Introduction: Internal Controls Are Now an AML Priority

In 2025, UAE regulators are no longer satisfied with AML policies that look good on paper. What they are testing instead is how internal controls actually work in practice. Weak internal controls are now one of the fastest ways for businesses to escalate their money laundering and terrorist financing (ML/TF) exposure—often without realizing it.

For many UAE companies, especially SMEs and DNFBPs, internal controls were designed for financial accuracy, not financial crime prevention. This gap has become a major compliance risk.

This article explains how weak internal controls amplify AML exposure, why regulators are focusing on them, and what businesses must do to strengthen their frameworks.

Why Internal Controls Matter in AML Compliance

Internal controls are the systems, procedures, and checks that ensure transactions are:

• Properly authorized

• Correctly recorded

• Independently reviewed

• Aligned with risk appetite

When these controls fail, AML risks do not just increase—they multiply.

Regulators increasingly view weak controls as enablers of financial crime, not just operational weaknesses.

Why Real Estate Remains a High-Risk Sector

Criminals continue to exploit real estate because:

• Transactions involve large sums in single deals

• Third-party payments are common

• Ownership can be layered through companies or nominees

Weak internal controls make it easier to:

• Accept unexplained funds

• Miss pricing anomalies

• Overlook beneficial ownership risks

Once funds are invested in property, tracing or recovering them becomes significantly harder. In some jurisdictions, this has even distorted housing markets, pushing prices beyond the reach of ordinary residents.

The Link Between Internal Controls and AML Failures

1. Poor Segregation of Duties

When the same person:

• Onboards the client

• Processes transactions

• Approves payments

There is little chance of independent challenge. This creates blind spots where suspicious activity can pass unchecked.

2. Inadequate Authorization Controls

Weak approval processes allow:

• High-value transactions without escalation

• Payments outside normal business activity

• Overrides without documented justification

From an AML perspective, these are red flags.

3. Weak Reconciliations and Reviews

Delayed or superficial reconciliations can hide:

• Circular transactions

• Structuring activity

• Unusual cash movements

By the time issues surface, the damage is often already done.

4. Inconsistent Record-Keeping

Incomplete or inaccurate records make it difficult to:

• Reconstruct transaction history

• Explain fund movements

• Respond to regulatory inspections

This directly increases compliance risk.

Risk-Based Approach: Why Controls Must Match Risk

What Regulators Expect

A risk-based approach (RBA) requires businesses to:

• Identify higher-risk clients, products, and transactions

• Apply stronger internal controls where risk is higher

• Continuously reassess risk exposure

According to Financial Action Task Force, internal controls are a foundational element of an effective AML framework.

Why One-Size-Fits-All Controls Fail

Applying the same control intensity to all clients means:

• High-risk clients receive insufficient scrutiny

• Low-risk clients consume unnecessary resources

Both outcomes weaken overall AML effectiveness.

How Weak Controls Escalate AML Exposure Over Time

Weak controls rarely cause immediate failures. Instead, they:

• Normalize risky behavior

• Reduce staff vigilance

• Create reliance on assumptions rather than evidence

Over time, this environment becomes attractive to bad actors.

Supervisory Expectations in the UAE

In the UAE, AML supervision is driven by the Anti-Money Laundering and Combating the Financing of Terrorism Supervision Department, operating under the Central Bank of the UAE.

During inspections, supervisors increasingly assess:

• Whether controls are operating as designed

• How exceptions are handled

• Evidence of independent oversight

• Alignment between risk assessments and controls

Policies alone are no longer enough.

Common Regulatory Findings Linked to Weak Controls

Recent inspection trends show repeated findings such as:

• “Insufficient segregation of duties”

• “Lack of documented transaction approvals”

• “Inadequate ongoing monitoring”

• “Controls not aligned with customer risk”

Each of these significantly increases AML exposure.

Why Emerging and Weakly Regulated Markets Need Extra Care

In developing or fast-growing sectors:

• Internal processes often lag behind business growth

• AML awareness may be limited

• Oversight structures may be informal

These conditions require stronger, not weaker, controls to prevent misuse.

Practical Steps to Strengthen Internal Controls

1. Align Controls With Risk

High-risk clients and transactions should trigger:

• Additional approvals

• Enhanced documentation

• More frequent reviews

2. Enforce Segregation of Duties

Even in small teams:

• Split onboarding, processing, and approval roles

• Use management oversight where staffing is limited

3. Strengthen Review and Reconciliation Processes

Reviews should be:

• Timely

• Documented

• Performed by someone independent

4. Improve Record Accuracy and Retention

Clear audit trails help businesses:

• Defend decisions

• Respond to inspections

• Identify suspicious patterns early

5. Use Expert AML Support

Professional advisors such as Swenta assist UAE businesses by:

• Identifying control gaps

• Aligning internal processes with AML expectations

• Preparing for supervisory inspections

Why Internal Controls Are Now a Board-Level Issue

Weak internal controls no longer affect just operations—they:

• Expose directors and partners to regulatory scrutiny

• Increase the risk of penalties

• Damage business credibility with banks and regulators

In 2025, internal controls are inseparable from AML accountability.

Weak internal controls do not just create inefficiencies—they actively escalate AML exposure. UAE regulators now expect businesses to demonstrate that controls are effective, risk-based, and consistently applied.

Strengthening internal controls today is not just about compliance—it is about protecting the business from long-term regulatory and reputational damage.