Introduction

The rapidly evolving global regulatory environment has placed unprecedented compliance pressures on insurers operating within the Dubai International Financial Centre (DIFC). Amidst increased international scrutiny and the introduction of new UAE federal directives, sanctions screening and export controls have emerged as critical concerns. For DIFC-based insurers, adherence to sanctions and trade restrictions is not only a matter of operational due diligence but is now fundamental for both legal compliance and reputational integrity. This advisory delves into the legal foundations, recent updates, and practical challenges faced by UAE insurers, offering senior executives and compliance officers actionable guidance to navigate the 2025 legal landscape.

Heightened regulatory expectations—driven by Federal Decree Law No. 20 of 2018 on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Cabinet Decision No. 10 of 2019, and ongoing regulatory circulars—now require insurers to adopt robust due diligence mechanisms to screen clients, assess business risks, and implement effective export control compliance. The DIFC, operating under the independent regulatory remit of the Dubai Financial Services Authority (DFSA), faces unique compliance challenges, requiring harmonisation with both local UAE legislation and international sanctions frameworks. Recent global events, including geopolitical tensions, have further intensified enforcement and placed insurers under increased scrutiny from global financial partners.

This article provides an in-depth exploration of the legal and practical issues surrounding sanctions screening and export controls within the DIFC. It highlights recent amendments, pitfall areas, and offers expert recommendations tailored for senior management, legal teams, and compliance professionals operating across UAE-based insurance markets.

Table of Contents

Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT)

The cornerstone of UAE’s response to financial crime, Federal Decree-Law No. 20 of 2018, imposes comprehensive obligations on all ‘Designated Non-Financial Businesses and Professions’ (DNFBPs), which includes insurance companies operating in or from the DIFC. This law is supplemented by Cabinet Decision No. 10 of 2019, offering regulatory clarity on required systems and reporting protocols.

The Decree mandates that all insurers must implement stringent customer due diligence (CDD), monitor client transactions against international and domestic sanctions lists, and establish real-time alert systems for identifying suspicious activities. Notably, Article 15 obligates institutions to cease transactions and report to the Financial Intelligence Unit (FIU) if a prohibited activity is detected.

Cabinet Decision No. 74 of 2020 on Terrorism Lists

This Cabinet Decision supplements the AML law by mandating updates to the UAE’s terrorism lists and outlining procedures for freezing assets of listed individuals and entities. Insurers are required to integrate these updates into their internal procedures, ensuring automated screening and timely reporting in line with Ministerial Guidelines.

Ministerial Resolution No. 16 of 2021 and Executive Regulations

This Resolution details the obligations of reporting entities (including insurers) regarding implementation of targeted financial sanctions and requirements for asset freezing. The Executive Regulations further require insurers to maintain documented policies, conduct ongoing employee training, and ensure full record-keeping for audit trails.

Dubai Financial Services Authority (DFSA) Regulatory Framework

The DFSA, as the independent regulator of the DIFC, has implemented its own Sourcebook (“GEN”) and AML Rulebook, which mirror and often expand on UAE federal obligations. The DFSA’s requirements cover screening clients against both UAE and international sanctions lists (such as OFAC, UN, and EU Sanctions) and mandate robust governance and reporting mechanisms. Insurance firms are required to nominate a Money Laundering Reporting Officer (MLRO) and evidence fulfilment of reporting requirements under UAE and DFSA rules. (See the DFSA Rulebook for reference.)

Export Control Laws: Federal Law No. 13 of 2007 and Cabinet Decision No. 50 of 2020

While primarily designed for the trade of dual-use goods, Federal Law No. 13 of 2007 on the Import and Export Controls of Commodities covers ancillary financial products (including insurance policy coverages) that relate to the export or trading of controlled industries. Cabinet Decision No. 50 of 2020 further refines licensing and screening requirements, holding insurers accountable for inadvertent facilitation of transactions or coverage linked to sanctioned products, jurisdictions, or entities.

Regulatory Perspective: The DFSA’s Approach and DIFC’s Alignment with Federal Law

DFSA’s Supervisory Model

The DFSA’s supervisory model is risk-based, requiring DIFC insurers to maintain systems and controls proportionate to the scale and complexity of their business. Regular risk assessments, periodic reporting, and ongoing enhancements of internal frameworks are mandated. The DFSA carries out regular thematic reviews and compliance inspections, with an expectation of full harmonisation with federal AML/CFT and sanctions laws.

