The Central Bank of the UAE (CBUAE) has issued fresh anti-money laundering and counter-terrorist financing (AML/CFT) guidelines to Registered Hawala Providers (RHP) and licensed Financial Institutions (LFIs) that offer services to RHP. The proposed guidance will help RHPs and LFIs understand and effectively implement the statutory AML/CFT responsibilities set forth in Federal Decree-Law No. (20) of 2018 on AML/CFT and Cabinet Decision No. (10) of 2019. The Financial Action Task Force (FATF) rules and advice are also taken into account in this guidance.
Hawala is an informal type of money transfer in which no tangible money is exchanged. A money transfer without money movement is how it’s described. Hawala is an alternate remittance route that operates outside of regular banking institutions that is still utilized today. As a result, the UAE Central Bank allows lawful hawala activity, which is seen as an important part of the country’s ongoing efforts to increase financial inclusion and bring the unbanked into the regulated financial system.
RHP must completely adhere to all UAE rules for targeted financial sanctions and suspicious transaction reporting (STR). RHPs must also create and maintain a robust AML/CFT compliance programme to prevent the activity from being used to support money laundering or terrorist funding. A competent compliance officer, adequate customer and agent due diligence, transaction monitoring, and record keeping should all be incorporated. Moreover, RHP must establish a settlement account with a UAE-based bank and inform the CBUAE of the account’s details. CBUAE urges LFIs to accept RHP clients and recommends that they implement adequate controls to minimize any risk that may arise as a result of these transactions. LFIs must not engage customers who are unregistered hawala providers situated in the UAE, and they must disclose any STRs to the UAE’s Financial Intelligence Unit, report them to the CBUAE when they are discovered, and constantly monitor the connection.
Globally, as the regulatory framework changes and becomes more demanding, financial institutions in the Gulf region, especially, are finding it increasingly difficult to implement new regulations and build comprehensive compliance systems. Nonetheless, in order to combat money laundering and terrorist funding in the UAE, the government has implemented strict restrictions on unlawful hawala transactions.
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