Central Bank of UAE Issues Updated Guidance For Licensed Financial Institutions

CBUAE issues updated guidance for licenced financial institutions on growing risks of money laundering and financing of terrorism

The UAE Central Bank has been actively issuing updated circulars to address the growing concerns of money laundering and terrorism financing over the last two years. This approach by the CBUAE is adopted as part of their ongoing efforts to maintain the integrity of the financial system and reconfirm their commitment to compliance with the recommendations of the FATF (Financial Action Task Force).

The CBUAE regularly releases rules and guidelines for the banking industry that cover several important topics, such as anti-money laundering and transaction monitoring. The most recently published guidance on payment risks for licensed financial institutions (“LFIs”) was released on August 2, 2022.

The new guidelines are intended to assist LFIs in addressing risks associated with money laundering, funding of terrorism, and sanctions by assisting in recognising such risks and helping to execute the required and preventive actions to mitigate those risks. FATF standards are also taken into consideration.

In order to reduce and manage the risks of money laundering and terrorism financing, LFIs should use a risk-based strategy given the quick transfer of money between payment participants and across borders. LFIs must carry out client due diligence and routine risk assessments to cover all transactions, and they should use the “goAML” portal to report any suspicious transactions to the UAE’s Financial Intelligence Unit.

Financial institutions should never handle payments for a correspondent unless they are absolutely certain that the correspondent performs the necessary screening.

The updated guidelines will guarantee that every LFI in the UAE is aware of its anti-money laundering (“AML”) obligations and has a sanctions compliance programme that screens transactions and helps to reduce associated risks.

The UAE has taken concrete steps to address several areas that need improvement by putting in place a strict regulatory control system and raising awareness, reiterating its strong commitment and the ongoing work it has put into strengthening its regulatory framework in relation to AML and Combating the Financing of Terrorism (“CFT”).

The guidance is one out of the other circulars and policies updated by the CBUAE, it seeks to address the challenge of money laundering and terrorist financing as a strategic priority and to stress the need for LFIs to understand their AML responsibilities and comply with the requirements.