UAE updates money laundering regulations

The United Arab Emirates has implemented new anti-money laundering regulations as it seeks to meet international standards of financial compliance.

The central bank last week notified banks and exchange houses of the 13 new regulations that update the UAE’s first anti-money laundering controls, which came into force in November 2000.

The strong US ally has moved to improve financial compliance procedures, especially since the September 11 attacks showed that terrorists were using the country, especially Dubai, as a financial and logistics hub.

However, patchy implementation of the existing regulations and the booming economy have combined to leave the country exposed to money laundering and terrorist financing.

The new measures, to be announced later this week, require banks to carry out more due diligence on prospective customers, enshrining many existing practices already carried out by international banks operating in the UAE but which are still ignored by some local and regional institutions.

A central bank official said the regulations aimed to bring UAE law into line with the latest requirements of the Financial Action Task Force on money laundering. “We want to tighten the system further,” he said.

FATF’s middle-eastern branch last week discussed an assessment of the UAE’s compliance with international standards on money laundering and terrorism finance, which included an International Monetary Fund inspection of the central bank earlier this year.

This assessment, which will include the new regulations in its annex, should be published within weeks.

“These new requirements have come in response to the remarks of the assessment team in March to try to fill in the gap with international requirements,” the central bank official said.

The new regulations, which include five amendments to the 2000 law, bring down the threshold at which banks are forced to verify the name and address of remitters from Dh40,000 ($11,000) to Dh3,500.

They also require banks to engage in enhanced due diligence to determine whether “foreign politically exposed persons” are trying to open an account in the UAE, as well as officially banning all financial relationships with “shell banks or companies”.

Banks should carry out extra due diligence on dealers in precious stones, real estate and luxury goods. Officials have for years raised concerns that the booming property sector of Dubai, and now Abu Dhabi, could be used by money launderers.

Western officials have lauded the UAE’s move to regulate hawala, the informal money transfer system used across the Middle East and South Asia, and point to an increasing number of prosecutions on drugs and money laundering charges.

“The issue is implementation – it’s not just whether you can implement your own regulations but whether regulations are enough to stay ahead of the criminal fraternity,” said one western official.

The central bank has also called on senior management to approve the opening of new correspondent banking relationships with foreign banks, taking care when they “are
headquartered in countries which are reported to be involved in drugs, a high level of public corruption and/or criminal/terrorist activities”.