Recent regulatory guidance, especially following the 2022–2024 FATF evaluations and the UAE’s subsequent removal from the FATF grey list, have seen the DFSA introduce more granular requirements for ongoing transaction monitoring, system testing, and data management for sanctions screening.

Coordination Between Federal and DIFC Systems

Although the DIFC enjoys a degree of legal independence, DIFC insurers are subject to both DFSA and UAE federal law. The Cabinet Decision No. (10/2019) formalised the requirement for all DIFC entities to comply concurrently with domestic legislation relating to AML/CFT and targeted financial sanctions. Conflict of law risks are mitigated by regular circulars and DFSA-issued compliance notices, which clarify obligations and outline best practices for harmonising controls.

DIFC insurers frequently interact with overseas reinsurers and international financial institutions, requiring robust alignment with global sanctions regimes. As such, the integration of international list screening (including OFAC and EU lists) is a practical necessity, leading insurers to adopt industry-standard software solutions and participate actively in industry compliance groups.

Practical Pitfalls for DIFC Insurers

Despite clear legislative obligations, a range of operational pitfalls continue to challenge insurance firms in the UAE. The most significant include:

  • Incomplete or Outdated List Screening: Reliance on legacy systems or manual checking can result in missed matches against rapidly updated UN or UAE lists.
  • Inadequate Client Due Diligence for Complex Structures: Insurance products are often sold to complex ownership structures (e.g., offshore holding companies), requiring enhanced due diligence and ongoing monitoring, especially for clients from high-risk jurisdictions.
  • Failures in Export Control Compliance: Insurers may inadvertently provide cover for goods or services subject to export restrictions, particularly when insuring multinational shipments or trade credit risks.
  • Deficient Employee Training and Awareness: Many compliance breaches arise from insufficient staff awareness of new legislation, list updates, or reporting protocols.
  • Inconsistent or Poor Documentation: Failure to maintain comprehensive evidence of screening, decision-making, and reporting can significantly hamper defence in case of regulatory scrutiny.

Real-World Pitfall Example

Case Study Suggestion: Visual Flow Diagram
A flowchart could illustrate the sanctions screening process for new clients, highlighting common breakpoints leading to missed matches or reporting failures.

Case Studies and Hypothetical Scenarios

To emphasise the real-world impact of compliance (and lapses), we present common scenarios:

Scenario Legal Issue Potential Consequences
An insurer issues a marine insurance policy for cargo with a route transiting a sanctioned country. Breach of export/import controls and sanctions laws if the policy inadvertently covers prohibited entities or goods. Penalty under Federal Decree-Law No. 20 of 2018; regulatory censure by DFSA; reputational damage.
A DIFC insurer onboards a corporate client without screening new ultimate beneficial owners (UBOs) after a shareholding restructure. Failure to conduct ongoing due diligence; potential exposure to sanctioned entities. Sanctions for non-compliance; increased risk of facilitating money laundering or terrorism financing.
Failure to promptly freeze assets after a client is added to the UAE terrorism list. Breach of Cabinet Decision No. 74/2020; non-compliance with asset freezing protocols. Regulatory fines; potential criminal liability for responsible officers; reputational risks.

Analysis

These scenarios highlight the pervasive influence of sanctions and export control laws over insurance operations, particularly where business is cross-border or clients present complex risk profiles. Errors are often systemic, arising from gaps in onboarding, monitoring, or insufficient cross-functional communication between business and compliance units.

Risks of Non-Compliance: Legal and Reputational Exposure

Sanctions breaches constitute serious regulatory infractions in the UAE, attracting the following potential consequences:

  • Regulatory Sanctions: The UAE Central Bank and DFSA possess authority to levy substantial fines and order business suspensions (see Federal Decree-Law No. 20 of 2018, Arts. 18–19; DFSA Decision Notices 2023–2024).
  • Criminal Liability: Responsible officers (including Board directors and MLROs) may face criminal charges for wilful or negligent breaches of anti-money laundering or export control regulations.
  • Loss of Licence: Persistent non-compliance may result in licence revocation or limitations on business expansion within the DIFC.
  • Reputational Damage: Placement on regulatory watchlists or negative media coverage can trigger reinsurance withdrawals, loss of customer trust, and increased costs of capital.

