Released on August 1, 2022, this roadmap for certified banking establishments by the Central Bank of the United Arab Emirates serves to govern individuals and entities licensed or controlled by CBUAE. Its primary aim is to ensure a comprehensive understanding of statutory obligations for licensed financial institutions in the UAE.

In the UAE, a recent boost was observed in regulatory oversight by the Central Bank over other certified funding establishments. Exchanging hubs and banks faced penalties for non-compliance with anti-money laundering and due diligence requirements.

The publication of this long-anticipated instruction aligns with the Financial Action Task Force standards, providing a new framework for individuals and entities holding financial licenses in the UAE. Starting September 1, 2022, these certified institutions are required to align their operations with the principles outlined in this updated guidance.

The Central Bank intensified its attention to the fiscal services in the Emirates and has committed to putting more efforts into assisting with money laundering prevention. The UAE have included into the list the countries subjected to expanded supervision with monitoring according to FATF due to failure or deficiencies in complying AML/CTF instructions in March 2022.

Regulating of budgetary establishments in the UAE: improved instruction principles

These recommendations enhance details on the following:

  1. Perils related to illegal wealth processing and other financial schemes are omnipresent in the payment sector, especially for certified banking establishments providing services to participants in this industry.
  2. AML/CTF obligations in accordance with CBUAE rules.
  3. Principles for risk assessment.
  4. Preemptive actions for LFIs offering assistance and support to clients.
  5. Defensive protocols for monetary institutions fulfilling services to other customers in the payment industry.
  6. Requirements for transaction monitoring, reporting of suspicious transactions, and sanctions regimes.
  7. Information on management and training requirements.

After the increased development of innovative technologies and subsequent advancements in the payment sector, customers are now presented with a multitude of new payment products and services (PPS) that do not have a unified risk profile. Therefore, it is crucial for LFIs to maintain vigilance regarding unforeseen risks associated with payment transactions involving a high degree of intermediation.

According to FATF regulations, it is expected that licensed providers of payment services will adopt a risk-based approach to reduce and manage AML risks. This begins with assessing the risks LFIs face in transactions involving PPS. This includes:

  • Financial Transactions and PPS: how do financial flows interconnect with Payment Products and Services (PPS)?
  • Funding Approaches: what methods do users employ to finance their PPS accounts?
  • Peer-to-Peer Dynamics in Payments: Which entities play roles in facilitating peer-to-peer payments within PPS?
  • Cross-Border Participation: Is there involvement in PPS by countries identified as high-risk in terms of financial activities?
  • Regulatory Landscape: What is the regulatory standing of PPS in countries where these services and products are extended?
  • Involvement of Agents and Affiliates: Who are the parties, and to what extent are they engaged in providing PPS?
  • Intermediation Insight: Does the Licensed Financial Institution (LFI) possess comprehensive visibility into all facets of PPS intermediation?
  • Rigorous Control Measures: Are there robust and effective control measures in place to manage risks associated with PPS?

When interested in obtaining a financial license in the UAE, please note that this instruction guide contains detailed information on sufficient customer validation, enhanced due diligence, and continuous monitoring. Notably, new guiding principles are outlined regarding the due diligence of digital and electronic means, the use of IP addresses and geographic indicators, due diligence of custodial services, due diligence of sellers, and monitoring of return payments.

The guidelines give precedence to electronic customer verification, particularly acknowledging the heightened risks associated with providing Payment Products and Services (PPS) in digital formats when the client's full identity remains undisclosed. Banks are explicitly instructed to employ government-established online verification channels for validating the customer's Emirates ID and preserving a digital validation record.

Moreover, the emphasis on robust electronic customer authentication includes the utilization of geolocation tools to scrutinize customer login locations during verification. This aids in identifying potential irregularities in login attempts or recognizing movement patterns. This highlights CBUAE's recognition of the changing dynamics in payment landscapes and the growing challenges posed by payment-related technologies, leading to the development of fresh regulations for payment services in the UAE.

The recent guidelines for licensed financial institutions in the UAE provide detailed instructions on Anti-Money Laundering/Countering the Financing of Terrorism (AML/CTF) obligations. The objective is to enable these institutions to establish robust control and supervision over transactions, with a focus on monitoring all activities. This includes the identification and reporting of suspicious transactions, the implementation of sanctions compliance programs, and a comprehensive understanding of verification methods for all involved parties.

Embarking on the path to secure a banking-related license in the UAE requires a distinct commitment intricately woven into the legal fabric. This commitment entails unwavering adherence to regulatory frameworks, including specific sanctions and directives from the UAE government, aligning with resolutions from the UN Security Council aimed at curbing financial manipulations. Consequently, institutions with certifications are obligated to formally register within the intricately designed Integrated Electronic Management System developed by the Financial Intelligence Unit.

Delving into the strategic counsel, it meticulously delineates specific facets that finance houses are encouraged to seamlessly incorporate into their mandated AML/CTF management. Going beyond mere staff training, the guidance emphasizes a meticulous and transparent allocation of responsibilities across these institutions. Of particular note is the directive tailored for LFIs offering Payment Products and Services (PPS), urging them to wholeheartedly shoulder the responsibility for comprehensive customer due diligence. The supplementary counsel, thoughtfully dispensed by CBUAE, strategically addresses proactive measures against risks tied to unregulated participants in transactions, especially in scenarios where the clarity of AML/CTF responsibilities might be obscured.

Concluding, the recently introduced AML/CTF regulations for LFIs encompass exacting obligations, spanning from KYC checks and vigilant transaction monitoring to steadfast compliance with the intricate web of financial sanctions provisions in the Emirates. For those navigating the path to secure a payment license in the UAE, our firm's experts eagerly await direct consultation. We proffer nuanced guidance through the intricate landscape of financial services regulation in the UAE, coupled with steadfast support in navigating the process of acquiring indispensable financial licenses.