Introduction

Money laundering remains one of the most insidious financial crimes: illicit funds are channelled through a series of steps to obscure their origin and ultimately appear legitimate. For financial institutions (FIs) operating in the UAE, the ability to identify these stages is critical to assessing, managing and mitigating risk. This comprehensive article outlines the three core phases of money laundering—Placement, Layering, and Integration—as reflected in the regulatory framework of the Central Bank of the UAE (CBUAE) and associated authorities. We also update you on the latest legislative and regulatory developments in the UAE’s AML/CFT regime as of 2025.

What is Money Laundering?

Broadly, money laundering can be defined as the process of exchanging money or assets that were obtained criminally for money or other assets that are “clean”. It is a serious financial crime risk that organisations across all industries must address. In the UAE context, the crime is defined as any transaction (or attempt) aimed at concealing or changing the source of illegally obtained funds by passing them through the financial and banking system so they appear to originate from legitimate sources.

Aside from understanding the three main stages, FIs must remain vigilant about the subsequent activity—namely the reintegration of the ‘cleaned’ funds into the legitimate economy—which renders detection more difficult later on.

What are the Three Stages of Money Laundering?

Financial institutions must be aware of the three distinct (though sometimes overlapping) phases of money laundering in order to:

• Identify where a certain product or service may be misused.

• Assess the inherent ML/FT (money laundering / financing of terrorism) risk at both enterprise level and business-relationship level.

• Tailor controls, monitoring and reporting accordingly.

Below is a breakdown of each stage, along with how the UAE’s regulatory environment addresses them.

Stage 1: Placement Phase

Definition & Purpose:

The placement phase is where illicit funds—often in cash—are introduced into the financial system. Criminals use this initial step to convert or deposit illegal proceeds into assets or accounts so that they enter the legitimate financial architecture.

Common Placement Methods:

• Blending of funds: Commingling dirty money with legitimate business revenue (e.g., cash-intensive enterprises).

• Smurfing (breaking up amounts): Depositing smaller sums across multiple accounts or branches to evade reporting thresholds.

• Currency smuggling: Carrying cash across borders or through informal channels to bypass banking scrutiny.

• Foreign exchange purchases: Buying foreign currencies with illicit funds to obscure beneficial ownership and asset origins.

• Loan repayment: Using illicit funds to repay legitimate loans, thereby giving the appearance of lawful transactions.

UAE Compliance Requirements:

In the UAE, the legal regime underpinning AML obligations includes:

• Federal Decree‑Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations (as amended) is the foundational law.

• Amendments such as Federal Decree‑Law No. 26 of 2021 and Federal Decree‑Law No. 7 of 2024 further strengthen the regime.

• FIs and designated non-financial businesses and professions (DNFBPs) must implement customer due diligence (CDD), maintain transaction monitoring capabilities, and report suspicious transactions to the UAE Financial Intelligence Unit (FIU).

Tips for FIs at Placement Stage:

• Establish strict cash-handling controls especially in cash-intensive sectors.

• Monitor accounts for frequent small deposits just under threshold levels.

• Verify legitimacy of large foreign currency purchases or cross-border cash movement.

• Ensure CDD for new clients includes source of funds checks, particularly where cash is involved.

Stage 2: Layering Phase

Definition & Purpose:
In the layering phase, criminals seek to obscure the origin of the illicit funds. They move money through complex transactions, transfers between accounts and jurisdictions, a series of conversions and re-conversions, to make tracing the link to the criminal origin more difficult.

Common Layering Techniques:

• Cross-border electronic transfers: Moving funds between accounts in different countries or financial markets.

• Shell companies/front businesses: Creating legal entities to conceal beneficial ownership.

• Reselling of assets: Converting cash into high-value liquid assets (real estate, jewellery, vehicles) and re-selling them.

• Conversion into financial instruments: Purchasing stocks, bonds, insurance policies with illicit funds.

• Internal transfers: Moving funds between multiple accounts within the same bank to mask origin.

UAE’s Measures in this Stage:

• The UAE’s National Strategy for AML/CFT and Proliferation Financing (2024-2027) emphasises the need to address emerging risks such as complex legal structures, virtual assets, trade-based money laundering (TBML) and cross-border layering.

• The CBUAE and other supervisory authorities require FIs to maintain full records of transactions, monitor patterns indicative of layering and report suspicious activity.

• Regulatory guidance calls for risk-based monitoring frameworks, specifically for high-risk sectors and services.

Tips for FIs at Layering Stage:

• Use automated transaction-monitoring systems with alerts for unusual patterns (e.g., frequent transfers to foreign jurisdictions, round-number transfers, frequent account changes).

• Scrutinise ownership structures of corporate clients – look for shell companies or complex webs of ownership.

• Apply enhanced due diligence (EDD) for higher-risk clients, especially those dealing in virtual assets or cross-border flows.

• Keep documentation of internal transfers and conversions (e.g., currency changes, asset sales) to detect suspicious layering behaviour.

• Collaborate with compliance teams to ensure that the institution’s risk-profile includes layering risk scenarios.

Stage 3: Integration Phase

Definition & Purpose:
The integration phase is the final stage where laundered funds are re-introduced into the legitimate economy in such a way that they appear to be normal business funds or personal wealth. At this point the money appears “clean” and harder to distinguish from lawful funds.

