in their own anti-corruption efforts. The UAE already stands as the regional outlier in anti-corruption efforts, with a CPI 2017 ranking of 21st in the world, comparable to many leading international jurisdictions. The combined efforts of both Saudi Arabia and the UAE could be instrumental in forging a clear path to greater transparency for other afflicted countries in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Staying Dry: Legal Safeguards Against Corruption In The Kingdom</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The primary anti-corruption provisions are provided by the anti-bribery law issued by Royal Decree No. M/36 of 29-Dhu al-Hijjah-1412 (corresponding to 30 June 1996) (the \"Anti-Bribery Law\"). More recently, a decree was issued setting out rules relating to gifts for public officials (Decree No. 60 dated 18 Safar 1437H (corresponding to 1 December 2015) (the \"Rules on Gifts to Officials\" or the \"Rules\").</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Bribery of Public Officials</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law is primarily focused on public servants. In order to maintain maximum protection for its public sector, the definition is intentionally broad, extending to personnel of joint stock companies, along with their board members and directors. It may also capture private sector individuals who are working on government-related projects, such as consultants to government projects, including temporary employees, experts appointed by the government or judiciary, or even employees of private companies contracted to provide public services. Employees of joint stock companies are also subject to the Anti-Bribery Law, as well as employees of companies and sole proprietorships engaged in banking services.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Anti-Bribery Law broadly defines a bribee as any public servant who solicits, accepts or receives for himself or for others, a gift or payment of any sort, or a promise thereof, as consideration for any act that impinges on the integrity of office. Defences against such practices are fortified by the absence of any exemption, caveat or even significant qualifying criteria for the type of act that could invoke bribery provisions. Any act can be considered corrupt, regardless of its legitimacy, whether it is a positive act or an omission, whether it has been done in the absence of a prior agreement, and even where it involves using the influence attached to a public office to gain benefit, rather than the performance of a relevant duty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Given the traditionally prominent role of the government in the national economy, the Anti-Bribery Law does provide relatively wide protection, despite the obvious lack of corresponding safeguards applicable to the private sector. Privatisation targets encapsulated by Vision 2030, however, necessitate more complete protection and new measures that target both the public and private sector are a requirement going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Penalties and Enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Under the Anti-Bribery Law, penalties for the offences set out above can reach maximum penalties of imprisonment for a term not exceeding ten years and/or a fine not exceeding one million riyals (about USD 275,000).</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Along with the specific penalties applicable to public servants who accept a bribe, it should be noted that the Anti-Bribery Law provides for the person offering the bribe (whether it is accepted or not), and any accomplice, to be susceptible to corresponding punishments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To protect a culture of respect for public officials, conviction on bribery offences also leads to dismissal and a bar from public office for a minimum of five years. In an attempt to prevent perpetrators from benefitting from the proceeds of crime, the Anti Bribery Law provides that any money, benefit or privilege derived from committal of the offence be confiscated wherever possible.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Gifts and Hospitality</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">No exemptions are provided for gifts and hospitality in the Anti-Bribery Law. Any benefit or privilege obtained by the bribee, regardless of its type or designation, whether material or otherwise, shall be considered a (prohibited) gift or promise. This has led to confusion in the past, as conventional business practices that would be widely accepted in other systems appeared to invoke the strict anti-bribery restrictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This matter was somewhat elucidated with the passing of the Rules on Gifts to Officials. Pursuant to these Rules, an official may accept gifts, given at visits and official occasions or at receptions of official guests, in accordance with custom and the courtesy protocols of such visits and occasions, though they cannot be cash and must be conventional in the context in which it is given. Crucially, businesses must be cognisant that generally, when reviewing the appositeness of a gift, the authorities will consider a number of contextual factors, including the proximity of the gift-giving to any relevant business deal, common courtesy practices of the firm in question, proportionality of the gift to conventional customs, and the appropriateness of the benefit given.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Though further provisions on the permissibility of certain types of gifts are outlined in the Rules, gifts and hospitality continue to be point of concern for business and can prove problematic in a culture where generosity is an ever-present feature of relations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Exposure for Corporate Entities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Significantly, where the manager or any employee of a private company is convicted of any offence under the Anti-Bribery Law, and the offence was committed for the benefit of such company, the law provides for a fine not exceeding ten times the value of the bribe and/or a ban from entering into public procurement or project contracts of at least 5 years. The briber can be exempted from punishment if he informs the authorities prior to the discovery of the offence, and this may provide some means by which corporate entities can limit their exposure upon becoming aware of any apparent offences under the Anti-Bribery Law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparing for the Tempest: Bolstering Defences Ahead Of Reform</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a strategic perspective, since bribery is rarely an isolated issue, responses need to be thorough and comprehensive; part of an overarching coordinated national strategy that provides protection across an entire economic system and all branches of government. In order to ensure that such strategies are effective and aligned across institutions and businesses, they require constant monitoring and enforcement by a dedicated and independent authority, Where these institutions also act as the recipient in a sound and efficient reporting mechanism, the presence of a clear and trustworthy process increases the confidence of international investors.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Aside from the well-publicised arrests, Saudi Arabia’s corruption reform has extended to measures in other parts of its anti-corruption framework that have more sustainable implications for how it will address corrupt practices in future. These bold new mechanisms also enhance the country’s invigorated anti-corruption culture, which marks an abrupt departure from its previous presumed reticence on corruption matters.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Newly-formed Supreme Committee for Anti-Corruption</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The formation of the Supreme Committee is indicative of the greater strategic importance of anti-graft efforts to the country’s wider reform programme. Chaired by the Crown Prince and comprised of high-ranking officials from various sectors of governance, including security, finance and existing anti-corruption bodies, the Committee acts as a mechanism that will immediately elevate corruption instances to the remit of the highest echelons of government. In so doing, the Kingdom is sending a strong message that it will no longer turn a blind eye to practices that compromise its financial system or rule of law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The new Supreme Committee will have vastly advanced investigative and prosecutorial powers, including the capacity to issue arrest warrants and order interim measures such as issuing travel bans and asset freezing orders. This is a critical limitation of the existing National Anti-Corruption Commission, more commonly known as Nazaha, which was established in 2012 and has limited capacity, despite its function as the primary recipient of reports of corrupt activity. The new committee will not replace Nazaha, which will continue to target the protection of national integrity, investigate instances of graft in government contracts and refer any incidents to the relevant authorities and public prosecution as and when necessary.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">By coordinating the activities of both the Supreme Committee and Nazaha, the efficacy of existing measures will be boosted by covering a wider scope of prosecutorial powers, increased authority with which to pursue perpetrators, and greater scrutiny through public awareness.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specialised Anti-corruption Units Within the Public Prosecution Department</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As an additional measure, the Saudi government announced as recently as March 2018 that it had established new specialised anti-corruption units within the Public Prosecution. Cases prosecuted by these units would be carried out under the direct oversight of the Attorney General, once again demonstrating the paramount importance of corruption-related cases. Though it is unclear when the dedicated units will become operational, in creating this new advanced capacity the Saudi government has improved its ability to investigate and prosecute corrupt activity and, in so doing, will add an extra deterrent against illicit practices.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Whistleblower Culture</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Whistleblower protection is a significant point of departure in many regimes across the globe. Whilst some Western systems, such as the US, actively promote whistleblowing activity through substantial financial incentives, most countries in the Middle East have thus far been slow to introduce formal protection for whistleblowers, preferring instead to rely on a positive reporting duty and conscionable actions by citizens.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In this context, Saudi Arabia’s more proactive approach appears as an outlier. Article 17 of the Anti-Bribery Law provides for rewards for information substantiating an offence. Any person who is not a briber, or an accomplice, and who provides incriminating information substantiating any offence set out in Anti-Bribery Law, shall receive a reward not less than five thousand riyals (about USD 1,350) and not more than half of the money confiscated. There may be scope for a higher reward to be approved in appropriate circumstances.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, King Salman’s recent order in May 2018 to provide whistle blower protection is progressive in its outlook and signifies Saudi Arabia’s willingness to accede to international standards of rights and transparency when it comes to prosecuting corruption crimes. If Saudi Arabia is mindful of the risks posed by the potential for spurious claims and introduces adequate measures to prevent abuse of the reporting system, whistle blower protection is yet a further measure that will likely serve to reinforce the culture of zero tolerance that Saudi Arabia is attempting to cultivate.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Impending Amendments to the Anti-Bribery Law</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 2 July 2018, Saudi Arabia’s Shoura (Consultative) Council approved draft amendments to the Anti-Bribery Law. The changes, which are yet to be implemented, are reportedly aimed at providing enhanced protection to public utilities through sound prosecution procedures and severe punishment for offences, as well as further enshrining the principles and commitments contained in the United Nations Convention Against Corruption (UNCAC). At present, the extent and exact nature of the amendments are unknown, but once officially passed into law, they have the potential to radically modernise Saudi Arabia’s anti-bribery legislation. This critical development warrants close attention over the coming months as the process to implementation progresses, and could assist investors in assessing the long-term outlook for Saudi Arabia’s economic integrity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A Weather Eye on the Horizon: Is Further Change an Inevitability?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Anti-corruption measures are an ancillary part of the legal reform process in KSA, but do not represent the totality of the country’s ongoing transition. New money-laundering laws passed in October 2017 are emblematic of the Kingdom’s resolve to eradicate illicit practices from its system. Corruption is symptomatic of countries where there is weak rule of law, but Saudi Arabia’s legal fortifications will go a long way to stamping out the nexus of criminal behaviour that facilitates and drives corruption trends. These are important contributory factors that should be considered by foreign investors when making an assessment of Saudi Arabia’s economic security.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The changes that have already been implemented will only improve the prognosis of anti-corruption in Saudi Arabia. The continued momentum garnered from these initiatives will drive awareness of corruption problems, aided by the combined activity of Nazaha and the newly formed Supreme Committee for Anti-Corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This is a pivotal time for Saudi Arabia and the long-term outlook is positive – there is already evidence of widespread reform to protect the Kingdom’s economic stability and integrity and address systemic weaknesses. Simultaneously, the changes that have been gradually introduced by Saudi Arabia’s General Investment Authority (SAGIA) since 2015 to liberalise the national economy and provide space for full foreign ownership in key sectors, are creating new incentive for foreign investors to tap into the largest market in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Equally, investors must strike the appropriate balance between caution and enthusiasm when encountering new opportunities in the market. Corruption challenges are persistent and pervasive and will require sustained redress for the foreseeable future. Though it is yet undetermined what new mechanisms and measures may be deployed in the Kingdom in future, it is likely that subsequent steps taken to quash illicit practices will have considerable consequences for domestic and foreign investors alike. This will require that foreign investors understand the legal framework and secure their interests against inevitable shifts in the Saudi market as reform measures revolutionise the domestic business culture.</p>\r\nOverall, however, Saudi Arabia’s recent multifaceted approach to reform has created the perfect storm for investors and, with an impending multitude of investment projects, businesses have a prime opportunity to invest at the leading edge of FDI, assured that corrupt practices are not operating with impunity.\r\n\r\n<img class=\"wp-image-8011 alignleft\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/676.jpg\" alt=\"\" width=\"1094\" height=\"475\" />'),
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	(249633,24357,'PostType','law_update_articles'),
	(249634,24357,'PostTitle','The Calm After the Storm: Saudi Arabia’s Anti-Corruption Tornado and the Investor Impact'),
	(249635,24357,'PostStatus','draft'),
	(249636,24357,'PostDate','2018-07-31 17:39:59'),
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	(249644,24358,'PostType','law_update_articles'),
	(249645,24358,'PostTitle','The Calm After the Storm: Saudi Arabia’s Anti-Corruption Tornado and the Investor Impact'),
	(249646,24358,'PostStatus','draft'),
	(249647,24358,'PostDate','2018-07-31 17:40:04'),
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	(249653,24358,'CurrentUserRoles','a:2:{i:0;s:13:\"administrator\";i:1;s:10:\"superadmin\";}'),
	(249654,24359,'PostID','7935'),
	(249655,24359,'PostType','law_update_articles'),
	(249656,24359,'PostTitle','Overhaul of the UAE Finance Companies Regulations'),
	(249657,24359,'PostStatus','draft'),
	(249658,24359,'PostDate','2018-07-31 17:40:06'),
	(249659,24359,'PostUrl','http://localhost:8888/tamimi/?post_type=law_update_articles&p=7935'),
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	(249661,24359,'ClientIP','86.98.5.18'),
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	(249663,24359,'CurrentUserID','8'),
	(249664,24359,'CurrentUserRoles','a:2:{i:0;s:13:\"administrator\";i:1;s:10:\"superadmin\";}'),
	(249665,24360,'PostID','7935'),
	(249666,24360,'PostType','law_update_articles'),
	(249667,24360,'PostTitle','Overhaul of the UAE Finance Companies Regulations'),
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	(249669,24360,'PostDate','2018-07-31 17:39:15'),
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	(249672,24360,'ClientIP','86.98.5.18'),
	(249673,24360,'UserAgent','Mozilla/5.0 (Macintosh; Intel Mac OS X 10_11_6) AppleWebKit/537.36 (KHTML, like Gecko) Chrome/67.0.3396.99 Safari/537.36'),
	(249674,24360,'CurrentUserID','8'),
	(249675,24360,'CurrentUserRoles','a:2:{i:0;s:13:\"administrator\";i:1;s:10:\"superadmin\";}'),
	(249676,24361,'PostID','7935'),
	(249677,24361,'PostTitle','Overhaul of the UAE Finance Companies Regulations'),
	(249678,24361,'PostStatus','draft'),
	(249679,24361,'PostType','law_update_articles'),
	(249680,24361,'PostDate','2018-07-31 17:40:45'),
	(249681,24361,'PostUrl','http://localhost:8888/tamimi/?post_type=law_update_articles&p=7935'),
	(249682,24361,'MetaID','223050'),
	(249683,24361,'MetaKey','content'),
	(249684,24361,'MetaValueNew','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"aligncenter wp-image-7997 size-large\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"640\" height=\"592\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).'),
	(249685,24361,'MetaValueOld','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"wp-image-7997  alignright\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"778\" height=\"720\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).'),
	(249686,24361,'MetaLink','content'),
	(249687,24361,'EditorLinkPost','http://localhost:8888/tamimi/wp-admin/post.php?post=7935&amp;action=edit'),
