The Role of Suspicious Transaction Reports (STRs) in Combatting Financial Crimes in the UAE

Table Of Contents

Introduction
What are Suspicious Transactions?
Understanding Suspicious Transaction Reports
Confidentiality and STR
The Increasing Number of Suspicious Reports
Role of Technology in Helping MLROs File STRs and SARs
Conclusion

Introduction

Imagine a neighbourhood watch group in a bustling community that keeps an eye out for anything unusual—like a stranger sneaking into someone’s backyard or a truck unloading goods late at night without explanation. They report these oddities to the local authorities, who investigate to ensure the community stays safe. Similarly, in the financial world, Suspicious Transaction Reports (STR) act as the system’s early warning mechanism, flagging unusual financial activities to regulators and law enforcement officials.

Under the UAE’s AML laws, suspicious transactions are defined as “transactions related to funds for which there are reasonable grounds to suspect that they are earned from felony or misdemeanour related to the financing of terrorism or of illegal organisations, whether committed or attempted.”¹ Just like our neighbourhood watch, whenever a Money Laundering Reporting Officer (MLRO) of a Reporting Entity determines that a transaction is suspicious, they submit a Suspicious Transaction Report (STR) through the goAML portal to the UAE Financial Intelligence Unit (UAE FIU) after completing the required analysis and documentation.

The importance of STRs cannot be overstated in a world where money laundering and financial crimes are rampant. According to the 2024 Global Financial Crime Report by Nasdaq Verafin, an estimated USD 3.1 trillion² in illicit funds flowed through the global financial system in 2023 and STRs are an essential tool in combatting such activities. They act as a frontline defence, helping authorities identify and disrupt illegal activities. STRs also provide a valuable source of information and data on suspicious transactions, helping in the formulation of policies and strategies to combat financial crimes effectively. More importantly, in an increasingly interconnected world, the sharing of STRs among authorities is essential to effectively combat international financial crime.

In this blog, we will break down the fundamentals of STRs—what they are, why they matter, and how they fit into UAE’s broader AML/CFT regulatory landscape. We’ll also examine how cutting-edge technologies—such as Artificial Intelligence (AI), Machine Learning (ML), and Large Language Models (LLMs)—are making it easier and more efficient for organisations to detect suspicious activity and file accurate, timely reports.

What are Suspicious Transactions?

The first step in reporting a suspicious transaction is to define what makes a transaction suspicious. This concept is fundamental to the UAE’s STR framework. Article 16 of Cabinet Decision No. 10 of 2019³ requires Financial Institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs) to have clear indicators in place for detecting suspicious transactions and to update these indicators continuously. For example, among several red-flag indicators, a bank might consider it suspicious if a customer who usually deposits a monthly salary of AED 15,000 suddenly begins depositing AED 50,000 in cash without a valid reason. Similarly other sectors have red flags unique to their specific activities.

Indicators related to the business relationship, customer, transactions, and means of payment within the Dealers of Precious Metals and Stones (DPMS) sector can be found in the Supplemental Guidance⁴ issued by the UAE Ministry of Economy for the sector. In a Strategic Analysis Report⁵ on Real Estate Money Laundering Typologies and Patterns, issued by the UAE FIU in December 2023, the following were identified as the top reasons by real estate Reporting Entities when submitting an STR/SAR to the UAE FIU:

Top Five Reasons for Reporting (RFR) by the Real Estate Sector to the UAEFIU

Source: Strategic Analysis Report on Real Estate Money Laundering Typologies and Patterns

The Central Bank of the UAE (CBUAE) has also outlined⁶ specific situations where a Licenced Financial Institution (LFI) should consider filing a report when dealing with legal persons or arrangements. These scenarios include:

A potential customer withdraws their interest in opening an account or acquiring financial services after being informed about the LFI’s Customer Due Diligence (CDD) requirements.
An existing customer cannot provide the necessary information about their business operations or details of their beneficial owners.
A customer is unable to explain certain transactions, provide supporting documents such as invoices, or offer clear details about their counterparties.
The LFI, after completing its CDD procedures, is not confident that it has identified the actual individuals who own or control the legal entity or arrangement.

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Understanding Suspicious Transaction Reports

The process of filing Suspicious Transaction Reports (STRs) requires meticulous attention to detail to ensure the reports are comprehensive and actionable. Besides filing an STR, reporting entities can submit a Suspicious Activity Report (SAR) as well. While an STR focuses on actual suspicious transactions, a SAR covers a wider range of suspicious behaviours, including attempted or planned activities that did not result in a completed transaction. By filing a SAR, organisations can alert authorities to potential threats before they materialise into actual crimes. It’s also important to note that STRs and SARs are not standalone documents but are part of a broader reporting ecosystem designed to provide authorities with a complete picture of suspicious activities. The UAE FIU has detailed the procedure⁷ and requirements for filing STRs through the goAML portal.

According to Article 21 of Cabinet Decision No. 10 of 2019⁸, a compliance officer in a reporting entity must review all records related to suspicious transactions. If the compliance officer concludes there are reasonable grounds for suspicion, they must report it to the FIU. The report includes the background, details of the parties involved, reasons for suspicion, and any warning signs of money laundering or terrorist financing. This information should be presented in a clear, structured investigative narrative report. This narrative, according to CBUAE’s Guidance to LFIs, should address critical investigative elements such as the who, what, when, where, why, and how of the suspicion. If an MLRO decides that the transaction should continue, they must document their reasons and maintain full confidentiality. After receiving the STR, the FIU reviews it, and may request additional information, and can share intelligence with local and international authorities.

