This article was co-authored by Khaled Shivji, Partner, Keystone Law Middle East and Pia Vining, Senior Director, Due Diligence, TRACE International and was originally published by Trace – click here to view the original article.
The United Arab Emirates (UAE) is strategically located next to the Arabian Gulf and shares a land border with Oman and Saudi Arabia. Formed in 1971, the UAE is a political and constitutional monarchy with a federal government.
The majority of the UAE’s citizens and residents live in Abu Dhabi, the UAE’s capital city, and Dubai, the nation’s commercial city. Most citizens and residents live harmoniously, and the UAE benefits from a very low crime rate.
Levels of perceived corruption within the UAE
The UAE ranks 40th (out of 194 countries) on TRACE’s 2020 Bribery Risk Matrix, which measures business bribery risk specifically. Indices measuring perceived corruption agree that the UAE experiences low levels of perceived corruption within the Middle East.
Legislation prohibiting corruption within the UAE
The UAE has rapidly evolved from a merchant trading hub to a major oil producer and more recently into a thriving, prosperous nation specialising in financial services, technology, space exploration, tourism and healthcare.
The Forbes Global 2000 lists several home-grown banks, airlines, port operators and hospitality firms that originated within the UAE. In addition, the UAE houses the regional hubs belonging to hundreds of multinational corporations.
This reference guide discusses the UAE’s approach to tackling bribery committed by multinational and private corporations located within the UAE. The UAE’s regulatory framework addressing bribery, corruption, fraud and money laundering is made up of a patchwork of federal and Emiri (local) legislation (Regulatory Framework).
The UAE’s Federal Penal Code (Federal Law No 3 of 1987) and Federal Human Resources Law (Law No. 11 of 2008) both prohibit acts of bribery involving public officials and individuals employed within the private sector. The UAE has adopted the United Nations Convention against Corruption, and the Convention’s definition of a “bribe” is incorporated into the national legislation.
Most government and public official posts are held by Emirati citizens. The UAE’s constitution—as well as media and libel laws—grants citizens a carte blanche right to privacy. However, more recently, the UAE’s prosecutorial authorities have stepped up enforcement actions taken against suspected bribery schemes. The UAE’s Federal Attorney General has acquiesced to the UAE’s media outlets naming and shaming public officials suspected of having committed bribery offences within a very limited few set of cases.
Anti-bribery obligations for multinational and private corporations within the UAE
Multinational companies must also be aware of very strict provisions within the Federal Penal Code mandating that:
- prosecutorial authorities have extraterritorial jurisdiction to prosecute suspected acts of bribery worldwide if consequences had caused an Emirati citizens or firm to suffer losses or damage;
- all citizens and residents must report suspected criminal offences committed within the UAE or perpetrated by state actors; and
- the UAE’s prosecutorial authorities may protect the identities of whistleblowers.
Due to the lack of wider reporting on suspected investigations, enforcement actions and guidance from local prosecutorial authorities, local and regional compliance teams must develop strong working relationships with regional managers, agents and distributors. Relationships such as these enable compliance teams to enhance dialogue with supply chains and senior managers who work more closely with government officials and public procurement teams.
For this reason, multinational companies may find that devolving some enforcement of their respective global compliance programmes to regional compliance departments offers the best possible mechanism to ensure that regional anti-bribery strategies can be tailored to expansive on-the-ground risks. Regional compliance teams also have the knowledge and relationships to ensure that they can help the regional board to develop a risk register utilising tacit knowledge about regional bribery risks, on-the-ground events and mitigation strategies utilised by other regional peers and industry leaders.
How TRACE supports clients in the UAE
Anti-bribery regulations vary from region to region, and it is important to have a team on the ground that knows the local laws, is committed to commercial transparency and is prepared to handle any compliance challenges that arise. But companies of all sizes must also ensure they operate in accordance with anti-bribery laws that have extraterritorial reach—such as the U.S. Foreign Corrupt Practices Act and the UK Bribery Act—in part by implementing globally accepted compliance best practices.
Enforcement authorities have repeatedly stated that multinational companies should, among other measures:
- maintain robust and dynamic compliance programs;
- conduct thorough risk assessments, including comprehensive due diligence on third party intermediaries; and
- promote a culture of compliance through regular training and other means.
Multinational companies are expected to “adequately” resource compliance and to continually monitor and improve processes. TRACE supports the compliance efforts of hundreds of multinational companies—many with operations in the Middle East—through a cost-sharing membership model that aims to help companies across all industry sectors more easily meet evolving compliance demands. TRACE also offers multilingual eLearning and third party risk management services.
Small and medium-sized enterprises (SMEs) can better prepare themselves to partner with multinational companies by taking a proactive approach to compliance and demonstrating their commitment to commercial transparency. TRACE supports hundreds of SMEs in the Gulf region in meeting international compliance standards and due diligence requirements mainly through TRACEcertification, a comprehensive due diligence review, analysis and approval process that allows third parties to purchase, own and share their verified due diligence reports. Companies and individuals with a current TRACEcertification report are included in the TRACE Intermediary Directory, a publicly searchable database that helps match multinational companies with pre-vetted and trained third parties, serving as a business and compliance tool for both SMEs and multinational companies.
TRACEcertification requires candidates to disclose true beneficial ownership, complete anti-bribery training and adopt a code of conduct addressing bribery, if one is not already in place. TRACEcertification also offers ongoing monitoring of third party relationships with constant screening of names against international sanctions and enforcement lists.
By working with both multinational companies and SMEs to increase commercial transparency, TRACE serves as a bridge between markets and helps to raise anti-bribery compliance standards in the UAE and beyond. The practical resources and tools offered by TRACE can help companies avoid legal, financial and reputational damage while improving business and fulfilling compliance obligations.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.