	(249688,24361,'ReportText','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"wp-image-7997  alignright\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"778\" height=\"720\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).|<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft wp-image-7994 size-full\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/11.jpg\" alt=\"\" width=\"5472\" height=\"845\" />Amongst the several new laws and regulations being introduced in the UAE, the UAE Central Bank (\"Central Bank\") has on10 May 2018 issued new Finance Company Regulations (\"Regulations\" or \"2018 Regulations\") which are to come into effect one month after its publication.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations replace the previous finance company regulations issued in 1996 and finance companies regulations for companies conducting business as per Islamic sharia’a principles issued in 2004 (\"Previous Regulations\") and aim at providing a detailed regulatory framework for Finance Companies to operate and develop within the UAE and also covers in its ambit the framework for protecting the customers of such Finance Companies.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations consolidate the regulations for both Islamic finance and conventional finance companies (\"Finance Company/ies\") and incorporate certain significant changes including changes to capital requirements and corporate governance, to also be followed by existing Finance Companies. We have set out below certain noteworthy features of these Regulations and a comparative table on the key changes from the Previous Regulations on subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>License Application</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Pursuant to these Regulations, conducting financing activities in the UAE without a central bank license is prohibited. An application for such license must include the proposed scope of activities, a feasibility study illustrating the financial activities and products to be launched, estimated financial projections, risk factors, corporate structure, start-up costs, branches and a recruitment plan.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Another important requisite is for the applicant to provide an unconditional guarantee from a UAE Bank, in favour of the Central Bank for an amount equivalent to the minimum required paid-up capital. The License will be granted for a period of three years and may be renewable for the same period unless otherwise required by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Any changes to the ownership of the Finance Company of 5% or more will require prior approval from the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Cancelling or Revoking a License</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank has the discretion to approve or refuse the License application, but must notify applicants in writing with reasons in case there is a refusal. Licenses can also be amended, revoked or cancelled at the discretion of the Board. The Regulations set out instances when the license can be cancelled which include providing false/misleading information, risking interests of the potential customers, or if there is a bankruptcy order filed against the Finance Company.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">If a Finance Company wishes to cease operations it must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Regulations also provide for penalties that will be imposed if such company does not follow the provisions of the Regulations including adhering to the anti-money laundering policies laid down by the Central Bank.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Permitted Activities</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10.1 of the Regulation details out the types of activities that are permitted, which are:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Retail finance,</li>\r\n 	<li dir=\"LTR\">mortgage finance,</li>\r\n 	<li dir=\"LTR\">wholesale finance,</li>\r\n 	<li dir=\"LTR\">pre-paid cards, and</li>\r\n 	<li dir=\"LTR\">distribution of third party products.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">The Central Bank can review and amend this list from time to time.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Article 10 further sets out the do’s and dont’s in relation to the business of the Finance Company, certain key features are:</p>\r\n\r\n<ul>\r\n 	<li dir=\"LTR\">it can extend loans only to ‘Juridicial Persons’ (defined under Article 93 of the UAE Civil Transactions Law) and individuals in the UAE. However, it is prohibited from accepting deposits or loans from individuals.</li>\r\n 	<li dir=\"LTR\">it may accept deposits only from Juridicial Persons, subject to certain conditions laid out under Article 10.4 and also borrow from UAE banks, and may even receive foreign funding provided that its risk has been adequately hedged. In doing so it must not exceed 25% of the sum of total amount of its debt capital.</li>\r\n 	<li dir=\"LTR\">it must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in its license.</li>\r\n 	<li dir=\"LTR\">it may only participate in the share capital of brokerage companies, money exchanges, UAE banks and other Finance Companies. Any such single participation cannot exceed 10% of its debt capital and the aggregate participation must not exceed 25% of the debt capital.</li>\r\n 	<li dir=\"LTR\">It must obtain approval from the Central Bank in order to issue bonds or sukuks. Such bonds and sukuks shall only be denominated in UAE dirhams or US Dollars.</li>\r\n 	<li dir=\"LTR\">it is prohibited from financing a borrower which is not an entity incorporated in the UAE or its free zones, or a UAE resident, or where the mortgaged assets are not in the UAE.</li>\r\n 	<li dir=\"LTR\">it is prohibited from entering into the business of money exchange.</li>\r\n 	<li dir=\"LTR\">it must not purchase immovable properties unless for its own use or specific approval for the same has been obtained from the Central Bank. This rule does not apply to Islamic Finance Companies (IFC). IFCs may own property including immovable property and goods as part of an underlying financing contract with a borrower.</li>\r\n</ul>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Minimum Capital, Liquidity Requirements and Credit Exposure Restrictions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The minimum paid-up capital for a Finance Company is 150 million UAE Dirhams. UAE national ownership of the Finance Company must comprise at least 60% of total paid-up capital. Finance Companies must also allocate at least 10% of annual net profits to establishing a statutory reserve until the reserve equals 50% of its paid-up capital.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets i.e. cash held in UAE bank, Certificates of deposit issued by the Central Bank held via a UAE bank, short term deposits with a UAE bank with maturity upto 30 days and UAE federal and local government bonds, which must not exceed 30% of the total liquid assets. For the purpose of calculating the 10% amount, a Finance Company may deduct from its aggregate liabilities, cash collateral, bank guarantees from UAE banks and sovereign guarantees.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The credit exposure is considered ‘large’ if the value of such exposure to one borrower or group of related entities is 7% or more. The Regulations set out maximum exposure limits for different borrower types.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Organisational Structure, Composition and Policies of the Finance Company</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Founding shareholders - Founding shareholders must satisfy \"Fit and Proper\" criteria as defined by the Central Bank and their appointment must be in line with the Commercial Companies Law<strong>.</strong></li>\r\n 	<li dir=\"LTR\">Board of Directors - The board of directors of a Finance Company must have no fewer than five members. Atleast 60% of the board members of an IFC must have knowledge of the banking business or Islamic finance and banking business as the case may be. The Regulations provide for detailed selection processes and guidances in relation to the board of directors</li>\r\n 	<li dir=\"LTR\">Sharia’a Supervision Committee and other committees - An IFC must have a Sharia’a Supervision Committee, and its role must be laid out in the policies of the IFC. Finance Companies must also have a board committee and credit committee.</li>\r\n 	<li dir=\"LTR\">Senior Management – Finance Companies must comply with the ‘fit and proper‘ test set out by the Central Bank and must be professional who understands the business of finance and was experience of not less than 10 years in the field of finance. Person within the senior management cannot be a part of the board.</li>\r\n 	<li dir=\"LTR\">Corporate Governance - While the Regulations set out certain minimum requirements for corporate governance, Finance Companies are permitted to set out their own policies and framework for corporate governance (complying with the Regulations), however these must be approved by its board of directors and a copy of such policies must be provided to the Central Bank.</li>\r\n 	<li dir=\"LTR\">Internal Policies – the Regulations set out the requirements that need to be adhered to by Finance Companies and IFC with respect to its internal polices in relation to management, risk management, extension of credit, compliance, information technology, security, audit, remuneration, outsourcing, etc.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Other provisions</strong></p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">Consumer Protection: the Name of the finance company must not include the words \"bank\", \"investment company\" or and other term which may mislead its customer. It must provide its customers with sufficient information regarding its products, etc. in order for them to be able to make an informed decision. The Finance Company must follow the Central Bank guidelines in relation to ‘Consumer Protection’.</li>\r\n 	<li dir=\"LTR\">Credit Reports - Every Finance Company must adhere to the credit reporting requirements of the Al Etihad Credit Bureau and other credit agencies to provide to and obtain information of the Borrower.</li>\r\n 	<li dir=\"LTR\">Accounting Standards - A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Differences in the new Regulations from the Previous Regulations</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The 2018 Regulations are far more detailed in the nature of investments permitted, liquidity requirements, organisational structure to be followed, investor guidance; we have set out below certain differences in the provisions between the Previous Regulations and 2018 Regulations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><img class=\"aligncenter wp-image-7997 size-large\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.23.26-PM-1024x947.png\" alt=\"\" width=\"640\" height=\"592\" /></p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These Regulations apply to all Finance Companies. Accordingly companies licensed prior to the date of the issuance of these Regulations need to comply with the 2018 Regulations and are given a period not exceeding 3 years from the publication to conform. However, the Central Bank may amend the requirement of compliance within 3 years if it deems the finance company to be substantially in compliance with these Regulations. All existing Finance Companies will require to provide the Central Bank with a detailed adjustment plan to comply with the articles of these Regulations.</p>\r\nAl Tamimi &amp; Company’s Banking and Finance team regularly advises on the Finance Company Regulations. For further information please contact Mark Brown (m.brown@tamimi.com) or Maymoona Talib (m.talib@tamimi.com).'),
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	(249706,24363,'PostTitle','The Calm After the Storm: Saudi Arabia’s Anti-Corruption Tornado and the Investor Impact'),
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	(249755,24368,'PostID','7940'),
	(249756,24368,'PostTitle','Stuck between a rock and a hard place… : The UK’s Unexplained Wealth Orders and the effect in the Middle East'),
	(249757,24368,'PostStatus','draft'),
	(249758,24368,'PostType','law_update_articles'),
	(249759,24368,'PostDate','2018-07-31 17:43:55'),
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	(249763,24368,'MetaValueNew','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft size-full wp-image-8002\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/17-1.png\" alt=\"\" width=\"3567\" height=\"715\" />The UK legislature has recently introduced domestic legislation aimed at money launderers, potentially resulting in unintended consequences for foreign nationals who have legitimate assets in the UK. These orders demand the intended target provide information about the origin of their wealth, and refusal to disclose that information may render the target subject to criminal prosecution in the UK. However, if the foreign national does comply with the Unexplained Wealth Order (UWO), then that individual may be subject to criminal prosecution in another State… a real Catch 22.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Controversially, there is no need for a foreign national to be accused of money laundering, or any criminality whatsoever, before they could be made subject to a UWO, which would lead to the freezing of their assets, or, worse, criminal prosecution.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The following article introduces UWOs to our clients and examines how one must be careful in weighing up their rights and obligations in respect of the request of a foreign State’s investigative authorities as it may impact their rights in the UAE, and around the GCC.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is a UWO?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 31st January 2018, the UK introduced their latest attempt at stemming money laundering in the UK: Unexplained Wealth Orders. UWOs are civil investigative powers that are aimed at tackling those who use the UK as a destination for money laundering, or as a destination for those who wish to spend their ill-gotten gains.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs have been introduced in the UK at a time when London, and the UK, is facing scrutiny as a perceived hotbed of money laundering and revelry. A main proponent of UWOs has been Transparency International UK’s corruption taskforce, who, amongst others, have repeatedly called for greater investigative action to be taken in the UK against individuals and entities thought to have been complicit in corruption, and have led the drive to bring UWOs into action in UK law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs are given legal effect pursuant to the UK Proceeds of Crime Act 2002 Article 362A, as introduced by the Criminal Finances Act 2017, and is defined in the legislation as:</p>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\"><em>‘An unexplained wealth order is an order requiring the respondent [i.e. the target of the order] to provide a statement—</em></p>\r\n\r\n<ul>\r\n 	<li><em>setting out the nature and extent of the respondent’s interest in the property in respect of which the order is made,</em></li>\r\n 	<li><em>explaining how the respondent obtained the property (including, in particular, how any costs incurred in obtaining it were met),</em></li>\r\n 	<li><em>where the property is held by the trustees of a settlement, setting out such details of the settlement as may be specified in the order, and</em></li>\r\n 	<li><em>setting out such other information in connection with the property as may be so specified.’</em></li>\r\n</ul>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\">The clear advantage that UWOs provide for UK investigative authorities is that it is no longer necessary for the UK authorities to demonstrate that an individual has been subject to a conviction for a criminal offence (either in the UK or abroad) in order to obtain information and take measures against a specific property.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Two months after the introduction of the legislation, in March 2018, it would appear that the first orders are now being made. We have seen the first use of these orders, not on a UK national, but on an Asian politician who owns two properties, worth USD $30 million, in the UK. The specific identity of this individual has not been disclosed as matters are ongoing, and no further details are available publically.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This means that if an individual owns assets in the UK and they are made subject to a UWO, they will be forced to declare how they obtained this asset, and if they fail to do so they would be subject to criminal prosecution by the UK authorities. This may lead to foreign individuals being stuck between a rock and a hard place, with nowhere to turn and no route of escape.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Why is it Relevant To You?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As will be apparent from the first orders made against the Asian politician, whilst UWOs do apply to individuals who are reasonably suspected of being involved in crime, the UWOs will also target politically exposed individuals who have not been subject to criminal conviction, or investigation, either in the UK or internationally.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The definition of a PEP, or Politically Exposed Person, varies from State to State, but for the purposes of the UK legislation, the legislators have defined PEPs as the following:</p>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\">‘(a) an individual who is, or has been, entrusted with prominent public functions by an international body or by a State other than the UK or other [European Economic Area] State;</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(b) a family member of a person within paragraph (a); or</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(c) known to be a close associate of a person within […] paragraph [a].’</p>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\">Evidently from this definition, paying particularly close attention to (c) namely ‘a close associate’ of an individual with prominent public functions, there is a very expansive definition of PEP, and this will likely include many unsuspecting individuals. The effect of this definition is that if you are an individual who has prominent public functions, or you are a close associate of another who has been entrusted with public functions, then you may now be targeted by the UK authorities with a UWO. Alarmingly, there is no need for you to have committed a crime, nor to have been suspected of being involved in a crime, for these orders to apply to you.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specifically, when could a UWO apply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UK high court judge can give notice of a UWO if the judge is satisfied that it is likely that a foreign PEP (as defined above) is the owner of suspicious wealth in the UK beyond their means, and if all of the following provisions are met:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The respondent’s known income is insufficient to obtain the asset; and</li>\r\n 	<li dir=\"LTR\">The value of the asset is greater than £50,000 (approx. AED 260,000).</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">This legislation does not only target Foreign PEPs, but also where there are reasonable grounds to suspect any individual has been involved in serious crime.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Applications for UWOs may be made without notice. This means that there is no requirement on the UK investigative authority to notify the target of a UWO that they, or their assets, have been made subject of a UWO.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What assets would this apply to?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UWO can be made against assets whose value is greater than £50,000. There is no need for the PEP to be the sole owner of the property whose value is over £50,000, nor is it of relevance if the property was purchased prior to the introduction of the UK legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is the effect?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Following the making of an order by the High Court, the Court may order an individual’s property to be frozen, which would preclude the subject of the order from dealing with the property. As these freezing orders may be made without notice, this means that an individual’s assets may be frozen prior to their knowledge of any order being made against them.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UWO will mandate the individual to explain, at a minimum:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The nature and extent of their interest in a particular property; and</li>\r\n 	<li dir=\"LTR\">Explain how the property was obtained.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">An explanation will be requested by the UK authorities where ‘there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property’.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Failing to Comply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Should the target of a UWO fail to comply with an order, or provide inaccurate or misleading information, then they will likely be subject to criminal sanction in the UK and may face a period of imprisonment and a financial penalty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Within the legislation, it is stated that a UWO could lead to criminal liability for a target if that individual fails, without reasonable excuse, to comply with the requirements imposed by the Court against that individual. There is no definition of what a reasonable excuse would be in the legislation, and is a subjective requirement that would be decided in Court during the course of litigation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong><img class=\"wp-image-8014 size-medium alignright\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.43.01-PM-242x300.png\" alt=\"\" width=\"242\" height=\"300\" />A View from the East: Stuck between a Rock and a Hard Place?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These orders, whilst designed to tackle money laundering on a global scale, and limit the use of the UK jurisdiction for those who seek to gain from their ill-gotten earnings, may cause legal difficulties for individuals based in foreign jurisdictions who are subject to UWOs – such as the UAE and the wider GCC – due to a conflict of laws between this UK legislation and that of other countries. This conflict could lead to an individual’s adherence to UK legislation meaning that the individual would be liable to prosecution in other jurisdictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Taking the UAE as a representative example of the Middle East’s approach to confidential or private information, the UAE’s jurisdiction imposes very strict obligations on an individual’s use and disclosure of confidential information. It is a criminal offence, pursuant to the UAE’s Federal Law No. 3 of 1987, as amended by Federal Decree No. 7 of 2016 (UAE Penal Code) to disclose secret information. Secret information is afforded an expansive definition in the UAE Penal Code and it is commonly viewed any information that is confidential, i.e. not in the public domain, and that an individual possesses due to their employment or individual nature.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Furthermore, due to the extraterritorial nature of the UAE Penal Code, should an individual commit a crime that is wholly or partly committed within the UAE, then that individual would be bound by the provisions of the Penal Code, and would be bound by provisions such as the disclosure of secret information. Specifically, should an individual be requested to provide secret information, such as the source of funds from a business entity, to the UK authorities, and that information relates to a UAE business or UAE based individual, then if the material or information is disclosed following a UWO in the UK, then in the UAE the individual may be subject to criminal prosecution for disclosing that exact information.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There is no exception afforded under UAE domestic legislation that would permit an individual to disclose confidential information to a foreign investigative authority (such as the UK’s Serious Fraud Office, Financial Conduct Authority, or National Security Agency). Should that individual disclose such information to the UK’s, or any other foreign State’s, investigative authority, then that individual may be liable to prosecution in the UAE in the same manner as though the disclosure had been made to a private individual or entity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Prosecution for disclosing confidential information is a serious offence in the UAE, and one that may carry a mandatory minimum period of imprisonment. Accordingly, the stakes are very high when one is subject to an international request for judicial assistance, in any form, and it is for that reason and in order to assist with international criminal investigations that the UAE has entered into number multilateral and bilateral treaties aimed at assisting mutual judicial assistance requests. As with most international requests from law enforcement agencies, such requests should follow the usual diplomatic channels through the deployment of letters rogatory.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The difficulties for UAE individuals would not stop simply at the threat of criminal sanction, but also according to the UAE’s Labour Law, should an individual disclose the secrets of their employer, then the worker may be dismissed without notice and forfeit their entire severance pay.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Accordingly, the receipt of a UWO in the UK demanding that an individual provide information to the UAE authorities may conflict with the statutory protection relating to confidential information (or other laws) in a foreign jurisdiction, such as the UAE. This would lead to the precarious situation where an individual may face prosecution in the UK if he doesn’t comply with the UWO, but criminal prosecution in the UAE if he does comply.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Conclusion</strong></p>\r\nThe above example and review provides a very high-level overview of the competing laws that the UK’s UWOs may catch. Whilst the UK legislation will no doubt serve as an effective deterrent and useful tool in minimising global money laundering, and limiting the attraction of the UK for criminals, it may have unintended consequences for foreign nationals holding legitimate assets in the UK. Prior to making any response to a request for assistance, it is imperative that the recipient apprise themselves of all legal considerations to ensure that they are not jumping out of the frying pan, but straight into the fire.'),