Confidentiality and STR

FATF Recommendation 20⁹ calls for prompt reporting of suspicious transactions to the FIU. Equally important is Recommendation 21, which ensures legal protection for those who report their suspicions in good faith. It also prohibits “tipping off,” meaning no one should inform the customer or others that an STR has been filed. Violating this rule can lead to imprisonment and substantial fines. Article 17 of the UAE’s Federal Decree-Law no (20) of 2018 mandates strict confidentiality for all information related to suspicious transactions or crimes. This information can only be shared when it is necessary for investigations, prosecutions, or legal proceedings under the law.

The UAE has strengthened these principles through legal amendments. Federal Decree-Law No. 26 of 2021,¹⁰ which modifies Federal Decree-Law No. (20) of 2018, increased the minimum imprisonment term from six months to one year for anyone who reveals information about a transaction under investigation. Fines, as per Article 25, now range from AED 100,000 to AED 500,000. This strict legal approach shows the UAE’s commitment to protecting the integrity of its financial system and discouraging any attempts to undermine ongoing investigations.

The Increasing Number of Suspicious Reports

In the United States, the number of SARs filed has risen sharply over the years. In 2022, over 3.6 million¹¹ SARs were filed, according a 57% increase compared to pre-pandemic levels in 2019.

Total SARs filed in the U.S. (All Industries)

Source: Thomson Reuters

This trend is evident in the UAE as well. In 2022, the UAE Financial Intelligence Unit (UAEFIU) received a total of 38,912 reports, comprising 33,459 STRs and 5,453 SARs, according to 2022 Annual Report¹² published by UAE FIU in February 2024. Financial Institutions (FIs) were responsible for 95% of these reports (37,117). The graphs below highlight the change in report volumes submitted in 2022 compared to 2021, with an overall increase of 79% in total reports filed.

Source: Annual Report, 2022, UAE FIU

In the first ten months of 2023 STR submissions across all sectors went even higher compared to 2022. DNFBPs recorded a remarkable 266% increase in STRs, and the real estate sector saw a 106% rise.¹³ A particularly important development was observed in the gold sector, where Suspicious Activities Reports surged from just 223 in 2021 to 6,432 in 2023, as reported by the Emirates News Agency (WAM).¹⁴This exponential growth underscores the UAE’s progress in strengthening its AML/CFT framework and improving sectoral participation in the reporting process.

Role of Technology in Helping MLROs File STRs and SARs

As the volume of Suspicious Transaction Reports (STRs) and Suspicious Activity Reports (SARs) continues to grow globally and in the UAE, technology plays an increasingly critical role to fighting financial crimes. With tasks ranging from monitoring transactions in real-time to selecting the appropriate Reason for Reporting (RFR) to writing cogent narratives, Artificial Intelligence (AI) can significantly streamline the process and enhance the quality of filings. Below are some of the important ways AI can assist MLROs in meeting these requirements:

Real-Time Transaction Monitoring and Alerts: By using Machine Learning and real-time analytics, AI systems can monitor transactions as they occur. When unusual patterns appear—such as sudden, large overseas transfers unrelated to a customer’s usual behaviour—the system can immediately alert the MLRO. This enables prompt action on high-risk cases while reducing time spent on low-level alerts.

Adaptive Threshold Setting: Adaptive Machine Learning models learn from historical data and normal transaction patterns to adjust detection thresholds automatically. For example, if a corporate client typically experiences seasonal spikes in transaction volumes, the AI adapts and avoids false alerts for these known variations. Only genuinely suspicious activities are flagged, improving efficiency and accuracy of the reporting.

Reducing False Positives and Prioritising High-Risk Cases: AI-driven models can assign risk scores to transactions, ensuring that the most critical alerts surface first. This prioritisation helps MLROs focus on significant red flags and avoids time wasted on low-risk or false-positive cases.

Intelligent Reason for Reporting (RFR) Selection: Machine Learning models can analyse the narrative drafted by the MLRO and suggest the most appropriate RFR in the goAML system. This reduces the likelihood of selecting an incorrect RFR.

Auto-Generating Transaction Narratives: Custom-trained LLM agents can summarise transactional data, investigation notes, and KYC documents into a concise and coherent narrative. MLROs can then provide a clear “Description/Summary of the Report,” meeting the UAE FIU’s requirements without missing mandatory fields or critical details. This results in more accurate and compliant STR/SAR submissions.

By automating data analysis, reducing false positives, intelligently suggesting RFRs, and assisting in narrative generation, technology ensures MLROs can maintain high-quality, timely filings that meet the UAE FIU’s reporting standards. It is important to note that, just like FIs and DNFBPs, Virtual Asset Service Providers (VASPs) that provide services related to the exchange, transfer, safekeeping, or administration of virtual assets are also required to adhere to the UAE’s stringent AML/CFT regulations.

In Dubai, VASPs are regulated by the Virtual Assets Regulatory Authority (VARA). According to VARA regulations, all reports of Suspicious Transactions must be submitted to the UAE FIU and VARA via the goAML platform or any other approved method, and in line with guidance issued by VARA.¹⁵VASPs must also continue monitoring transactions under a Suspicious Transaction Report (STR) on a near real-time basis.

Conclusion

Suspicious Transaction Reports (STRs) are essential tools for safeguarding the financial system from money laundering, terrorist financing, and other illegal activities. As criminals devise increasingly sophisticated methods and as global financial systems become more interconnected, the volume and complexity of STRs and SARs will continue to rise. This evolving landscape calls for advanced technologies for faster, more accurate, and more compliant reporting.

Discover how AKW Consultants can help organisations overcome these challenges. With a wealth of experience in regulatory compliance, the use of advanced technological solutions, and an in-depth understanding of goAML portal requirements, AKW Consultants supports companies in filing accurate and efficient STR/SAR reports while ensuring full compliance with the UAE’s AML/CFT laws.

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