Common Integration Methods:

• Investing in businesses: Using laundered funds to acquire or invest in companies.

• Purchasing real estate: Buying high-value properties to park illicit wealth.

• Stocks and bonds investments: Placing funds in financial markets to legitimise them.

• Use of stored value products: Utilising prepaid cards or digital wallets for anonymity.

• Funding new criminal activities: Using cleaned funds to facilitate further illegal ventures or investments.

UAE’s Measures in this Stage:

• The UAE’s National Strategy 2024-2027 emphasises monitoring large-value transactions, investment in sectors vulnerable to money laundering, and aligning the national regime with international standards.

• The Ministry of Economy (MoE) as the supervisory authority for DNFBPs oversees awareness, inspection and enforcement in sectors such as real estate, precious metals and gemstones, auditors, corporate service providers.

Tips for FIs at Integration Stage:

• Monitor clients’ investment behaviour — sudden purchase of high-value assets or shifts in business strategy may signal integration.

• Require robust source of wealth verification for clients who are major investors or high-net-worth individuals.

• Ensure ongoing monitoring of business relationships, not just at onboarding, and flag unusual changes in behaviour or business model.

• Remain vigilant for the possibility that a client is using legitimate business flows as a cover for illicit funds being reintegrated.

AML Framework in the UAE – The Updated Landscape

To support understanding of the three phases, it is essential to know the regulatory backdrop in the UAE, especially given recent reforms.

Key Legislation & Regulatory Framework

• Federal Decree-Law No. 20 of 2018: The foundational AML law in the UAE.

• Amendments: Including Federal Decree-Law No. 26 of 2021 and Federal Decree-Law No. 7 of 2024, which strengthened the AML/CTF legal regime.

• In November 2025, a new Federal Law No. 10 of 2025 (Concerning Combating Money Laundering, Terrorism Financing and Proliferation Financing) was enacted, replacing earlier laws and broadening the scope to include virtual assets, proliferation financing and lowering legal thresholds.

• Cabinet and supervisory decisions, including Regulation of Beneficial Owner Procedures, sanctions for non-compliance, and enhanced enforcement powers.

National Strategy 2024-2027

The UAE’s National Strategy for AML/CFT/CPF (to cover Proliferation Financing) for the period 2024-2027 is a landmark document:

• It sets out 11 strategic objectives (or pillars) focusing on risk-based compliance, effectiveness, sustainability, international coordination, technology & data-analytics, supervision, and sectors vulnerable to money laundering.

• Key priorities include addressing virtual assets, cybercrime, trade-based money laundering, complex legal structures and beneficial ownership transparency.

• The strategy was approved in September 2024 and followed the removal of the UAE from the Financial Action Task Force (FATF) grey list in February 2024.

Supervisory and Enforcement Action

• FIs and DNFBPs are required to register with the goAML portal, designate a compliance officer, conduct enterprise-wide risk assessments, apply enhanced due diligence where required, retain records (at least 5 years) and report suspicious transactions.

• In July 2025, case-studies show the UAE imposing significant fines on banks and exchange houses over AML breaches—highlighting the regulator’s increasingly robust enforcement posture.

Implications for FIs & DNFBPs

For audit, accounting, tax, financial services firms and other DNFBPs operating in the UAE:

• Embed risk-based AML/CFT programmes aligned with the National Strategy 2024-2027.

• Ensure your enterprise-wide risk assessment identifies mis-use of products/services at each stage of money laundering.

• Maintain up-to-date policies, staff training, transaction monitoring, and internal escalation processes.

• Focus on layering and integration risks as well as placement – emerging risks such as virtual assets, trade-based laundering and complex ownership structures require deeper attention.

• Regularly review and update your AML compliance programme to reflect new legislation (e.g., Law No. 10/2025) and regulatory guidance.

How Swenta Can Assist

As a specialist audit, accounting and tax advisory firm, Swenta offers tailored services to support your business in meeting UAE’s AML obligations:

• Risk Assessments & Compliance Audits – comprehensive enterprise-wide risk assessment of ML/FT exposure, gap-analysis of your AML programme, remediation roadmap.

• KYC & Monitoring Solutions – assistance with designing and implementing customer due diligence (CDD), beneficial ownership checking, and ongoing transaction monitoring frameworks.

• Suspicious Activity Reporting (SAR) Support – guidance on establishing internal controls to detect and report suspicious transactions via the FIU/goAML portal.

• AML/CFT Training Programmes – structured training for staff at all levels to increase awareness of ML/FT risk, recognition of the three stages (placement, layering, integration) and regulatory responsibilities.

• Regulatory Update & Advisory – keeping you abreast of the latest legislative changes (including Law No. 10/2025), supervisory expectations and enforcement trends.

Contact Swenta today to ensure your business remains compliant with the UAE’s evolving AML framework and avoid the risks associated with money laundering and terrorist financing.

Conclusion

Understanding the three stages of money laundering—placement, layering and integration—provides organisations with a clear framework to assess risk, establish controls and intervene effectively. Within the UAE’s regulatory environment, enhanced by the National Strategy for 2024-2027, new legislation (e.g., Law No. 10/2025) and increasing enforcement, the need for robust AML/CFT programmes has never been greater. Financial institutions and DNFBPs must proactively embed risk-based mechanisms and stay current with evolving threats—only then can they safeguard their operations, reputation and the integrity of the UAE’s financial system.