	(249764,24368,'MetaValueOld','<p dir=\"LTR\" align=\"LEFT\">The UK legislature has recently introduced domestic legislation aimed at money launderers, potentially resulting in unintended consequences for foreign nationals who have legitimate assets in the UK. These orders demand the intended target provide information about the origin of their wealth, and refusal to disclose that information may render the target subject to criminal prosecution in the UK. However, if the foreign national does comply with the Unexplained Wealth Order (UWO), then that individual may be subject to criminal prosecution in another State… a real Catch 22.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Controversially, there is no need for a foreign national to be accused of money laundering, or any criminality whatsoever, before they could be made subject to a UWO, which would lead to the freezing of their assets, or, worse, criminal prosecution.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The following article introduces UWOs to our clients and examines how one must be careful in weighing up their rights and obligations in respect of the request of a foreign State’s investigative authorities as it may impact their rights in the UAE, and around the GCC.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is a UWO?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 31st January 2018, the UK introduced their latest attempt at stemming money laundering in the UK: Unexplained Wealth Orders. UWOs are civil investigative powers that are aimed at tackling those who use the UK as a destination for money laundering, or as a destination for those who wish to spend their ill-gotten gains.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs have been introduced in the UK at a time when London, and the UK, is facing scrutiny as a perceived hotbed of money laundering and revelry. A main proponent of UWOs has been Transparency International UK’s corruption taskforce, who, amongst others, have repeatedly called for greater investigative action to be taken in the UK against individuals and entities thought to have been complicit in corruption, and have led the drive to bring UWOs into action in UK law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs are given legal effect pursuant to the UK Proceeds of Crime Act 2002 Article 362A, as introduced by the Criminal Finances Act 2017, and is defined in the legislation as:</p>\r\n\r\n<dir>\r\n<p dir=\"LTR\" align=\"LEFT\"><em>‘An unexplained wealth order is an order requiring the respondent [i.e. the target of the order] to provide a statement—</em></p>\r\n\r\n<ul>\r\n 	<li><em>setting out the nature and extent of the respondent’s interest in the property in respect of which the order is made,</em></li>\r\n 	<li><em>explaining how the respondent obtained the property (including, in particular, how any costs incurred in obtaining it were met),</em></li>\r\n 	<li><em>where the property is held by the trustees of a settlement, setting out such details of the settlement as may be specified in the order, and</em></li>\r\n 	<li><em>setting out such other information in connection with the property as may be so specified.’</em></li>\r\n</ul>\r\n</dir>\r\n<p dir=\"LTR\" align=\"LEFT\">The clear advantage that UWOs provide for UK investigative authorities is that it is no longer necessary for the UK authorities to demonstrate that an individual has been subject to a conviction for a criminal offence (either in the UK or abroad) in order to obtain information and take measures against a specific property.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Two months after the introduction of the legislation, in March 2018, it would appear that the first orders are now being made. We have seen the first use of these orders, not on a UK national, but on an Asian politician who owns two properties, worth USD $30 million, in the UK. The specific identity of this individual has not been disclosed as matters are ongoing, and no further details are available publically.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This means that if an individual owns assets in the UK and they are made subject to a UWO, they will be forced to declare how they obtained this asset, and if they fail to do so they would be subject to criminal prosecution by the UK authorities. This may lead to foreign individuals being stuck between a rock and a hard place, with nowhere to turn and no route of escape.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Why is it Relevant To You?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As will be apparent from the first orders made against the Asian politician, whilst UWOs do apply to individuals who are reasonably suspected of being involved in crime, the UWOs will also target politically exposed individuals who have not been subject to criminal conviction, or investigation, either in the UK or internationally.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The definition of a PEP, or Politically Exposed Person, varies from State to State, but for the purposes of the UK legislation, the legislators have defined PEPs as the following:</p>\r\n\r\n<dir>\r\n<p dir=\"LTR\" align=\"LEFT\">‘(a) an individual who is, or has been, entrusted with prominent public functions by an international body or by a State other than the UK or other [European Economic Area] State;</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(b) a family member of a person within paragraph (a); or</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(c) known to be a close associate of a person within […] paragraph [a].’</p>\r\n\r\n</dir>\r\n<p dir=\"LTR\" align=\"LEFT\">Evidently from this definition, paying particularly close attention to (c) namely ‘a close associate’ of an individual with prominent public functions, there is a very expansive definition of PEP, and this will likely include many unsuspecting individuals. The effect of this definition is that if you are an individual who has prominent public functions, or you are a close associate of another who has been entrusted with public functions, then you may now be targeted by the UK authorities with a UWO. Alarmingly, there is no need for you to have committed a crime, nor to have been suspected of being involved in a crime, for these orders to apply to you.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specifically, when could a UWO apply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UK high court judge can give notice of a UWO if the judge is satisfied that it is likely that a foreign PEP (as defined above) is the owner of suspicious wealth in the UK beyond their means, and if all of the following provisions are met:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The respondent’s known income is insufficient to obtain the asset; and</li>\r\n 	<li dir=\"LTR\">The value of the asset is greater than £50,000 (approx. AED 260,000).</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">This legislation does not only target Foreign PEPs, but also where there are reasonable grounds to suspect any individual has been involved in serious crime.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Applications for UWOs may be made without notice. This means that there is no requirement on the UK investigative authority to notify the target of a UWO that they, or their assets, have been made subject of a UWO.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What assets would this apply to?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UWO can be made against assets whose value is greater than £50,000. There is no need for the PEP to be the sole owner of the property whose value is over £50,000, nor is it of relevance if the property was purchased prior to the introduction of the UK legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is the effect?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Following the making of an order by the High Court, the Court may order an individual’s property to be frozen, which would preclude the subject of the order from dealing with the property. As these freezing orders may be made without notice, this means that an individual’s assets may be frozen prior to their knowledge of any order being made against them.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UWO will mandate the individual to explain, at a minimum:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The nature and extent of their interest in a particular property; and</li>\r\n 	<li dir=\"LTR\">Explain how the property was obtained.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">An explanation will be requested by the UK authorities where ‘there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property’.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Failing to Comply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Should the target of a UWO fail to comply with an order, or provide inaccurate or misleading information, then they will likely be subject to criminal sanction in the UK and may face a period of imprisonment and a financial penalty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Within the legislation, it is stated that a UWO could lead to criminal liability for a target if that individual fails, without reasonable excuse, to comply with the requirements imposed by the Court against that individual. There is no definition of what a reasonable excuse would be in the legislation, and is a subjective requirement that would be decided in Court during the course of litigation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A View from the East: Stuck between a Rock and a Hard Place?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These orders, whilst designed to tackle money laundering on a global scale, and limit the use of the UK jurisdiction for those who seek to gain from their ill-gotten earnings, may cause legal difficulties for individuals based in foreign jurisdictions who are subject to UWOs – such as the UAE and the wider GCC – due to a conflict of laws between this UK legislation and that of other countries. This conflict could lead to an individual’s adherence to UK legislation meaning that the individual would be liable to prosecution in other jurisdictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Taking the UAE as a representative example of the Middle East’s approach to confidential or private information, the UAE’s jurisdiction imposes very strict obligations on an individual’s use and disclosure of confidential information. It is a criminal offence, pursuant to the UAE’s Federal Law No. 3 of 1987, as amended by Federal Decree No. 7 of 2016 (UAE Penal Code) to disclose secret information. Secret information is afforded an expansive definition in the UAE Penal Code and it is commonly viewed any information that is confidential, i.e. not in the public domain, and that an individual possesses due to their employment or individual nature.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Furthermore, due to the extraterritorial nature of the UAE Penal Code, should an individual commit a crime that is wholly or partly committed within the UAE, then that individual would be bound by the provisions of the Penal Code, and would be bound by provisions such as the disclosure of secret information. Specifically, should an individual be requested to provide secret information, such as the source of funds from a business entity, to the UK authorities, and that information relates to a UAE business or UAE based individual, then if the material or information is disclosed following a UWO in the UK, then in the UAE the individual may be subject to criminal prosecution for disclosing that exact information.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There is no exception afforded under UAE domestic legislation that would permit an individual to disclose confidential information to a foreign investigative authority (such as the UK’s Serious Fraud Office, Financial Conduct Authority, or National Security Agency). Should that individual disclose such information to the UK’s, or any other foreign State’s, investigative authority, then that individual may be liable to prosecution in the UAE in the same manner as though the disclosure had been made to a private individual or entity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Prosecution for disclosing confidential information is a serious offence in the UAE, and one that may carry a mandatory minimum period of imprisonment. Accordingly, the stakes are very high when one is subject to an international request for judicial assistance, in any form, and it is for that reason and in order to assist with international criminal investigations that the UAE has entered into number multilateral and bilateral treaties aimed at assisting mutual judicial assistance requests. As with most international requests from law enforcement agencies, such requests should follow the usual diplomatic channels through the deployment of letters rogatory.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The difficulties for UAE individuals would not stop simply at the threat of criminal sanction, but also according to the UAE’s Labour Law, should an individual disclose the secrets of their employer, then the worker may be dismissed without notice and forfeit their entire severance pay.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Accordingly, the receipt of a UWO in the UK demanding that an individual provide information to the UAE authorities may conflict with the statutory protection relating to confidential information (or other laws) in a foreign jurisdiction, such as the UAE. This would lead to the precarious situation where an individual may face prosecution in the UK if he doesn’t comply with the UWO, but criminal prosecution in the UAE if he does comply.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Conclusion</strong></p>\r\nThe above example and review provides a very high-level overview of the competing laws that the UK’s UWOs may catch. Whilst the UK legislation will no doubt serve as an effective deterrent and useful tool in minimising global money laundering, and limiting the attraction of the UK for criminals, it may have unintended consequences for foreign nationals holding legitimate assets in the UK. Prior to making any response to a request for assistance, it is imperative that the recipient apprise themselves of all legal considerations to ensure that they are not jumping out of the frying pan, but straight into the fire.'),
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	(249767,24368,'ReportText','<p dir=\"LTR\" align=\"LEFT\">The UK legislature has recently introduced domestic legislation aimed at money launderers, potentially resulting in unintended consequences for foreign nationals who have legitimate assets in the UK. These orders demand the intended target provide information about the origin of their wealth, and refusal to disclose that information may render the target subject to criminal prosecution in the UK. However, if the foreign national does comply with the Unexplained Wealth Order (UWO), then that individual may be subject to criminal prosecution in another State… a real Catch 22.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Controversially, there is no need for a foreign national to be accused of money laundering, or any criminality whatsoever, before they could be made subject to a UWO, which would lead to the freezing of their assets, or, worse, criminal prosecution.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The following article introduces UWOs to our clients and examines how one must be careful in weighing up their rights and obligations in respect of the request of a foreign State’s investigative authorities as it may impact their rights in the UAE, and around the GCC.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is a UWO?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 31st January 2018, the UK introduced their latest attempt at stemming money laundering in the UK: Unexplained Wealth Orders. UWOs are civil investigative powers that are aimed at tackling those who use the UK as a destination for money laundering, or as a destination for those who wish to spend their ill-gotten gains.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs have been introduced in the UK at a time when London, and the UK, is facing scrutiny as a perceived hotbed of money laundering and revelry. A main proponent of UWOs has been Transparency International UK’s corruption taskforce, who, amongst others, have repeatedly called for greater investigative action to be taken in the UK against individuals and entities thought to have been complicit in corruption, and have led the drive to bring UWOs into action in UK law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs are given legal effect pursuant to the UK Proceeds of Crime Act 2002 Article 362A, as introduced by the Criminal Finances Act 2017, and is defined in the legislation as:</p>\r\n\r\n<dir>\r\n<p dir=\"LTR\" align=\"LEFT\"><em>‘An unexplained wealth order is an order requiring the respondent [i.e. the target of the order] to provide a statement—</em></p>\r\n\r\n<ul>\r\n 	<li><em>setting out the nature and extent of the respondent’s interest in the property in respect of which the order is made,</em></li>\r\n 	<li><em>explaining how the respondent obtained the property (including, in particular, how any costs incurred in obtaining it were met),</em></li>\r\n 	<li><em>where the property is held by the trustees of a settlement, setting out such details of the settlement as may be specified in the order, and</em></li>\r\n 	<li><em>setting out such other information in connection with the property as may be so specified.’</em></li>\r\n</ul>\r\n</dir>\r\n<p dir=\"LTR\" align=\"LEFT\">The clear advantage that UWOs provide for UK investigative authorities is that it is no longer necessary for the UK authorities to demonstrate that an individual has been subject to a conviction for a criminal offence (either in the UK or abroad) in order to obtain information and take measures against a specific property.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Two months after the introduction of the legislation, in March 2018, it would appear that the first orders are now being made. We have seen the first use of these orders, not on a UK national, but on an Asian politician who owns two properties, worth USD $30 million, in the UK. The specific identity of this individual has not been disclosed as matters are ongoing, and no further details are available publically.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This means that if an individual owns assets in the UK and they are made subject to a UWO, they will be forced to declare how they obtained this asset, and if they fail to do so they would be subject to criminal prosecution by the UK authorities. This may lead to foreign individuals being stuck between a rock and a hard place, with nowhere to turn and no route of escape.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Why is it Relevant To You?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As will be apparent from the first orders made against the Asian politician, whilst UWOs do apply to individuals who are reasonably suspected of being involved in crime, the UWOs will also target politically exposed individuals who have not been subject to criminal conviction, or investigation, either in the UK or internationally.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The definition of a PEP, or Politically Exposed Person, varies from State to State, but for the purposes of the UK legislation, the legislators have defined PEPs as the following:</p>\r\n\r\n<dir>\r\n<p dir=\"LTR\" align=\"LEFT\">‘(a) an individual who is, or has been, entrusted with prominent public functions by an international body or by a State other than the UK or other [European Economic Area] State;</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(b) a family member of a person within paragraph (a); or</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(c) known to be a close associate of a person within […] paragraph [a].’</p>\r\n\r\n</dir>\r\n<p dir=\"LTR\" align=\"LEFT\">Evidently from this definition, paying particularly close attention to (c) namely ‘a close associate’ of an individual with prominent public functions, there is a very expansive definition of PEP, and this will likely include many unsuspecting individuals. The effect of this definition is that if you are an individual who has prominent public functions, or you are a close associate of another who has been entrusted with public functions, then you may now be targeted by the UK authorities with a UWO. Alarmingly, there is no need for you to have committed a crime, nor to have been suspected of being involved in a crime, for these orders to apply to you.