Eastern Region: From someone lending money to a friend, to another paying for a car bought from an unrelated seller, some bank customers choose “family support” as the purpose of a transfer simply to save time.
Problems can arise, however, if the beneficiary later becomes involved in a money laundering or drug trafficking case. The sender may then face questions about the nature of their relationship with the beneficiary and the real reason for the transfer, particularly when the recorded purpose, such as “family support”, does not reflect the reality of the transaction.
Choosing the purpose of a bank transfer may seem like a routine step that takes only seconds, but it can acquire legal significance when a dispute arises over the recovery of funds or when financial transactions involving people under investigation are reviewed.
A description selected merely for convenience may not reflect the true nature of the funds or the relationship between the parties, making it necessary for the sender to explain the discrepancy and provide evidence of the actual reason for the transfer.
Legal experts and a banking expert warned customers against selecting purposes that do not correspond with the reality of financial transfers, particularly using “family support” when sending money to friends or unrelated people, or when paying debts or purchasing goods and services.
They said such information could affect the ability to prove financial rights before the courts and could prompt banking enquiries when accompanied by indicators requiring further verification of the transaction.
However, choosing an incorrect description alone does not constitute a money laundering offence or prove that the sender was involved in illegal activity.
Evidence
Lawyer and legal consultant Dr Asawer Khamis Al Mansouri said choosing a purpose that does not match the reality of a bank transfer may have legal consequences, particularly when a dispute arises over the nature of the transferred funds and the reason for sending them.
She noted that some customers may select “family support” simply because it is convenient, even when the money is being sent to a friend or another person as a loan or to fulfil a financial obligation.
The significance of the recorded purpose can become apparent when a sender seeks repayment of money claimed to have been provided as a loan, while the transaction data describes it as “family support”.
Dr Al Mansouri explained that a bank transfer proves that money moved from one account to another, but does not necessarily establish the legal reason for the transfer, such as whether it was a loan, a gift or the payment of a debt.
She said the description entered by the sender may be considered as one element of evidence in a lawsuit, but is not conclusive proof of the true nature of the financial transaction. Its significance is subject to the court’s assessment alongside documents, correspondence and other evidence presented in the case.
As a result, an inaccurate description could affect a sender’s ability to prove their rights and recover their money.
Dr Al Mansouri added that the implications could extend beyond disputes involving debts and financial claims. A discrepancy between the recorded information and the actual transaction may raise concerns for financial institutions, particularly when accompanied by frequent or unusual transfers or other indicators requiring verification of the source of funds and the true purpose of the transactions.
She said UAE legislation concerning the prevention of money laundering requires financial institutions to carry out due diligence, monitor transactions and report suspicious activity in accordance with the applicable legal requirements.
However, she stressed that selecting an incorrect transfer description does not, in itself, constitute a money laundering offence. Criminal liability may arise if the transaction is connected to criminal conduct and the legal elements of an offence are established, including knowledge of the illegal source of the funds and the commission of an act criminalised by law.
She also stressed the distinction between suspicion surrounding a financial transaction and proof of a crime. Suspicion alone is insufficient to establish criminal liability, which requires consideration of the transaction, its surrounding circumstances and the relevant evidence.
Enhancing transaction transparency
Consultant Dr Abdullah Al-Harbi stressed the importance of accurately identifying the purpose of a bank transfer and avoiding the use of “family support” simply because it is the easiest or quickest option.
If money is being transferred to a friend or an unrelated person, or as part of a financial transaction unrelated to family support, the information accompanying the transfer should reflect its true nature and purpose, he said.
Choosing an incorrect purpose does not necessarily indicate illegal activity, but in some circumstances it may require the customer to provide further clarification about the transaction.
Dr Al-Harbi said accurate information could help avoid confusion and enable the competent authorities to understand and distinguish between different types of financial transfers more clearly.
He urged customers to pause before completing a transfer and ask themselves: “To whom am I transferring the money? And why? And does the purpose I chose reflect the reality of the transaction?”
Choosing the correct description, he said, helps make a transaction clearer and easier to explain if questions subsequently arise.
Accurately recording the purpose of transfers is therefore more than a formality, he added. It can help preserve financial rights and enhance transaction transparency.
Dr Al-Harbi also advised customers to retain documents and correspondence explaining the actual reasons for transfers, particularly those involving personal loans, debts and purchases of goods and services, so they can demonstrate the nature of a transaction when necessary.
He said taking a few seconds to select the correct purpose can help prevent confusion when a transfer is reviewed later, adding that accuracy and transparency in financial transactions are an individual responsibility that contributes to protecting rights and maintaining the integrity of banking transactions.
Legal consequences
Financial adviser and banking expert Amjad Nasr said the stated purpose of a transfer is not merely a formality required to complete the transaction. It may also be relevant to compliance requirements and measures to combat money laundering and terrorist financing.
He warned against selecting broad options such as “family support” simply because they are convenient or because a customer wants to bypass the process of identifying the true purpose of a transfer.
Providing inaccurate information, he said, could result in banking enquiries or legal consequences, particularly when a transaction involves people or entities under investigation or subject to legal restrictions.
Nasr said “family support” would be appropriate when a person transfers money to a family member to cover living expenses. It would not accurately describe transactions involving the purchase of a car, repayment of a loan, payment of rent, settlement of a commercial invoice or provision of a personal loan.
In such cases, customers should select the option that most accurately reflects the nature of the transaction, when one is available.
Similarly, transferring money for tuition fees differs from paying medical costs, while payment for a professional service differs from sending a gift or donation.
Nasr said selecting the nearest or easiest option should not replace the need to ensure that the information recorded is accurate.
He noted that banks and exchange companies provide main and secondary lists enabling customers to specify transfer purposes more precisely. He also suggested adding an optional field in which customers could clearly state the purpose of a transfer when none of the available options precisely matches the transaction.
He said this could help clarify the reason funds are being transferred between accounts.
Nasr stressed that transparency and accuracy in recording transfer purposes help protect customers, enhance the integrity of financial transactions and support efforts to combat money laundering and terrorist financing.
Source: Emirates 24|7