Common Transactions Compliance Advisory Mistakes to Avoid in Dubai
Every one of these errors is a version of the same mistake: treating compliance as a document to be produced rather than a question to be answered before money moves.
Compliance errors in a Dubai transaction rarely stop it at the time; they surface later, when a supervisor, a bank or a subsequent buyer reads the file and asks who checked what, and when. They are set out here by stage — before signing, in the documents, at closing and after — from screening the company but not the people behind it to treating a signed share purchase agreement as ownership.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Transactions compliance covers the checks a business has to run because of who it is dealing with and what the deal moves: customer due diligence, screening, source of funds, the consents a change of ownership triggers, and the tax treatment of the structure chosen. Mistakes in this area almost never stop a transaction at the time. They surface afterwards, when a supervisor, a bank or a subsequent buyer reads the file and asks who checked what, and when.
Who is asking depends on the business. Banks and other financial institutions answer to the Central Bank. Law firms, corporate service providers, real estate brokers and dealers in precious metals and stones fall within the designated non-financial businesses and professions regime supervised by the Ministry of Economy. Firms licensed in the DIFC answer to the Dubai Financial Services Authority and those in ADGM to the Financial Services Regulatory Authority, each under its own free zone rulebook. Suspicious transaction reports go to the Financial Intelligence Unit. The errors below recur across all of them.
Related: See our AML compliance advisory practice for the underlying obligations.
Before signing
Running the checks at signing rather than at first contact. Due diligence exists to inform the decision whether to do the deal at all. Completed after terms are agreed, it becomes a formality nobody wants to hear bad news from, and a business that has already committed commercially will find reasons to explain away what the screening returned.
Screening the entity and stopping there. The counterparty is a company; the risk usually sits with people. Ultimate beneficial owners, the individuals who actually control the company, the signatories on the account and their close associates all need to be identified and screened, against sanctions lists and for politically exposed status. An ownership chain that stops at an offshore holding company has not been established.
Treating a trade licence as proof of ownership. A licence identifies the shareholders of record with the licensing authority. It is not an ownership chain, it says nothing about who funds the business, and it is not a substitute for the beneficial ownership record the counterparty should be able to produce.
No record of source of funds. On cash-intensive businesses and real estate in particular, the question is not only who the buyer is but where the money came from. The answer needs to be documented at the time and kept, not recalled later.
In the documents
Compliance clauses treated as boilerplate. A warranty that the counterparty complies with all applicable anti-money-laundering laws is worth very little on its own. What gives it effect is the machinery around it: a right to information, an obligation to notify a change in ownership or control, and a defined consequence, whether termination, suspension of payment or withholding of completion, if a check returns something unacceptable.
Confidentiality drafted without regard to reporting duties. A confidentiality clause cannot override a reporting obligation, and a party that files a report must not tell the counterparty it has done so. Drafting that promises to disclose any regulatory contact to the other side creates a conflict with that prohibition.
Personal data moved into a data room without a basis. Employee and customer data disclosed in diligence is regulated: Federal Decree-Law No. 45 of 2021 on personal data protection applies onshore, and the DIFC and ADGM operate their own data regimes. This is dealt with by redaction, staged disclosure and a proper agreement covering the data room, not by assuming diligence is an exception.
At closing
Overlooking change of control approvals. An onshore share transfer requires an amendment to the memorandum of association, notarised, and the approval of the licensing authority before it takes effect against the company. A regulated firm needs the prior approval of the DFSA or FSRA for a change in its controllers, and some sector regulators impose their own consent requirements. Signing a share purchase agreement does not make the buyer a shareholder; registration does.
Assuming the structure is tax-neutral. Corporate tax under Federal Decree-Law No. 47 of 2022 and value added tax at 5% under Federal Decree-Law No. 8 of 2017, as amended by Federal Decree-Law No. 18 of 2022, do not treat a sale of shares and a sale of a business and its assets the same way. That is a question to put to a tax adviser while the structure can still be changed.
After closing
Nobody owns the file. Records have to be retained for the period the applicable rules require, in a form that can actually be produced. Relationships also need re-screening as they continue, because the counterparty who was clean at onboarding may not be two years on. Where the transaction was an acquisition, this becomes a governance question for the buyer as much as a compliance one, and it belongs in the same review as the rest of the target's corporate governance obligations. One point worth checking on any share purchase: the Economic Substance Regulations were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024, but obligations for the financial years 2019 to 2022 survive, and an unresolved filing from that period transfers with the company.
The single underlying error
Every item above is a version of the same mistake: treating compliance as a document to be produced rather than a question to be answered before money moves. The file is not the point. The decision the file supports is.
Related Services: Explore our transactions compliance advisory services for practical legal support in this area.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
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