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specifically, when could a UWO apply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UK high court judge can give notice of a UWO if the judge is satisfied that it is likely that a foreign PEP (as defined above) is the owner of suspicious wealth in the UK beyond their means, and if all of the following provisions are met:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The respondent’s known income is insufficient to obtain the asset; and</li>\r\n 	<li dir=\"LTR\">The value of the asset is greater than £50,000 (approx. AED 260,000).</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">This legislation does not only target Foreign PEPs, but also where there are reasonable grounds to suspect any individual has been involved in serious crime.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Applications for UWOs may be made without notice. This means that there is no requirement on the UK investigative authority to notify the target of a UWO that they, or their assets, have been made subject of a UWO.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What assets would this apply to?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UWO can be made against assets whose value is greater than £50,000. There is no need for the PEP to be the sole owner of the property whose value is over £50,000, nor is it of relevance if the property was purchased prior to the introduction of the UK legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is the effect?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Following the making of an order by the High Court, the Court may order an individual’s property to be frozen, which would preclude the subject of the order from dealing with the property. As these freezing orders may be made without notice, this means that an individual’s assets may be frozen prior to their knowledge of any order being made against them.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UWO will mandate the individual to explain, at a minimum:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The nature and extent of their interest in a particular property; and</li>\r\n 	<li dir=\"LTR\">Explain how the property was obtained.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">An explanation will be requested by the UK authorities where ‘there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property’.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Failing to Comply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Should the target of a UWO fail to comply with an order, or provide inaccurate or misleading information, then they will likely be subject to criminal sanction in the UK and may face a period of imprisonment and a financial penalty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Within the legislation, it is stated that a UWO could lead to criminal liability for a target if that individual fails, without reasonable excuse, to comply with the requirements imposed by the Court against that individual. There is no definition of what a reasonable excuse would be in the legislation, and is a subjective requirement that would be decided in Court during the course of litigation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>A View from the East: Stuck between a Rock and a Hard Place?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These orders, whilst designed to tackle money laundering on a global scale, and limit the use of the UK jurisdiction for those who seek to gain from their ill-gotten earnings, may cause legal difficulties for individuals based in foreign jurisdictions who are subject to UWOs – such as the UAE and the wider GCC – due to a conflict of laws between this UK legislation and that of other countries. This conflict could lead to an individual’s adherence to UK legislation meaning that the individual would be liable to prosecution in other jurisdictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Taking the UAE as a representative example of the Middle East’s approach to confidential or private information, the UAE’s jurisdiction imposes very strict obligations on an individual’s use and disclosure of confidential information. It is a criminal offence, pursuant to the UAE’s Federal Law No. 3 of 1987, as amended by Federal Decree No. 7 of 2016 (UAE Penal Code) to disclose secret information. Secret information is afforded an expansive definition in the UAE Penal Code and it is commonly viewed any information that is confidential, i.e. not in the public domain, and that an individual possesses due to their employment or individual nature.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Furthermore, due to the extraterritorial nature of the UAE Penal Code, should an individual commit a crime that is wholly or partly committed within the UAE, then that individual would be bound by the provisions of the Penal Code, and would be bound by provisions such as the disclosure of secret information. Specifically, should an individual be requested to provide secret information, such as the source of funds from a business entity, to the UK authorities, and that information relates to a UAE business or UAE based individual, then if the material or information is disclosed following a UWO in the UK, then in the UAE the individual may be subject to criminal prosecution for disclosing that exact information.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There is no exception afforded under UAE domestic legislation that would permit an individual to disclose confidential information to a foreign investigative authority (such as the UK’s Serious Fraud Office, Financial Conduct Authority, or National Security Agency). Should that individual disclose such information to the UK’s, or any other foreign State’s, investigative authority, then that individual may be liable to prosecution in the UAE in the same manner as though the disclosure had been made to a private individual or entity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Prosecution for disclosing confidential information is a serious offence in the UAE, and one that may carry a mandatory minimum period of imprisonment. Accordingly, the stakes are very high when one is subject to an international request for judicial assistance, in any form, and it is for that reason and in order to assist with international criminal investigations that the UAE has entered into number multilateral and bilateral treaties aimed at assisting mutual judicial assistance requests. As with most international requests from law enforcement agencies, such requests should follow the usual diplomatic channels through the deployment of letters rogatory.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The difficulties for UAE individuals would not stop simply at the threat of criminal sanction, but also according to the UAE’s Labour Law, should an individual disclose the secrets of their employer, then the worker may be dismissed without notice and forfeit their entire severance pay.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Accordingly, the receipt of a UWO in the UK demanding that an individual provide information to the UAE authorities may conflict with the statutory protection relating to confidential information (or other laws) in a foreign jurisdiction, such as the UAE. This would lead to the precarious situation where an individual may face prosecution in the UK if he doesn’t comply with the UWO, but criminal prosecution in the UAE if he does comply.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Conclusion</strong></p>\r\nThe above example and review provides a very high-level overview of the competing laws that the UK’s UWOs may catch. Whilst the UK legislation will no doubt serve as an effective deterrent and useful tool in minimising global money laundering, and limiting the attraction of the UK for criminals, it may have unintended consequences for foreign nationals holding legitimate assets in the UK. Prior to making any response to a request for assistance, it is imperative that the recipient apprise themselves of all legal considerations to ensure that they are not jumping out of the frying pan, but straight into the fire.|<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft size-full wp-image-8002\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/17-1.png\" alt=\"\" width=\"3567\" height=\"715\" />The UK legislature has recently introduced domestic legislation aimed at money launderers, potentially resulting in unintended consequences for foreign nationals who have legitimate assets in the UK. These orders demand the intended target provide information about the origin of their wealth, and refusal to disclose that information may render the target subject to criminal prosecution in the UK. However, if the foreign national does comply with the Unexplained Wealth Order (UWO), then that individual may be subject to criminal prosecution in another State… a real Catch 22.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Controversially, there is no need for a foreign national to be accused of money laundering, or any criminality whatsoever, before they could be made subject to a UWO, which would lead to the freezing of their assets, or, worse, criminal prosecution.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The following article introduces UWOs to our clients and examines how one must be careful in weighing up their rights and obligations in respect of the request of a foreign State’s investigative authorities as it may impact their rights in the UAE, and around the GCC.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is a UWO?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">On 31st January 2018, the UK introduced their latest attempt at stemming money laundering in the UK: Unexplained Wealth Orders. UWOs are civil investigative powers that are aimed at tackling those who use the UK as a destination for money laundering, or as a destination for those who wish to spend their ill-gotten gains.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs have been introduced in the UK at a time when London, and the UK, is facing scrutiny as a perceived hotbed of money laundering and revelry. A main proponent of UWOs has been Transparency International UK’s corruption taskforce, who, amongst others, have repeatedly called for greater investigative action to be taken in the UK against individuals and entities thought to have been complicit in corruption, and have led the drive to bring UWOs into action in UK law.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">UWOs are given legal effect pursuant to the UK Proceeds of Crime Act 2002 Article 362A, as introduced by the Criminal Finances Act 2017, and is defined in the legislation as:</p>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\"><em>‘An unexplained wealth order is an order requiring the respondent [i.e. the target of the order] to provide a statement—</em></p>\r\n\r\n<ul>\r\n 	<li><em>setting out the nature and extent of the respondent’s interest in the property in respect of which the order is made,</em></li>\r\n 	<li><em>explaining how the respondent obtained the property (including, in particular, how any costs incurred in obtaining it were met),</em></li>\r\n 	<li><em>where the property is held by the trustees of a settlement, setting out such details of the settlement as may be specified in the order, and</em></li>\r\n 	<li><em>setting out such other information in connection with the property as may be so specified.’</em></li>\r\n</ul>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\">The clear advantage that UWOs provide for UK investigative authorities is that it is no longer necessary for the UK authorities to demonstrate that an individual has been subject to a conviction for a criminal offence (either in the UK or abroad) in order to obtain information and take measures against a specific property.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Two months after the introduction of the legislation, in March 2018, it would appear that the first orders are now being made. We have seen the first use of these orders, not on a UK national, but on an Asian politician who owns two properties, worth USD $30 million, in the UK. The specific identity of this individual has not been disclosed as matters are ongoing, and no further details are available publically.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This means that if an individual owns assets in the UK and they are made subject to a UWO, they will be forced to declare how they obtained this asset, and if they fail to do so they would be subject to criminal prosecution by the UK authorities. This may lead to foreign individuals being stuck between a rock and a hard place, with nowhere to turn and no route of escape.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Why is it Relevant To You?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As will be apparent from the first orders made against the Asian politician, whilst UWOs do apply to individuals who are reasonably suspected of being involved in crime, the UWOs will also target politically exposed individuals who have not been subject to criminal conviction, or investigation, either in the UK or internationally.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The definition of a PEP, or Politically Exposed Person, varies from State to State, but for the purposes of the UK legislation, the legislators have defined PEPs as the following:</p>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\">‘(a) an individual who is, or has been, entrusted with prominent public functions by an international body or by a State other than the UK or other [European Economic Area] State;</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(b) a family member of a person within paragraph (a); or</p>\r\n<p dir=\"LTR\" align=\"LEFT\">(c) known to be a close associate of a person within […] paragraph [a].’</p>\r\n&nbsp;\r\n<p dir=\"LTR\" align=\"LEFT\">Evidently from this definition, paying particularly close attention to (c) namely ‘a close associate’ of an individual with prominent public functions, there is a very expansive definition of PEP, and this will likely include many unsuspecting individuals. The effect of this definition is that if you are an individual who has prominent public functions, or you are a close associate of another who has been entrusted with public functions, then you may now be targeted by the UK authorities with a UWO. Alarmingly, there is no need for you to have committed a crime, nor to have been suspected of being involved in a crime, for these orders to apply to you.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Specifically, when could a UWO apply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UK high court judge can give notice of a UWO if the judge is satisfied that it is likely that a foreign PEP (as defined above) is the owner of suspicious wealth in the UK beyond their means, and if all of the following provisions are met:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The respondent’s known income is insufficient to obtain the asset; and</li>\r\n 	<li dir=\"LTR\">The value of the asset is greater than £50,000 (approx. AED 260,000).</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">This legislation does not only target Foreign PEPs, but also where there are reasonable grounds to suspect any individual has been involved in serious crime.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Applications for UWOs may be made without notice. This means that there is no requirement on the UK investigative authority to notify the target of a UWO that they, or their assets, have been made subject of a UWO.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What assets would this apply to?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">A UWO can be made against assets whose value is greater than £50,000. There is no need for the PEP to be the sole owner of the property whose value is over £50,000, nor is it of relevance if the property was purchased prior to the introduction of the UK legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What is the effect?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Following the making of an order by the High Court, the Court may order an individual’s property to be frozen, which would preclude the subject of the order from dealing with the property. As these freezing orders may be made without notice, this means that an individual’s assets may be frozen prior to their knowledge of any order being made against them.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UWO will mandate the individual to explain, at a minimum:</p>\r\n\r\n<ol>\r\n 	<li dir=\"LTR\">The nature and extent of their interest in a particular property; and</li>\r\n 	<li dir=\"LTR\">Explain how the property was obtained.</li>\r\n</ol>\r\n<p dir=\"LTR\" align=\"LEFT\">An explanation will be requested by the UK authorities where ‘there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property’.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Failing to Comply?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Should the target of a UWO fail to comply with an order, or provide inaccurate or misleading information, then they will likely be subject to criminal sanction in the UK and may face a period of imprisonment and a financial penalty.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Within the legislation, it is stated that a UWO could lead to criminal liability for a target if that individual fails, without reasonable excuse, to comply with the requirements imposed by the Court against that individual. There is no definition of what a reasonable excuse would be in the legislation, and is a subjective requirement that would be decided in Court during the course of litigation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong><img class=\"wp-image-8014 size-medium alignright\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/Screen-Shot-2018-07-31-at-5.43.01-PM-242x300.png\" alt=\"\" width=\"242\" height=\"300\" />A View from the East: Stuck between a Rock and a Hard Place?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">These orders, whilst designed to tackle money laundering on a global scale, and limit the use of the UK jurisdiction for those who seek to gain from their ill-gotten earnings, may cause legal difficulties for individuals based in foreign jurisdictions who are subject to UWOs – such as the UAE and the wider GCC – due to a conflict of laws between this UK legislation and that of other countries. This conflict could lead to an individual’s adherence to UK legislation meaning that the individual would be liable to prosecution in other jurisdictions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Taking the UAE as a representative example of the Middle East’s approach to confidential or private information, the UAE’s jurisdiction imposes very strict obligations on an individual’s use and disclosure of confidential information. It is a criminal offence, pursuant to the UAE’s Federal Law No. 3 of 1987, as amended by Federal Decree No. 7 of 2016 (UAE Penal Code) to disclose secret information. Secret information is afforded an expansive definition in the UAE Penal Code and it is commonly viewed any information that is confidential, i.e. not in the public domain, and that an individual possesses due to their employment or individual nature.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Furthermore, due to the extraterritorial nature of the UAE Penal Code, should an individual commit a crime that is wholly or partly committed within the UAE, then that individual would be bound by the provisions of the Penal Code, and would be bound by provisions such as the disclosure of secret information. Specifically, should an individual be requested to provide secret information, such as the source of funds from a business entity, to the UK authorities, and that information relates to a UAE business or UAE based individual, then if the material or information is disclosed following a UWO in the UK, then in the UAE the individual may be subject to criminal prosecution for disclosing that exact information.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There is no exception afforded under UAE domestic legislation that would permit an individual to disclose confidential information to a foreign investigative authority (such as the UK’s Serious Fraud Office, Financial Conduct Authority, or National Security Agency). Should that individual disclose such information to the UK’s, or any other foreign State’s, investigative authority, then that individual may be liable to prosecution in the UAE in the same manner as though the disclosure had been made to a private individual or entity.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Prosecution for disclosing confidential information is a serious offence in the UAE, and one that may carry a mandatory minimum period of imprisonment. Accordingly, the stakes are very high when one is subject to an international request for judicial assistance, in any form, and it is for that reason and in order to assist with international criminal investigations that the UAE has entered into number multilateral and bilateral treaties aimed at assisting mutual judicial assistance requests. As with most international requests from law enforcement agencies, such requests should follow the usual diplomatic channels through the deployment of letters rogatory.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The difficulties for UAE individuals would not stop simply at the threat of criminal sanction, but also according to the UAE’s Labour Law, should an individual disclose the secrets of their employer, then the worker may be dismissed without notice and forfeit their entire severance pay.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Accordingly, the receipt of a UWO in the UK demanding that an individual provide information to the UAE authorities may conflict with the statutory protection relating to confidential information (or other laws) in a foreign jurisdiction, such as the UAE. This would lead to the precarious situation where an individual may face prosecution in the UK if he doesn’t comply with the UWO, but criminal prosecution in the UAE if he does comply.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Conclusion</strong></p>\r\nThe above example and review provides a very high-level overview of the competing laws that the UK’s UWOs may catch. Whilst the UK legislation will no doubt serve as an effective deterrent and useful tool in minimising global money laundering, and limiting the attraction of the UK for criminals, it may have unintended consequences for foreign nationals holding legitimate assets in the UK. Prior to making any response to a request for assistance, it is imperative that the recipient apprise themselves of all legal considerations to ensure that they are not jumping out of the frying pan, but straight into the fire.'),
