Pursuant to Article 458 of Federal Decree Law No. 31 of 2021 on the Issuance of Crimes and Penalties, entering into an agreement where one individual lends money to another with an interest rate is deemed as a criminal offense, and punishable under UAE law. The law states individuals who provide a loan to another individual, with the expectation of receiving interest payments, in any form of civil or commercial transaction, explicit or implicit, will face imprisonment for a minimum period of one year and a fine not less than AED 50,000.

The existence of the original debt and implicit interest can be established through a variety of means, including bank statements and loan agreements. Additionally, if the offender takes advantage of the debtor’s necessity, vulnerability, or inclination to commit the crime outlined in this article, it will be considered as an aggravating circumstance.

Unfortunately, because of widespread unawareness, this phenomenon has witnessed a surge within intimate circles of friends and relatives, extending even to family members such as siblings, where the concept of interest has transformed into a business transaction for the lender.

The primary reason for criminalizing this practice stems from the fact the law permits financial institutions, licensed banks, or authorized exchange agencies to carry out such activities, whereas individuals are prohibited from charging any form of interest on a loan. Therefore, the UAE legislator emphasizes that in such cases, the lender takes advantage of the borrower’s financial need, persuading them to accept an interest rate that is portrayed as more favorable than that offered by banks or other financial institutions. In some cases, the lender may even lower the interest rate below that of established institutions to secure the completion of the transaction. These circumstances are considered aggravating factors when determining the appropriate penalty.

This offense inflicts various forms of harm on individuals including financial, psychological, and moral consequences. Some perpetrators go as far as seizing personal documents from the borrower, such as passports, or they acquire a postdate cheque exceeding the original loan amount along with the interest, claiming it serves as personal guarantees.

The criminalization of lending money with interest under UAE law aims to deter individuals from engaging in this illegal practice and protect borrowers from financial exploitation. The penalties imposed serve as a strong deterrent and emphasize the seriousness of the offense. By promoting fair and lawful financial practices, the legislation contributes to a more secure and ethical financial environment.

The author of this article is Mahmood Shakir Al Mashhadani. Mahmood specialises in white collar crime and cybercrime in addition to wider criminal matters. He is also the author of “Organized Crimes” published by Dar Alnahda Al Arabia Egypt and Dar Al Nahda Alelmiya UAE in 2018. For any queries, please contact Mahmood directly.

Mahmood Shakir Al Mashhadani Senior Associate mahmood@galadarilaw.com