Penalty Comparison Table (Old vs. New Laws)

Infraction Pre-2020 Penalties Post-2020 Penalties
Failure to conduct due diligence Administrative fines Up to AED 5 million (Art. 19, Decree-Law 20/2018), possible criminal prosecution
Breaching sanctions (asset freeze failure) Temporary business suspension Permanent business closure, criminal sanctions, international reporting to FATF
Inadequate internal controls Warning notices Public censure, ongoing DFSA monitoring, indemnity insurance premium increases

Best Practice Compliance Strategies for 2025

A robust compliance programme is no longer optional. Industry-leading insurers within the DIFC deploy layered strategies to mitigate legal and reputational risks. These generally include:

  • Automated Sanctions and PEP Screening: Deploy AI-powered tools that screen against UAE, UN, OFAC, and EU lists, with automated update feeds.
  • Risk-Based Client Onboarding: Apply enhanced due diligence for clients from high-risk jurisdictions or with complex ownership profiles.
  • Regular Employee Training: Mandatory annual (or more frequent) training on AML/CFT and sanctions developments, including tabletop exercises for crisis management.
  • Senior Management Involvement: Clearly defined governance structures, Board oversight, and named MLROs with direct access to the Executive.
  • Integrated Export Control Workflows: Where insurance covers or facilitates cross-border trade, conduct product-level export control checks and maintain up-to-date red-flag indicators.
  • Multi-Jurisdictional Compliance Liaison: Establish frameworks to monitor international sanctions changes and reflect best practices from global financial hubs.

Suggestion: A compliance checklist image or an infographic summarizing these actions will assist in policy dissemination.

Table: Practical Compliance Checklist for DIFC Insurers

Action Frequency Owner
Screen clients and transactions against all relevant sanctions lists Ongoing (real-time) Compliance/MLRO
Conduct annual enterprise-wide risk assessment Annually (or upon major business changes) Senior Management
Staff training and awareness updates At least once per year HR/Compliance
Test and audit internal controls and IT systems Semi-annually Internal Audit/IT
Immediate reporting of suspicious activities to FIU and DFSA As soon as identified MLRO

Comparative Legal Tables and Compliance Checklists

Table: DIFC Insurer Compliance at a Glance (2024 vs 2025 Regulatory Updates)

Requirement 2024 Regime 2025 Updates
Sanctions List Screening Manual or semi-automated; focus on UAE lists Automated, multi-jurisdictional, must cover UN/EU/OFAC/other
Export Control Processes Focused on goods, limited to trade insurance lines Extended to cover digital/financial products, integrated into client onboarding
Internal Governance MLRO accountable, indirect Board supervision Direct Board oversight, regular compliance reporting, annual CEO sign-off
Training Annual, basic awareness Adaptive, role-specific, scenario-based

Conclusion and Forward-Looking Guidance

The regulatory winds driving sanctions screening and export controls have grown stronger and more complex for DIFC insurers in 2025. With increasing convergence between UAE federal law and international best practices, insurers must prioritise investment in compliance infrastructure, embrace technology, and build a culture of accountability. Non-compliance is no longer a matter of administrative inconvenience—it exposes organisations to existential threats, from financial penalties to permanent market exclusion.

Looking ahead, it is expected that UAE authorities (notably the UAE Ministry of Justice and the DFSA) will continue to heighten surveillance and share information with international partners. We anticipate increased alignment with global standards—particularly as geopolitical tensions persist and regulatory cooperation intensifies. Proactive insurers should regularly review and test their compliance arrangements, maintain a dialogue with regulators, and cultivate a board-level compliance ethos.

Professional Best Practices for UAE Insurers:

  • Adopt enterprise-wide, automated sanctions screening systems integrated with daily updated international lists.
  • Conduct periodic independent audits of AML and sanctions processes.
  • Maintain ongoing liaison with the DFSA and relevant federal authorities concerning regulatory changes.
  • Embed export controls and sanctions compliance as core operational requirements, not afterthoughts.

For tailored advice or a compliance health check, insurance industry stakeholders are encouraged to consult with a qualified UAE legal adviser who understands both the letter and the spirit of these fast-changing requirements.