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	(249816,24373,'PostDate','2018-07-31 17:45:05'),
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	(249820,24373,'MetaValueNew','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft size-full wp-image-8015\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/19.jpg\" alt=\"\" width=\"4573\" height=\"1322\" />Combating corruption is a hot topic across the globe. Scoring on top of international rankings, the Nordic countries (being Denmark, Norway, Sweden, Finland and Iceland) have traditionally been regarded as the global frontrunners when it comes to anti-corruption. In the Middle East, governments are working hard to decrease bribery and increase transparency in society, which ultimately complements the general promotion of civil rights. Research indicates that free speech, independent media, political dissent and an open and engaged civil society, access to information and the non-existence of censorship are the core elements preventing corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The author previously practised law in Finland, advising Finnish and Scandinavian clients, before locating to the UAE. In this article I seek to provide comparative insights on the topic of anti-corruption practices between the Middle East and the Nordic countries, in light of current developments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>From global harmonisation of laws to local enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Combating corruption on a global level is subject to several international treaties, the provisions of which are then transposed to national laws, harmonising the content thereof. The most important international treaties in this regard are the United Nations Convention Against Corruption of 2003 and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 1997. In Europe, an intergovernmental body called the Group of States against Corruption (GRECO) was established in 1999 by the Council of Europe to monitor its Member States’ compliance with the organisation’s anti-corruption standards.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The intention of international treaties is to establish common worldwide legislative standards for anti-corruption laws through imposing obligations on the Member States to bring their legislation in line with the obligations of the treaties. As a result, the laws of different Member States should include similar provisions criminalising the different forms of bribery, which provisions are locally enforced by national authorities. Despite these developments, it goes without saying that the national anti-corruption laws are far from being harmonised and different geographic regions face different corruption related challenges.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Corruption Perceptions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Transparency International is a non-governmental watchdog promoting anti-corruption in the world. It publishes an annual Corruption Perception Index, ranking 180 countries and territories by their perceived levels of public sector corruption, predicated on information provided by experts and businesspeople.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Middle East consists of a variety of jurisdictions, many of which are far from homogenous. While some of the countries are still subject to weaker public institutions due to, e.g.; internal conflict, a number of countries in the Middle East, such as Jordan and Lebanon, are taking positive steps towards fighting corruption and increasing transparency and integrity in their societies. The hard work conducted by local governments in the Middle East is gradually attracting the attention of the rest of the world.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This year, the United Arab Emirates (\"UAE\") ranked higher on the index than ever before. The UAE reached the 21st position in the ranking being the frontrunner of the Middle East. According to Transparency International, this may be due to good and efficient management of public finances, improved public procurement and better access to public services and infrastructure in the UAE. In 2016, the UAE carried out a significant reform of its criminal laws, which may be reflected in the Index as well.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Nordic countries usually score highest in international anti-corruption rankings. According to the latest Corruption Perceptions Index, Denmark was ranked the 2nd least corrupt country in the world, after New Zealand. Finland and Norway shared 3rd spot and Sweden ranked 6th. Iceland, holding 13th position, appears to be an outlier among Nordic countries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Considering the rankings, one may ask whether Nordic countries are perhaps a safe-harbour from corruption. Despite the apparently excellent reputation, do corruption related risks still exist for businesses in the Nordics? Are the Nordic Countries the complete opposite to the Middle East?</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Finland: There is a snake in paradise</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Despite direct bribery being relatively rare in Finland and the rest of the Nordic jurisdictions, the existence of conflicts of interest and the lack of transparency in declaring conflicts of interest have turned out to be a common feature of the Nordic countries. This may be difficult to detect considering it is an inherently subjective evaluation. I suggest corruption does exist in Nordic countries, but that it has taken forms that are relatively difficult to detect by researchers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In the aftermath of its evaluation round in September 2017, GRECO issued recommendations to Finland aimed at improving its anti-corruption regime, such recommendations being published in March 2018. Six of the recommendations issued by GRECO concerned senior government officials and ministers, and eight of them law enforcement authorities. Regarding law enforcement agencies, GRECO recommends that the Police and the Border Guard develop a dedicated anti-corruption strategy or policy, compile a code of conduct and specify their guidelines for secondary employment, organise training on the prevention and combating of corruption, and reinforce ethical practices in their career-related processes. In addition, it is recommended that the police enhance their risk management, internal oversight, and procedures to be followed by their officials when taking up secondary employment.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">When it comes to whistleblower protection, GRECO recommends that the Police and the Border Guard be obliged to report suspicions of corruption and that protection of the whistleblowers be enhanced. At the moment, Finnish law does not include all-encompassing provisions protecting whistleblowers, applicable across different industries and, as a result, whistleblowers are practically protected only by the provisions in the Employment Act regulating grounds for dismissal. When it comes to the GRECO anti-corruption recommendations with regards to judges, public prosecutors and Members of Parliament, the Finnish Ministry of Justice announced in May 2018 that it has duly implemented all the recommendations. Also, the current Minister of Labour is strongly promoting enhancing whistleblower protection in Finland according to his political agenda.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Sweden: a recent extraterritoriality exercise in the telecommunications sector</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Finland is not the only Nordic jurisdiction that has recently encountered serious corruption allegations. In Sweden, a local leading telecommunications company and its Uzbek subsidiary admitted paying (on multiple occasions between 2007 and 2010) more than USD 331 million in bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecommunications industry. The telecommunications operator, which used to be a listed company in New York, used US bank accounts to move the bribery related assets, which triggered the involvement of the US authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In 2017, the company reached a settlement involving the anti-corruption authorities of the United States, the Netherlands and Sweden. In the United States, the company entered a deferred prosecution agreement agreeing to pay the fine, implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals. The U.S. authorities agreed to credit any disgorged profits paid to the Swedish and Dutch authorities as a result of related national proceedings in Sweden and in the Netherlands.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to the criminal proceedings faced by the company, the individual directors involved are now being prosecuted in Sweden for bribery. According to the prosecutor, the company paid the authorities to make a preferred decision when considering its operational licenses in Uzbekistan and the prosecuted directors in question were aware of the bribery or even took initiative in the matter.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The loopholes relating to gifts and hospitality in the Middle East</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">In Europe and in the United States, there is a common trend of companies becoming extremely cautious when it comes to hospitality and gifts, including business to business relationships. Public officials aside, one of the most common corruption related issues that businesses often struggle with is to understand where to draw the line between illegitimate and legitimate, or sometimes even expected, provision of business gifts and hospitality in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There are different legislative approaches to private sector bribery in the Middle East. For example, the UAE has explicitly criminalised bribery in business in Article 236 bis of the Federal Law No. 3 of 1987 as amended by the Federal Decree Law No. 7 of 2016 (\"UAE Penal Code\"). Another example can be found in Qatar where passive bribery i.e. accepting illegitimate benefits in the private sector has been criminalised in Article 146 of the Law Number 11 of 2004 (\"Qatar Penal Code\")..</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In light of the above, and importantly for companies doing business in the Middle East, it is highly recommended to adopt restrictive hospitality policies in order to avoid bribery risks in relation to both the public and the private sector. It should be noted that the anti-bribery laws in the Middle East do not usually include exceptions when it comes to gifts of only nominal value, if the corrupt intent can be proven. Also, the definition of a public official tends to be relatively broad resulting e.g. employees of many companies subject to (partial) government ownership being regarded as public officials.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Key take home for global businesses: global vigilance</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The above examples indicate that regardless of the jurisdiction - whether the Middle East, the high ranking Nordic countries or elsewhere in the world, no business is entirely safe from corruption related risks. International rankings aside, businesses should pay attention to corruption risks and implement strict compliance policies. As demonstrated above, there is no safe-harbour when it comes to corruption risk management.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Adopting an anti-bribery policy is always advisable irrespective of whether the law so obliges. The policy should be embedded in the business procedures of the company, accompanied by quality training of the personnel at regular intervals to identify and avoid compliance risks.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Similarly to compliance policies, legislators have adopted different approaches to whistleblowing regulations. Businesses should not hesitate to go beyond the statutory requirements and implement independent whistleblowing channels to help foster a compliance culture in their organisations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is important to note that bribery is only one aspect of corruption. As demonstrated above, corruption can take many forms. Detecting and avoiding conflicts of interest in business operations can work against presuming corrupt intent, due to which businesses are advised to include relevant provisions on excluding conflicted employees from decision making in order to manage corruption risks. Even though the examples set out above include significant intentional bribery, in many jurisdictions bribery offences are criminalised even if the offence is not intentionally committed.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to local laws and local law enforcement, the extraterritorial effect of certain foreign anti-corruption laws should be observed. For example, US Foreign Corrupt Practices Act (\"FCPA\") is widely known to be enforced also in respect of corruption offences taking place outside the United States. Transacting in US Dollars or employing US citizens may trigger the application of the FCPA and enforcement thereof by US authorities irrespective of the location of the business or any potential bribery activity, including in the Middle East. Businesses are recommended to adopt anti-corruption policies and accounting standards that meet the requirements of all the statutes potentially applicable to their operations. It seems that national authorities are working closely together to resolve cross-border bribery matters making it more difficult for the offenders to escape the jurisdiction of national authorities in an international context.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It seems that the Nordics can no longer take their high ranking in the Transparency International Corruption Perceptions Index for granted. This is partly due not only to international watchdogs, but also legislators and law enforcement authorities realising that the roots of corruption are embedded in conflict of interest which is a prevalent issue in the Nordic countries. At the same time, other countries are also working hard towards efficient enforcement of anti-corruption laws which makes competition at the top level fiercer than ever.</p>\r\nAs Transparency International and intergovernmental bodies, such as the United Nations, do not solely consider the content of laws and enforcement statistics, making general changes in improving transparency and integrity in the public sector may also yield a positive effect on anti-corruption. Importantly for businesses, it should be noted that bribery is widely criminalised in the Middle East and bribery laws actively enforced. The efforts made by the governments in the Middle East are gradually being recognised in the international domain.');

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	(249821,24373,'MetaValueOld','<p dir=\"LTR\" align=\"LEFT\">Combating corruption is a hot topic across the globe. Scoring on top of international rankings, the Nordic countries (being Denmark, Norway, Sweden, Finland and Iceland) have traditionally been regarded as the global frontrunners when it comes to anti-corruption. In the Middle East, governments are working hard to decrease bribery and increase transparency in society, which ultimately complements the general promotion of civil rights. Research indicates that free speech, independent media, political dissent and an open and engaged civil society, access to information and the non-existence of censorship are the core elements preventing corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The author previously practised law in Finland, advising Finnish and Scandinavian clients, before locating to the UAE. In this article I seek to provide comparative insights on the topic of anti-corruption practices between the Middle East and the Nordic countries, in light of current developments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>From global harmonisation of laws to local enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Combating corruption on a global level is subject to several international treaties, the provisions of which are then transposed to national laws, harmonising the content thereof. The most important international treaties in this regard are the United Nations Convention Against Corruption of 2003 and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 1997. In Europe, an intergovernmental body called the Group of States against Corruption (GRECO) was established in 1999 by the Council of Europe to monitor its Member States’ compliance with the organisation’s anti-corruption standards.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The intention of international treaties is to establish common worldwide legislative standards for anti-corruption laws through imposing obligations on the Member States to bring their legislation in line with the obligations of the treaties. As a result, the laws of different Member States should include similar provisions criminalising the different forms of bribery, which provisions are locally enforced by national authorities. Despite these developments, it goes without saying that the national anti-corruption laws are far from being harmonised and different geographic regions face different corruption related challenges.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Corruption Perceptions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Transparency International is a non-governmental watchdog promoting anti-corruption in the world. It publishes an annual Corruption Perception Index, ranking 180 countries and territories by their perceived levels of public sector corruption, predicated on information provided by experts and businesspeople.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Middle East consists of a variety of jurisdictions, many of which are far from homogenous. While some of the countries are still subject to weaker public institutions due to, e.g.; internal conflict, a number of countries in the Middle East, such as Jordan and Lebanon, are taking positive steps towards fighting corruption and increasing transparency and integrity in their societies. The hard work conducted by local governments in the Middle East is gradually attracting the attention of the rest of the world.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This year, the United Arab Emirates (\"UAE\") ranked higher on the index than ever before. The UAE reached the 21st position in the ranking being the frontrunner of the Middle East. According to Transparency International, this may be due to good and efficient management of public finances, improved public procurement and better access to public services and infrastructure in the UAE. In 2016, the UAE carried out a significant reform of its criminal laws, which may be reflected in the Index as well.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Nordic countries usually score highest in international anti-corruption rankings. According to the latest Corruption Perceptions Index, Denmark was ranked the 2nd least corrupt country in the world, after New Zealand. Finland and Norway shared 3rd spot and Sweden ranked 6th. Iceland, holding 13th position, appears to be an outlier among Nordic countries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Considering the rankings, one may ask whether Nordic countries are perhaps a safe-harbour from corruption. Despite the apparently excellent reputation, do corruption related risks still exist for businesses in the Nordics? Are the Nordic Countries the complete opposite to the Middle East?</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Finland: There is a snake in paradise</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Despite direct bribery being relatively rare in Finland and the rest of the Nordic jurisdictions, the existence of conflicts of interest and the lack of transparency in declaring conflicts of interest have turned out to be a common feature of the Nordic countries. This may be difficult to detect considering it is an inherently subjective evaluation. I suggest corruption does exist in Nordic countries, but that it has taken forms that are relatively difficult to detect by researchers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In the aftermath of its evaluation round in September 2017, GRECO issued recommendations to Finland aimed at improving its anti-corruption regime, such recommendations being published in March 2018. Six of the recommendations issued by GRECO concerned senior government officials and ministers, and eight of them law enforcement authorities. Regarding law enforcement agencies, GRECO recommends that the Police and the Border Guard develop a dedicated anti-corruption strategy or policy, compile a code of conduct and specify their guidelines for secondary employment, organise training on the prevention and combating of corruption, and reinforce ethical practices in their career-related processes. In addition, it is recommended that the police enhance their risk management, internal oversight, and procedures to be followed by their officials when taking up secondary employment.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">When it comes to whistleblower protection, GRECO recommends that the Police and the Border Guard be obliged to report suspicions of corruption and that protection of the whistleblowers be enhanced. At the moment, Finnish law does not include all-encompassing provisions protecting whistleblowers, applicable across different industries and, as a result, whistleblowers are practically protected only by the provisions in the Employment Act regulating grounds for dismissal. When it comes to the GRECO anti-corruption recommendations with regards to judges, public prosecutors and Members of Parliament, the Finnish Ministry of Justice announced in May 2018 that it has duly implemented all the recommendations. Also, the current Minister of Labour is strongly promoting enhancing whistleblower protection in Finland according to his political agenda.