Abu Dhabi: UAE courts have heard several cases in which claimants lost substantial sums of money they had transferred to others because they were unable to prove the true purpose of those transfers. Courts reaffirmed that the burden of proof rests entirely on the claimant, as the legal principle is the presumption of innocence.
Meanwhile, the General Secretariat of the National Committee for Combating Money Laundering and Terrorist Financing has urged bank customers to accurately state the purpose of transfers and avoid automatically selecting “family support” for all transactions.
Legal adviser Hossam Al-Mawafi stressed that the purpose of a bank transfer should not be treated as a simple procedural field completed with the quickest description. He said the stated purpose could later become an important factor in verifying the nature of the transaction, the source of funds and the reason for the transfer, whether before a financial institution or in the event of a legal dispute.
According to cases, several plaintiffs failed to recover funds because they could not prove the actual purpose of transfers made to other parties.
In one case, a court dismissed a lawsuit filed by a young man seeking the return of more than AED90,000 transferred to a colleague in three instalments. The court also ordered him to pay legal costs after he failed to provide evidence that the transfers were loans.
The ruling stated that bank statements and transfer receipts prove only that funds were transferred, not the legal basis for the transfer. As the defendant denied the existence of a loan, the burden of proof remained with the plaintiff, who failed to establish the existence of a debt.
In another case, a court rejected a claim filed by a woman seeking the return of AED169,000 and AED50,000 in compensation after alleging that a young man exploited her trust and promised marriage in order to obtain loans and financial commitments for his benefit.
The court found that the case lacked conclusive evidence and supporting receipts proving the defendant’s liability.
In a third case, a court rejected a woman’s claim seeking the return of AED335,000, which she said she paid on behalf of her husband towards a car loan, in addition to AED30,000 in compensation. The court ordered her to pay legal costs after finding that she failed to prove the existence of any debt agreement.
The court stated that the documents submitted did not establish that the transfers from the claimant’s account had been made to the car company for the purpose of financing the vehicle. The documents also failed to provide other evidence supporting her claim.
Transfer purpose
The General Secretariat of the National Committee for Combating Money Laundering, Terrorist Financing and Financing of the Proliferation of Weapons urged users of banking applications to select transfer purposes that accurately reflect the nature of their transactions and avoid automatically choosing “family support” for unrelated transfers.
The recommendation was made as part of the “Moment of Awareness” programme launched by the General Secretariat to address community issues through simplified educational content aimed at promoting awareness and positive behaviour.
Dr Abdullah Al-Harbi, legal adviser at the General Secretariat, said that selecting a transfer purpose may seem straightforward, but accuracy is important.
“Many people choose ‘family support’ because it is the first and fastest option, even when the transfer is to a friend or relates to a service or purchase. This practice should be avoided,” he said.
He added that the transfer purpose forms part of the information provided to banks and that inaccurate descriptions may trigger additional enquiries, particularly if questions later arise regarding the beneficiary’s account.
Dr Al-Harbi explained that financial institutions use transfer purposes to understand and monitor transactions. Selecting a purpose that does not reflect reality may make a legitimate transaction appear unclear.
He urged customers to choose the option that most closely matches the actual transaction, whether it relates to rent, services, trade or another purpose.
Future disputes
Al-Mawafi said the UAE’s legislative framework for combating money laundering, including Federal Decree-Law No. 10 of 2025 on combating money laundering, terrorist financing and the financing of the proliferation of weapons, as well as its executive regulations issued under Cabinet Resolution No. 134 of 2025, is based on due diligence and understanding the nature of transactions.
He noted that the Central Bank of the UAE distinguishes between the source of funds and the purpose of a transaction. The source relates to how money was obtained, such as through a salary, business activity or property sale, while the purpose relates to why the transfer was made, such as family support, debt repayment or investment.
Al-Mawafi said problems arise when people routinely select “living expenses” for all transfers, even when the transaction actually relates to a property purchase, loan, investment or payment for services.
He explained that the consequences may only become apparent years later if proof of the transaction's true nature is required.
“If a person transfers AED500,000 to another party as a loan but records the purpose as ‘living expenses’, then later seeks repayment through the courts, they may be required to explain this discrepancy and provide additional evidence such as a loan agreement, debt acknowledgement or correspondence,” he said.
He added that the same principle applies to real estate transactions. If a transfer forms part of a property purchase, it is preferable to describe it accordingly and retain the related sales agreement, payment receipts and correspondence.
Al-Mawafi stressed that selecting an inaccurate description does not automatically constitute money laundering. However, discrepancies between the recorded purpose and the actual transaction may result in enquiries, requests for supporting documents and greater difficulty proving the true nature of the transaction during disputes.
He advised customers to state the real purpose of transfers and retain supporting documents, noting that clear records of both the source of funds and the reason for their transfer provide the strongest protection if future clarification becomes necessary.
Money laundering penalties
Al-Mawafi added that UAE law imposes severe penalties when money laundering offences are proven.
Under Article 26 of Federal Decree-Law No. 10 of 2025, offenders may face imprisonment ranging from one to 10 years and fines of not less than AED100,000 and up to AED5 million, or the equivalent value of the funds involved in the crime, whichever is greater.
In aggravated cases, penalties may increase to temporary imprisonment and fines ranging from AED1 million to AED10 million, or double the value of the funds involved, whichever is greater.