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Sweden: a recent extraterritoriality exercise in the telecommunications sector</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Finland is not the only Nordic jurisdiction that has recently encountered serious corruption allegations. In Sweden, a local leading telecommunications company and its Uzbek subsidiary admitted paying (on multiple occasions between 2007 and 2010) more than USD 331 million in bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecommunications industry. The telecommunications operator, which used to be a listed company in New York, used US bank accounts to move the bribery related assets, which triggered the involvement of the US authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In 2017, the company reached a settlement involving the anti-corruption authorities of the United States, the Netherlands and Sweden. In the United States, the company entered a deferred prosecution agreement agreeing to pay the fine, implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals. The U.S. authorities agreed to credit any disgorged profits paid to the Swedish and Dutch authorities as a result of related national proceedings in Sweden and in the Netherlands.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to the criminal proceedings faced by the company, the individual directors involved are now being prosecuted in Sweden for bribery. According to the prosecutor, the company paid the authorities to make a preferred decision when considering its operational licenses in Uzbekistan and the prosecuted directors in question were aware of the bribery or even took initiative in the matter.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The loopholes relating to gifts and hospitality in the Middle East</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">In Europe and in the United States, there is a common trend of companies becoming extremely cautious when it comes to hospitality and gifts, including business to business relationships. Public officials aside, one of the most common corruption related issues that businesses often struggle with is to understand where to draw the line between illegitimate and legitimate, or sometimes even expected, provision of business gifts and hospitality in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There are different legislative approaches to private sector bribery in the Middle East. For example, the UAE has explicitly criminalised bribery in business in Article 236 bis of the Federal Law No. 3 of 1987 as amended by the Federal Decree Law No. 7 of 2016 (\"UAE Penal Code\"). Another example can be found in Qatar where passive bribery i.e. accepting illegitimate benefits in the private sector has been criminalised in Article 146 of the Law Number 11 of 2004 (\"Qatar Penal Code\")..</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In light of the above, and importantly for companies doing business in the Middle East, it is highly recommended to adopt restrictive hospitality policies in order to avoid bribery risks in relation to both the public and the private sector. It should be noted that the anti-bribery laws in the Middle East do not usually include exceptions when it comes to gifts of only nominal value, if the corrupt intent can be proven. Also, the definition of a public official tends to be relatively broad resulting e.g. employees of many companies subject to (partial) government ownership being regarded as public officials.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Key take home for global businesses: global vigilance</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The above examples indicate that regardless of the jurisdiction - whether the Middle East, the high ranking Nordic countries or elsewhere in the world, no business is entirely safe from corruption related risks. International rankings aside, businesses should pay attention to corruption risks and implement strict compliance policies. As demonstrated above, there is no safe-harbour when it comes to corruption risk management.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Adopting an anti-bribery policy is always advisable irrespective of whether the law so obliges. The policy should be embedded in the business procedures of the company, accompanied by quality training of the personnel at regular intervals to identify and avoid compliance risks.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Similarly to compliance policies, legislators have adopted different approaches to whistleblowing regulations. Businesses should not hesitate to go beyond the statutory requirements and implement independent whistleblowing channels to help foster a compliance culture in their organisations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is important to note that bribery is only one aspect of corruption. As demonstrated above, corruption can take many forms. Detecting and avoiding conflicts of interest in business operations can work against presuming corrupt intent, due to which businesses are advised to include relevant provisions on excluding conflicted employees from decision making in order to manage corruption risks. Even though the examples set out above include significant intentional bribery, in many jurisdictions bribery offences are criminalised even if the offence is not intentionally committed.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to local laws and local law enforcement, the extraterritorial effect of certain foreign anti-corruption laws should be observed. For example, US Foreign Corrupt Practices Act (\"FCPA\") is widely known to be enforced also in respect of corruption offences taking place outside the United States. Transacting in US Dollars or employing US citizens may trigger the application of the FCPA and enforcement thereof by US authorities irrespective of the location of the business or any potential bribery activity, including in the Middle East. Businesses are recommended to adopt anti-corruption policies and accounting standards that meet the requirements of all the statutes potentially applicable to their operations. It seems that national authorities are working closely together to resolve cross-border bribery matters making it more difficult for the offenders to escape the jurisdiction of national authorities in an international context.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It seems that the Nordics can no longer take their high ranking in the Transparency International Corruption Perceptions Index for granted. This is partly due not only to international watchdogs, but also legislators and law enforcement authorities realising that the roots of corruption are embedded in conflict of interest which is a prevalent issue in the Nordic countries. At the same time, other countries are also working hard towards efficient enforcement of anti-corruption laws which makes competition at the top level fiercer than ever.</p>\r\nAs Transparency International and intergovernmental bodies, such as the United Nations, do not solely consider the content of laws and enforcement statistics, making general changes in improving transparency and integrity in the public sector may also yield a positive effect on anti-corruption. Importantly for businesses, it should be noted that bribery is widely criminalised in the Middle East and bribery laws actively enforced. The efforts made by the governments in the Middle East are gradually being recognised in the international domain.'),
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	(249824,24373,'ReportText','<p dir=\"LTR\" align=\"LEFT\">Combating corruption is a hot topic across the globe. Scoring on top of international rankings, the Nordic countries (being Denmark, Norway, Sweden, Finland and Iceland) have traditionally been regarded as the global frontrunners when it comes to anti-corruption. In the Middle East, governments are working hard to decrease bribery and increase transparency in society, which ultimately complements the general promotion of civil rights. Research indicates that free speech, independent media, political dissent and an open and engaged civil society, access to information and the non-existence of censorship are the core elements preventing corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The author previously practised law in Finland, advising Finnish and Scandinavian clients, before locating to the UAE. In this article I seek to provide comparative insights on the topic of anti-corruption practices between the Middle East and the Nordic countries, in light of current developments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>From global harmonisation of laws to local enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Combating corruption on a global level is subject to several international treaties, the provisions of which are then transposed to national laws, harmonising the content thereof. The most important international treaties in this regard are the United Nations Convention Against Corruption of 2003 and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 1997. In Europe, an intergovernmental body called the Group of States against Corruption (GRECO) was established in 1999 by the Council of Europe to monitor its Member States’ compliance with the organisation’s anti-corruption standards.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The intention of international treaties is to establish common worldwide legislative standards for anti-corruption laws through imposing obligations on the Member States to bring their legislation in line with the obligations of the treaties. As a result, the laws of different Member States should include similar provisions criminalising the different forms of bribery, which provisions are locally enforced by national authorities. Despite these developments, it goes without saying that the national anti-corruption laws are far from being harmonised and different geographic regions face different corruption related challenges.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Corruption Perceptions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Transparency International is a non-governmental watchdog promoting anti-corruption in the world. It publishes an annual Corruption Perception Index, ranking 180 countries and territories by their perceived levels of public sector corruption, predicated on information provided by experts and businesspeople.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Middle East consists of a variety of jurisdictions, many of which are far from homogenous. While some of the countries are still subject to weaker public institutions due to, e.g.; internal conflict, a number of countries in the Middle East, such as Jordan and Lebanon, are taking positive steps towards fighting corruption and increasing transparency and integrity in their societies. The hard work conducted by local governments in the Middle East is gradually attracting the attention of the rest of the world.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This year, the United Arab Emirates (\"UAE\") ranked higher on the index than ever before. The UAE reached the 21st position in the ranking being the frontrunner of the Middle East. According to Transparency International, this may be due to good and efficient management of public finances, improved public procurement and better access to public services and infrastructure in the UAE. In 2016, the UAE carried out a significant reform of its criminal laws, which may be reflected in the Index as well.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Nordic countries usually score highest in international anti-corruption rankings. According to the latest Corruption Perceptions Index, Denmark was ranked the 2nd least corrupt country in the world, after New Zealand. Finland and Norway shared 3rd spot and Sweden ranked 6th. Iceland, holding 13th position, appears to be an outlier among Nordic countries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Considering the rankings, one may ask whether Nordic countries are perhaps a safe-harbour from corruption. Despite the apparently excellent reputation, do corruption related risks still exist for businesses in the Nordics? Are the Nordic Countries the complete opposite to the Middle East?</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Finland: There is a snake in paradise</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Despite direct bribery being relatively rare in Finland and the rest of the Nordic jurisdictions, the existence of conflicts of interest and the lack of transparency in declaring conflicts of interest have turned out to be a common feature of the Nordic countries. This may be difficult to detect considering it is an inherently subjective evaluation. I suggest corruption does exist in Nordic countries, but that it has taken forms that are relatively difficult to detect by researchers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In the aftermath of its evaluation round in September 2017, GRECO issued recommendations to Finland aimed at improving its anti-corruption regime, such recommendations being published in March 2018. Six of the recommendations issued by GRECO concerned senior government officials and ministers, and eight of them law enforcement authorities. Regarding law enforcement agencies, GRECO recommends that the Police and the Border Guard develop a dedicated anti-corruption strategy or policy, compile a code of conduct and specify their guidelines for secondary employment, organise training on the prevention and combating of corruption, and reinforce ethical practices in their career-related processes. In addition, it is recommended that the police enhance their risk management, internal oversight, and procedures to be followed by their officials when taking up secondary employment.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">When it comes to whistleblower protection, GRECO recommends that the Police and the Border Guard be obliged to report suspicions of corruption and that protection of the whistleblowers be enhanced. At the moment, Finnish law does not include all-encompassing provisions protecting whistleblowers, applicable across different industries and, as a result, whistleblowers are practically protected only by the provisions in the Employment Act regulating grounds for dismissal. When it comes to the GRECO anti-corruption recommendations with regards to judges, public prosecutors and Members of Parliament, the Finnish Ministry of Justice announced in May 2018 that it has duly implemented all the recommendations. Also, the current Minister of Labour is strongly promoting enhancing whistleblower protection in Finland according to his political agenda.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Sweden: a recent extraterritoriality exercise in the telecommunications sector</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Finland is not the only Nordic jurisdiction that has recently encountered serious corruption allegations. In Sweden, a local leading telecommunications company and its Uzbek subsidiary admitted paying (on multiple occasions between 2007 and 2010) more than USD 331 million in bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecommunications industry. The telecommunications operator, which used to be a listed company in New York, used US bank accounts to move the bribery related assets, which triggered the involvement of the US authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In 2017, the company reached a settlement involving the anti-corruption authorities of the United States, the Netherlands and Sweden. In the United States, the company entered a deferred prosecution agreement agreeing to pay the fine, implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals. The U.S. authorities agreed to credit any disgorged profits paid to the Swedish and Dutch authorities as a result of related national proceedings in Sweden and in the Netherlands.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to the criminal proceedings faced by the company, the individual directors involved are now being prosecuted in Sweden for bribery. According to the prosecutor, the company paid the authorities to make a preferred decision when considering its operational licenses in Uzbekistan and the prosecuted directors in question were aware of the bribery or even took initiative in the matter.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The loopholes relating to gifts and hospitality in the Middle East</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">In Europe and in the United States, there is a common trend of companies becoming extremely cautious when it comes to hospitality and gifts, including business to business relationships. Public officials aside, one of the most common corruption related issues that businesses often struggle with is to understand where to draw the line between illegitimate and legitimate, or sometimes even expected, provision of business gifts and hospitality in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There are different legislative approaches to private sector bribery in the Middle East. For example, the UAE has explicitly criminalised bribery in business in Article 236 bis of the Federal Law No. 3 of 1987 as amended by the Federal Decree Law No. 7 of 2016 (\"UAE Penal Code\"). Another example can be found in Qatar where passive bribery i.e. accepting illegitimate benefits in the private sector has been criminalised in Article 146 of the Law Number 11 of 2004 (\"Qatar Penal Code\")..</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In light of the above, and importantly for companies doing business in the Middle East, it is highly recommended to adopt restrictive hospitality policies in order to avoid bribery risks in relation to both the public and the private sector. It should be noted that the anti-bribery laws in the Middle East do not usually include exceptions when it comes to gifts of only nominal value, if the corrupt intent can be proven. Also, the definition of a public official tends to be relatively broad resulting e.g. employees of many companies subject to (partial) government ownership being regarded as public officials.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Key take home for global businesses: global vigilance</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The above examples indicate that regardless of the jurisdiction - whether the Middle East, the high ranking Nordic countries or elsewhere in the world, no business is entirely safe from corruption related risks. International rankings aside, businesses should pay attention to corruption risks and implement strict compliance policies. As demonstrated above, there is no safe-harbour when it comes to corruption risk management.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Adopting an anti-bribery policy is always advisable irrespective of whether the law so obliges. The policy should be embedded in the business procedures of the company, accompanied by quality training of the personnel at regular intervals to identify and avoid compliance risks.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Similarly to compliance policies, legislators have adopted different approaches to whistleblowing regulations. Businesses should not hesitate to go beyond the statutory requirements and implement independent whistleblowing channels to help foster a compliance culture in their organisations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is important to note that bribery is only one aspect of corruption. As demonstrated above, corruption can take many forms. Detecting and avoiding conflicts of interest in business operations can work against presuming corrupt intent, due to which businesses are advised to include relevant provisions on excluding conflicted employees from decision making in order to manage corruption risks. Even though the examples set out above include significant intentional bribery, in many jurisdictions bribery offences are criminalised even if the offence is not intentionally committed.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to local laws and local law enforcement, the extraterritorial effect of certain foreign anti-corruption laws should be observed. For example, US Foreign Corrupt Practices Act (\"FCPA\") is widely known to be enforced also in respect of corruption offences taking place outside the United States. Transacting in US Dollars or employing US citizens may trigger the application of the FCPA and enforcement thereof by US authorities irrespective of the location of the business or any potential bribery activity, including in the Middle East. Businesses are recommended to adopt anti-corruption policies and accounting standards that meet the requirements of all the statutes potentially applicable to their operations. It seems that national authorities are working closely together to resolve cross-border bribery matters making it more difficult for the offenders to escape the jurisdiction of national authorities in an international context.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It seems that the Nordics can no longer take their high ranking in the Transparency International Corruption Perceptions Index for granted. This is partly due not only to international watchdogs, but also legislators and law enforcement authorities realising that the roots of corruption are embedded in conflict of interest which is a prevalent issue in the Nordic countries. At the same time, other countries are also working hard towards efficient enforcement of anti-corruption laws which makes competition at the top level fiercer than ever.</p>\r\nAs Transparency International and intergovernmental bodies, such as the United Nations, do not solely consider the content of laws and enforcement statistics, making general changes in improving transparency and integrity in the public sector may also yield a positive effect on anti-corruption. Importantly for businesses, it should be noted that bribery is widely criminalised in the Middle East and bribery laws actively enforced. The efforts made by the governments in the Middle East are gradually being recognised in the international domain.|<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignleft size-full wp-image-8015\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/19.jpg\" alt=\"\" width=\"4573\" height=\"1322\" />Combating corruption is a hot topic across the globe. Scoring on top of international rankings, the Nordic countries (being Denmark, Norway, Sweden, Finland and Iceland) have traditionally been regarded as the global frontrunners when it comes to anti-corruption. In the Middle East, governments are working hard to decrease bribery and increase transparency in society, which ultimately complements the general promotion of civil rights. Research indicates that free speech, independent media, political dissent and an open and engaged civil society, access to information and the non-existence of censorship are the core elements preventing corruption.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The author previously practised law in Finland, advising Finnish and Scandinavian clients, before locating to the UAE. In this article I seek to provide comparative insights on the topic of anti-corruption practices between the Middle East and the Nordic countries, in light of current developments.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>From global harmonisation of laws to local enforcement</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Combating corruption on a global level is subject to several international treaties, the provisions of which are then transposed to national laws, harmonising the content thereof. The most important international treaties in this regard are the United Nations Convention Against Corruption of 2003 and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 1997. In Europe, an intergovernmental body called the Group of States against Corruption (GRECO) was established in 1999 by the Council of Europe to monitor its Member States’ compliance with the organisation’s anti-corruption standards.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The intention of international treaties is to establish common worldwide legislative standards for anti-corruption laws through imposing obligations on the Member States to bring their legislation in line with the obligations of the treaties. As a result, the laws of different Member States should include similar provisions criminalising the different forms of bribery, which provisions are locally enforced by national authorities. Despite these developments, it goes without saying that the national anti-corruption laws are far from being harmonised and different geographic regions face different corruption related challenges.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Corruption Perceptions</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Transparency International is a non-governmental watchdog promoting anti-corruption in the world. It publishes an annual Corruption Perception Index, ranking 180 countries and territories by their perceived levels of public sector corruption, predicated on information provided by experts and businesspeople.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The Middle East consists of a variety of jurisdictions, many of which are far from homogenous. While some of the countries are still subject to weaker public institutions due to, e.g.; internal conflict, a number of countries in the Middle East, such as Jordan and Lebanon, are taking positive steps towards fighting corruption and increasing transparency and integrity in their societies. The hard work conducted by local governments in the Middle East is gradually attracting the attention of the rest of the world.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">This year, the United Arab Emirates (\"UAE\") ranked higher on the index than ever before. The UAE reached the 21st position in the ranking being the frontrunner of the Middle East. According to Transparency International, this may be due to good and efficient management of public finances, improved public procurement and better access to public services and infrastructure in the UAE. In 2016, the UAE carried out a significant reform of its criminal laws, which may be reflected in the Index as well.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Nordic countries usually score highest in international anti-corruption rankings. According to the latest Corruption Perceptions Index, Denmark was ranked the 2nd least corrupt country in the world, after New Zealand. Finland and Norway shared 3rd spot and Sweden ranked 6th. Iceland, holding 13th position, appears to be an outlier among Nordic countries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Considering the rankings, one may ask whether Nordic countries are perhaps a safe-harbour from corruption. Despite the apparently excellent reputation, do corruption related risks still exist for businesses in the Nordics? Are the Nordic Countries the complete opposite to the Middle East?</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Finland: There is a snake in paradise</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Despite direct bribery being relatively rare in Finland and the rest of the Nordic jurisdictions, the existence of conflicts of interest and the lack of transparency in declaring conflicts of interest have turned out to be a common feature of the Nordic countries. This may be difficult to detect considering it is an inherently subjective evaluation. I suggest corruption does exist in Nordic countries, but that it has taken forms that are relatively difficult to detect by researchers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In the aftermath of its evaluation round in September 2017, GRECO issued recommendations to Finland aimed at improving its anti-corruption regime, such recommendations being published in March 2018. Six of the recommendations issued by GRECO concerned senior government officials and ministers, and eight of them law enforcement authorities. Regarding law enforcement agencies, GRECO recommends that the Police and the Border Guard develop a dedicated anti-corruption strategy or policy, compile a code of conduct and specify their guidelines for secondary employment, organise training on the prevention and combating of corruption, and reinforce ethical practices in their career-related processes. In addition, it is recommended that the police enhance their risk management, internal oversight, and procedures to be followed by their officials when taking up secondary employment.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">When it comes to whistleblower protection, GRECO recommends that the Police and the Border Guard be obliged to report suspicions of corruption and that protection of the whistleblowers be enhanced. At the moment, Finnish law does not include all-encompassing provisions protecting whistleblowers, applicable across different industries and, as a result, whistleblowers are practically protected only by the provisions in the Employment Act regulating grounds for dismissal. When it comes to the GRECO anti-corruption recommendations with regards to judges, public prosecutors and Members of Parliament, the Finnish Ministry of Justice announced in May 2018 that it has duly implemented all the recommendations. Also, the current Minister of Labour is strongly promoting enhancing whistleblower protection in Finland according to his political agenda.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Sweden: a recent extraterritoriality exercise in the telecommunications sector</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Finland is not the only Nordic jurisdiction that has recently encountered serious corruption allegations. In Sweden, a local leading telecommunications company and its Uzbek subsidiary admitted paying (on multiple occasions between 2007 and 2010) more than USD 331 million in bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecommunications industry. The telecommunications operator, which used to be a listed company in New York, used US bank accounts to move the bribery related assets, which triggered the involvement of the US authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In 2017, the company reached a settlement involving the anti-corruption authorities of the United States, the Netherlands and Sweden. In the United States, the company entered a deferred prosecution agreement agreeing to pay the fine, implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals. The U.S. authorities agreed to credit any disgorged profits paid to the Swedish and Dutch authorities as a result of related national proceedings in Sweden and in the Netherlands.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to the criminal proceedings faced by the company, the individual directors involved are now being prosecuted in Sweden for bribery. According to the prosecutor, the company paid the authorities to make a preferred decision when considering its operational licenses in Uzbekistan and the prosecuted directors in question were aware of the bribery or even took initiative in the matter.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The loopholes relating to gifts and hospitality in the Middle East</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">In Europe and in the United States, there is a common trend of companies becoming extremely cautious when it comes to hospitality and gifts, including business to business relationships. Public officials aside, one of the most common corruption related issues that businesses often struggle with is to understand where to draw the line between illegitimate and legitimate, or sometimes even expected, provision of business gifts and hospitality in the Middle East.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">There are different legislative approaches to private sector bribery in the Middle East. For example, the UAE has explicitly criminalised bribery in business in Article 236 bis of the Federal Law No. 3 of 1987 as amended by the Federal Decree Law No. 7 of 2016 (\"UAE Penal Code\"). Another example can be found in Qatar where passive bribery i.e. accepting illegitimate benefits in the private sector has been criminalised in Article 146 of the Law Number 11 of 2004 (\"Qatar Penal Code\")..</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In light of the above, and importantly for companies doing business in the Middle East, it is highly recommended to adopt restrictive hospitality policies in order to avoid bribery risks in relation to both the public and the private sector. It should be noted that the anti-bribery laws in the Middle East do not usually include exceptions when it comes to gifts of only nominal value, if the corrupt intent can be proven. Also, the definition of a public official tends to be relatively broad resulting e.g. employees of many companies subject to (partial) government ownership being regarded as public officials.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Key take home for global businesses: global vigilance</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The above examples indicate that regardless of the jurisdiction - whether the Middle East, the high ranking Nordic countries or elsewhere in the world, no business is entirely safe from corruption related risks. International rankings aside, businesses should pay attention to corruption risks and implement strict compliance policies. As demonstrated above, there is no safe-harbour when it comes to corruption risk management.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Adopting an anti-bribery policy is always advisable irrespective of whether the law so obliges. The policy should be embedded in the business procedures of the company, accompanied by quality training of the personnel at regular intervals to identify and avoid compliance risks.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Similarly to compliance policies, legislators have adopted different approaches to whistleblowing regulations. Businesses should not hesitate to go beyond the statutory requirements and implement independent whistleblowing channels to help foster a compliance culture in their organisations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is important to note that bribery is only one aspect of corruption. As demonstrated above, corruption can take many forms. Detecting and avoiding conflicts of interest in business operations can work against presuming corrupt intent, due to which businesses are advised to include relevant provisions on excluding conflicted employees from decision making in order to manage corruption risks. Even though the examples set out above include significant intentional bribery, in many jurisdictions bribery offences are criminalised even if the offence is not intentionally committed.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition to local laws and local law enforcement, the extraterritorial effect of certain foreign anti-corruption laws should be observed. For example, US Foreign Corrupt Practices Act (\"FCPA\") is widely known to be enforced also in respect of corruption offences taking place outside the United States. Transacting in US Dollars or employing US citizens may trigger the application of the FCPA and enforcement thereof by US authorities irrespective of the location of the business or any potential bribery activity, including in the Middle East. Businesses are recommended to adopt anti-corruption policies and accounting standards that meet the requirements of all the statutes potentially applicable to their operations. It seems that national authorities are working closely together to resolve cross-border bribery matters making it more difficult for the offenders to escape the jurisdiction of national authorities in an international context.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">It seems that the Nordics can no longer take their high ranking in the Transparency International Corruption Perceptions Index for granted. This is partly due not only to international watchdogs, but also legislators and law enforcement authorities realising that the roots of corruption are embedded in conflict of interest which is a prevalent issue in the Nordic countries. At the same time, other countries are also working hard towards efficient enforcement of anti-corruption laws which makes competition at the top level fiercer than ever.</p>\r\nAs Transparency International and intergovernmental bodies, such as the United Nations, do not solely consider the content of laws and enforcement statistics, making general changes in improving transparency and integrity in the public sector may also yield a positive effect on anti-corruption. Importantly for businesses, it should be noted that bribery is widely criminalised in the Middle East and bribery laws actively enforced. The efforts made by the governments in the Middle East are gradually being recognised in the international domain.'),
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	(249881,24378,'MetaValueNew','<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignright wp-image-8005 size-large\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/21-200x1024.jpg\" alt=\"\" width=\"200\" height=\"1024\" />The introduction of VAT in the UAE at the start of 2018, was a major change for businesses, Shiraz Khan of Al Tamimi &amp; Company looks back on how they should have tackled the implementation phase and what their priorities should be going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UAE’s VAT system is broadly based on common prin-ciples that have been agreed by all GCC countries in the Uniﬁed GCC VAT Agreement. These include certain ar-eas which all the individual GCC countries are required to follow. For example, the mandatory and voluntary registration thresholds were set by the GCC VAT Agreement. The standard VAT rate of 5% was also ﬁxed by the GCC VAT Agreement across the GCC. However, individual GCC countries do have some freedom to determine the application of VAT on some matters such as the VAT treatment of certain sectors and industries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>UAE Legislation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">UAE VAT legislation is made up of Federal Decree Law No. 8/2017 on VAT (the VAT Law) and Cabinet Decision No. 52/2017 on the Executive Regulations to the VAT Law (VAT Executive Regula-tions). The Federal Decree-Law No. 8/2017, which was published in August 2017, sets out the UAE VAT rules. The Executive Regula-tions which were issued in November 2017 deal with the detailed application of the VAT Law’s provisions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, the Federal Tax Authority (FTA), which was formed under Federal Decree-Law No. 13/ 2016 on the Establishment of the FTA is responsible for the administration, management, collection and enforcement of VAT and all other current and future Federal taxes. At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. It was also important for organisa-tions to make changes to their business processes, including invoicing and record keeping so they were compliant with the new VAT legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a legal perspective, it was necessary to review existing contracts with customers to check if they needed to renegotiate contracts which had no VAT clause in order to avoid bearing any VAT cost. They also had to check that all new contracts dealt with the application of VAT and set out which party was responsible for bearing the VAT liability.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order to achieve this objective and manage relationships with customers, communication with customers was required. It was also important to communicate with suppliers to ensure they were going to issue VAT compliant invoices which would facilitate the recovery of VAT. Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. As is the case in all other tax jurisdictions, businesses should seek tax advice from a reputable professional services ﬁrm rather than tax authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The FTA have conducted a country-wide campaign to increase awareness, through a series of seminars on VAT introduction in 2017. Given their limited resources, the scale of this campaign has been impressive and is unprecedented even by the standards of more mature tax jurisdictions. Although, some businesses may disagree, it was never realistic to expect a new tax authority like the FTA to personally visit every registered business just to tell them VAT was being introduced. The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).'),
	(249882,24378,'MetaValueOld','<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT in the UAE at the start of 2018, was a major change for businesses, Shiraz Khan of Al Tamimi &amp; Company looks back on how they should have tackled the implementation phase and what their priorities should be going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UAE’s VAT system is broadly based on common prin-ciples that have been agreed by all GCC countries in the Uniﬁed GCC VAT Agreement. These include certain ar-eas which all the individual GCC countries are required to follow. For example, the mandatory and voluntary registration thresholds were set by the GCC VAT Agreement. The standard VAT rate of 5% was also ﬁxed by the GCC VAT Agreement across the GCC. However, individual GCC countries do have some freedom to determine the application of VAT on some matters such as the VAT treatment of certain sectors and industries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>UAE Legislation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">UAE VAT legislation is made up of Federal Decree Law No. 8/2017 on VAT (the VAT Law) and Cabinet Decision No. 52/2017 on the Executive Regulations to the VAT Law (VAT Executive Regula-tions). The Federal Decree-Law No. 8/2017, which was published in August 2017, sets out the UAE VAT rules. The Executive Regula-tions which were issued in November 2017 deal with the detailed application of the VAT Law’s provisions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, the Federal Tax Authority (FTA), which was formed under Federal Decree-Law No. 13/ 2016 on the Establishment of the FTA is responsible for the administration, management, collection and enforcement of VAT and all other current and future Federal taxes. At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. It was also important for organisa-tions to make changes to their business processes, including invoicing and record keeping so they were compliant with the new VAT legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a legal perspective, it was necessary to review existing contracts with customers to check if they needed to renegotiate contracts which had no VAT clause in order to avoid bearing any VAT cost. They also had to check that all new contracts dealt with the application of VAT and set out which party was responsible for bearing the VAT liability.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order to achieve this objective and manage relationships with customers, communication with customers was required. It was also important to communicate with suppliers to ensure they were going to issue VAT compliant invoices which would facilitate the recovery of VAT. Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. As is the case in all other tax jurisdictions, businesses should seek tax advice from a reputable professional services ﬁrm rather than tax authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The FTA have conducted a country-wide campaign to increase awareness, through a series of seminars on VAT introduction in 2017. Given their limited resources, the scale of this campaign has been impressive and is unprecedented even by the standards of more mature tax jurisdictions. Although, some businesses may disagree, it was never realistic to expect a new tax authority like the FTA to personally visit every registered business just to tell them VAT was being introduced. The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).'),
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	(249885,24378,'ReportText','<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT in the UAE at the start of 2018, was a major change for businesses, Shiraz Khan of Al Tamimi &amp; Company looks back on how they should have tackled the implementation phase and what their priorities should be going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UAE’s VAT system is broadly based on common prin-ciples that have been agreed by all GCC countries in the Uniﬁed GCC VAT Agreement. These include certain ar-eas which all the individual GCC countries are required to follow. For example, the mandatory and voluntary registration thresholds were set by the GCC VAT Agreement. The standard VAT rate of 5% was also ﬁxed by the GCC VAT Agreement across the GCC. However, individual GCC countries do have some freedom to determine the application of VAT on some matters such as the VAT treatment of certain sectors and industries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>UAE Legislation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">UAE VAT legislation is made up of Federal Decree Law No. 8/2017 on VAT (the VAT Law) and Cabinet Decision No. 52/2017 on the Executive Regulations to the VAT Law (VAT Executive Regula-tions). The Federal Decree-Law No. 8/2017, which was published in August 2017, sets out the UAE VAT rules. The Executive Regula-tions which were issued in November 2017 deal with the detailed application of the VAT Law’s provisions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, the Federal Tax Authority (FTA), which was formed under Federal Decree-Law No. 13/ 2016 on the Establishment of the FTA is responsible for the administration, management, collection and enforcement of VAT and all other current and future Federal taxes. At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. It was also important for organisa-tions to make changes to their business processes, including invoicing and record keeping so they were compliant with the new VAT legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a legal perspective, it was necessary to review existing contracts with customers to check if they needed to renegotiate contracts which had no VAT clause in order to avoid bearing any VAT cost. They also had to check that all new contracts dealt with the application of VAT and set out which party was responsible for bearing the VAT liability.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order to achieve this objective and manage relationships with customers, communication with customers was required. It was also important to communicate with suppliers to ensure they were going to issue VAT compliant invoices which would facilitate the recovery of VAT. Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. As is the case in all other tax jurisdictions, businesses should seek tax advice from a reputable professional services ﬁrm rather than tax authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The FTA have conducted a country-wide campaign to increase awareness, through a series of seminars on VAT introduction in 2017. Given their limited resources, the scale of this campaign has been impressive and is unprecedented even by the standards of more mature tax jurisdictions. Although, some businesses may disagree, it was never realistic to expect a new tax authority like the FTA to personally visit every registered business just to tell them VAT was being introduced. The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"></p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).|<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignright wp-image-8005 size-large\" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/21-200x1024.jpg\" alt=\"\" width=\"200\" height=\"1024\" />The introduction of VAT in the UAE at the start of 2018, was a major change for businesses, Shiraz Khan of Al Tamimi &amp; Company looks back on how they should have tackled the implementation phase and what their priorities should be going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UAE’s VAT system is broadly based on common prin-ciples that have been agreed by all GCC countries in the Uniﬁed GCC VAT Agreement. These include certain ar-eas which all the individual GCC countries are required to follow. For example, the mandatory and voluntary registration thresholds were set by the GCC VAT Agreement. The standard VAT rate of 5% was also ﬁxed by the GCC VAT Agreement across the GCC. However, individual GCC countries do have some freedom to determine the application of VAT on some matters such as the VAT treatment of certain sectors and industries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>UAE Legislation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">UAE VAT legislation is made up of Federal Decree Law No. 8/2017 on VAT (the VAT Law) and Cabinet Decision No. 52/2017 on the Executive Regulations to the VAT Law (VAT Executive Regula-tions). The Federal Decree-Law No. 8/2017, which was published in August 2017, sets out the UAE VAT rules. The Executive Regula-tions which were issued in November 2017 deal with the detailed application of the VAT Law’s provisions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, the Federal Tax Authority (FTA), which was formed under Federal Decree-Law No. 13/ 2016 on the Establishment of the FTA is responsible for the administration, management, collection and enforcement of VAT and all other current and future Federal taxes. At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. It was also important for organisa-tions to make changes to their business processes, including invoicing and record keeping so they were compliant with the new VAT legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a legal perspective, it was necessary to review existing contracts with customers to check if they needed to renegotiate contracts which had no VAT clause in order to avoid bearing any VAT cost. They also had to check that all new contracts dealt with the application of VAT and set out which party was responsible for bearing the VAT liability.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order to achieve this objective and manage relationships with customers, communication with customers was required. It was also important to communicate with suppliers to ensure they were going to issue VAT compliant invoices which would facilitate the recovery of VAT. Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. As is the case in all other tax jurisdictions, businesses should seek tax advice from a reputable professional services ﬁrm rather than tax authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The FTA have conducted a country-wide campaign to increase awareness, through a series of seminars on VAT introduction in 2017. Given their limited resources, the scale of this campaign has been impressive and is unprecedented even by the standards of more mature tax jurisdictions. Although, some businesses may disagree, it was never realistic to expect a new tax authority like the FTA to personally visit every registered business just to tell them VAT was being introduced. The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).'),
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At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. 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Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. 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The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).'),
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At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. 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Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. As is the case in all other tax jurisdictions, businesses should seek tax advice from a reputable professional services ﬁrm rather than tax authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The FTA have conducted a country-wide campaign to increase awareness, through a series of seminars on VAT introduction in 2017. Given their limited resources, the scale of this campaign has been impressive and is unprecedented even by the standards of more mature tax jurisdictions. Although, some businesses may disagree, it was never realistic to expect a new tax authority like the FTA to personally visit every registered business just to tell them VAT was being introduced. The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).'),
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At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. It was also important for organisa-tions to make changes to their business processes, including invoicing and record keeping so they were compliant with the new VAT legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a legal perspective, it was necessary to review existing contracts with customers to check if they needed to renegotiate contracts which had no VAT clause in order to avoid bearing any VAT cost. They also had to check that all new contracts dealt with the application of VAT and set out which party was responsible for bearing the VAT liability.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order to achieve this objective and manage relationships with customers, communication with customers was required. It was also important to communicate with suppliers to ensure they were going to issue VAT compliant invoices which would facilitate the recovery of VAT. Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. As is the case in all other tax jurisdictions, businesses should seek tax advice from a reputable professional services ﬁrm rather than tax authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The FTA have conducted a country-wide campaign to increase awareness, through a series of seminars on VAT introduction in 2017. Given their limited resources, the scale of this campaign has been impressive and is unprecedented even by the standards of more mature tax jurisdictions. Although, some businesses may disagree, it was never realistic to expect a new tax authority like the FTA to personally visit every registered business just to tell them VAT was being introduced. The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).|<p dir=\"LTR\" align=\"LEFT\"><img class=\"alignright wp-image-8016 \" src=\"http://localhost:8888/tamimi/wp-content/uploads/2018/07/21-379x1024.jpg\" alt=\"\" width=\"305\" height=\"824\" />The introduction of VAT in the UAE at the start of 2018, was a major change for businesses, Shiraz Khan of Al Tamimi &amp; Company looks back on how they should have tackled the implementation phase and what their priorities should be going forward.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The UAE’s VAT system is broadly based on common prin-ciples that have been agreed by all GCC countries in the Uniﬁed GCC VAT Agreement. These include certain ar-eas which all the individual GCC countries are required to follow. For example, the mandatory and voluntary registration thresholds were set by the GCC VAT Agreement. The standard VAT rate of 5% was also ﬁxed by the GCC VAT Agreement across the GCC. However, individual GCC countries do have some freedom to determine the application of VAT on some matters such as the VAT treatment of certain sectors and industries.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>UAE Legislation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">UAE VAT legislation is made up of Federal Decree Law No. 8/2017 on VAT (the VAT Law) and Cabinet Decision No. 52/2017 on the Executive Regulations to the VAT Law (VAT Executive Regula-tions). The Federal Decree-Law No. 8/2017, which was published in August 2017, sets out the UAE VAT rules. The Executive Regula-tions which were issued in November 2017 deal with the detailed application of the VAT Law’s provisions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In addition, the Federal Tax Authority (FTA), which was formed under Federal Decree-Law No. 13/ 2016 on the Establishment of the FTA is responsible for the administration, management, collection and enforcement of VAT and all other current and future Federal taxes. At present VAT and excise tax are the only taxes at the Federal level. Federal Law No. 7/2017 for Tax Procedures and Cabinet Decision No. 36/2017 on the Executive Regulations on Tax Procedures are also relevant in this context as they provide a procedural framework that is applied across all Federal Taxes. This includes details and requirements related to tax registra-tion, ﬁling of tax returns and settlement of taxes, tax audits, appeals and penalties as well as FTA and taxpayers’ rights and obligations.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Implementation Challenges</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">The introduction of VAT was a major change for businesses operating in the UAE. In order to prepare for it, busi-nesses had to complete a number of steps before VAT came into force. These included analysing the impact of VAT on their operations and across many diﬀer-ent functions including Legal, Finance, IT, Human Resources, Procurement, Sales, Marketing and Strategy.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">Businesses had to review and deter-mine the VAT treatment of all their sales and purchase transactions and understand their resulting compli-ance obligations. In addition, they had to assess the capability of their existing IT system or software to produce auto-matic VAT reporting and consider if an upgrade would be suﬃcient or they would need a whole new system. It was also important for organisa-tions to make changes to their business processes, including invoicing and record keeping so they were compliant with the new VAT legislation.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">From a legal perspective, it was necessary to review existing contracts with customers to check if they needed to renegotiate contracts which had no VAT clause in order to avoid bearing any VAT cost. They also had to check that all new contracts dealt with the application of VAT and set out which party was responsible for bearing the VAT liability.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In order to achieve this objective and manage relationships with customers, communication with customers was required. It was also important to communicate with suppliers to ensure they were going to issue VAT compliant invoices which would facilitate the recovery of VAT. Finally, businesses had to evaluate the cash ﬂow implications and their working capital requirements as a result of now having to pay VAT before they received payments from customers.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">All in all, a signiﬁcant amount of work had to be undertaken by businesses to be ready for VAT. In other jurisdictions such as Malaysia when a similar goods or services tax (known as GST) was implemented, companies there typically needed around six to 18 months to prepare for the change depending on the size and complexity of their operations and transactions.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Preparation Time</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Although some of the large multinational groups in the UAE began their preparations in 2016 or in the beginning of 2017, many busi-nesses in the UAE took a reactive approach instead and decided to wait until the publication of the complete VAT legislation in November before taking any action. There was also an expectation or possibly a hope in the UAE business community that the imple-mentation of VAT would be delayed by the UAE Government based on previous experience in the UAE. (Although, this was despite an indication from the FTA in early 2017 that VAT would be imple-mented on 1 January 2018 and the fact the VAT Law also conﬁrmed that VAT would be implemented by this date when it was published in August 2017.)</p>\r\n<p dir=\"LTR\" align=\"LEFT\">In hindsight, once the UAE Government had taken a decision to implement VAT on 1 January 2018 and this fact was conﬁrmed by the VAT law, businesses could have done more and been more proactive with their VAT preparations. VAT is not a new tax and it or a similar tax exists in more than 160 other countries around the globe. In addition, the UAE VAT law is is largely based on the EU VAT rules and Malaysian GST system. In addition, the GCC VAT Agreement on which UAE VAT legislation was based was also published in the ﬁrst half of 2017. So as far as the UAE is concerned, although the ﬁnal VAT Executive Regulations were not published until November 2017, most of the information in these regulations had already been made available by the FTA earlier in the year as part of an awareness campaign. So, a signiﬁcant amount of information was already available in the public domain even before the VAT Executive Regulations were published and it was suﬃcient to enable businesses to begin their preparations. In fact, most of the information in the VAT Executive Regulations was already known before these Regulations were issued. It would have been better for businesses to begin preparation before the VAT Executive Regulations were issued based on the known information at that time and then validate any assumptions or conﬁrm positions after the regulations were issued in November 2017. Unfortunately, in the UAE, many businesses took the wrong approach and instead waited for the regulations before even beginning this work which meant they only had one month to get ready. A few businesses were even taken by surprise by the introduction of VAT despite the fact the FTA, tax advisers and the local and business press had conducted an awareness campaign throughout 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>The Role of the Federal Tax Authority</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">Many businesses operating in the UAE appear to have misun-derstood the role of the FTA. The FTA is a new tax authority, the legislation establishing it was published towards the end of 2016 and it only began recruiting staﬀ in the middle of 2017.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">As with any tax authority in mature tax jurisdictions, the FTA’s primary role is to administer, collect and enforce Federal taxes and apply procedures which are related to these taxes. Although it will issue technical guidance to the public on tax matters, like any tax authority, it is not responsible for advising businesses on their tax obligations or on the VAT implications of their transac-tions. Unfortunately, a number of businesses have not understood what the responsiblities of the FTA are and are currently trying to contact the FTA helpline or meet FTA representatives to obtain tax advice, although this is not part of their role. Like many tax authorities in other countries, the FTA, particularly as it is a new body, has very limited resources. With over 300,000 businesses now registered for VAT in the UAE, clearly it is not possible for the FTA to engage directly with all of them and provide tax advice particularly as this is not a part of their remit. As is the case in all other tax jurisdictions, businesses should seek tax advice from a reputable professional services ﬁrm rather than tax authorities.</p>\r\n<p dir=\"LTR\" align=\"LEFT\">The FTA have conducted a country-wide campaign to increase awareness, through a series of seminars on VAT introduction in 2017. Given their limited resources, the scale of this campaign has been impressive and is unprecedented even by the standards of more mature tax jurisdictions. Although, some businesses may disagree, it was never realistic to expect a new tax authority like the FTA to personally visit every registered business just to tell them VAT was being introduced. The onus was also on these busi-nesses to speak to advisers and read the many articles which have been published in newspapers and business magazines on the subject.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>Interpretation</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">It is easy to mistakenly assume that since the VAT legislation has been issued now, its interpretation will be straightforward and the VAT treatment of all transactions will be clear. In many countries where VAT has been in place for some time, guidance tends to be sought from the published practice of the tax authority in the form of public notices and circulars. Case law precedent is also relied on to check how the courts have decided cases with similar facts in the past. In such countries, VAT law continues to evolve and even decades after its implementation uncertainty remains, as such, the tax authorities in these countries continue to be involved in disputes with businesses, new cases on complex VAT issues continue to be heard by the courts and new schemes are introduced to take into account unique circumstances and industry speciﬁc issues. Similar developments can be expected in the UAE as the UAE VAT legisla-tion has only been eﬀective for just over three months and there is currently no case law from which guidance can be obtained. It will also take time for the FTA’s practice to develop as they audit businesses’ VAT returns and encounter diﬀerent situations. In the future, the FTA will no doubt make further guidance available and new schemes may be announced to take account of diﬀerent industries issues. Any disputes with the FTA will be subject to a three-tier appeal system. Businesses who have a dispute with the FTA, will have the right to ask them to reconsider their decision, and the matter will then be referred to another inspector. An objec-tion against the FTA’s reconsideration decision may then be made to an independent tax disputes resolution committee made up of a judge and two tax experts. Appeals may be made against that committee’s decision to a competent court.</p>\r\n<p dir=\"LTR\" align=\"LEFT\"><strong>What should businesses do now?</strong></p>\r\n<p dir=\"LTR\" align=\"LEFT\">As VAT has been implemented and ﬁling deadlines are approach-ing, the focus for businesses has shifted from VAT implementa-tion to the preparation of their ﬁrst VAT return. Companies are currently trying to identify and conﬁrm the VAT treatment of their transactions so they are able to ﬁle a complete and correct tax return. The completion of the tax return may seem a simple, straightforward task, but the department (and in some cases the individual) within the organisation who ﬁles the return on behalf of the business will be held responsible for the tax positions taken in that return regardless of whether the compliance work was outsourced. The relevant department will usually be the tax department, but it could be the legal or ﬁnance department. Given VAT is a new law, there may be uncertainty on many technical posi-tions which could create risk and this has to be taken seriously as penalties for non-compliance, including incorrect tax returns, could be as high as 300% of the tax amount due. Therefore the person responsible for this area must proactively manage this risk by obtaining professional tax advice from a reputable ﬁrm if there are uncertainties and should also document this advice for internal risk management. Going forward, it will be a challenge for FTA, tax advisers and businesses to interpret and apply the provisions of the new VAT legislation. Although VAT will involve a compliance cost for businesses, given the potential risks and penalties, it is important when ever there is uncertainty, busi-nesses work with a trusted tax adviser and navigate logically through any areas of doubt.</p>\r\nFor further information please contact Shiraz Khan, (s.khan@tamimi.com).'),
