UAE Central Bank Launched New Guidance to Re-inforce AML/CFT

The global economic downturn, coupled with the COVID-19 pandemic and increasing financial crimes has produced a lethal mixture for financial institutions, which has resulted in a plethora of challenges. Financial Institutions are working relentlessly to adopt new legislation and establish full compliance mechanisms as the regulatory regime evolves and becomes more demanding.

Financial crimes such as money laundering and the financing of terrorism concerns are invading and destabilizing nations’ monetary systems. As a result of this, the Central Bank of UAE (CBUAE) has taken stringent efforts by issuing new guidance to increase the assessment of Anti-money Laundering (AML) and Combating Financing of Terrorism (CFT) controls for Licensed Exchange Houses (LEH) in order to mitigate fraudulent practices. The guideline, which comes into force instantly, will enhance LEH’s awareness of risks and successful execution of their statutory AML/CFT requirements, based on Financial Action Task Force (FATF) recommendations. It is also imperative that within one month, all licensed exchange houses in the UAE must exhibit adherence with the guidance’s standards.

The exchange house sector in the UAE is viewed as having a high degree of risk and materiality, which is aggravated by its sensitivity to cash and cross-border operations. The new standards shall act as vital factors to safeguard these licensed houses, as outlined below.

• Exchange houses must have an adequate AML/CFT Programme in place to prevent their company from being used as enabler for money laundering or terrorism funding, according to the guidelines.
• Exchange houses should adopt a risk-based approach towards AML/CFT by undertaking a comprehensive risk assessment process that includes customers, products and service, delivery channel, new technology, geographic, counterparty, and illicit activity uncertainties.
• To successfully manage risks, the risk assessment conclusions must drive the program’s complete rules, procedures, internal controls, and personnel training.
• Dedicated compliance function, strong customer due diligence, constant transaction monitoring, and full compliance with the UAE’s rules on Targeted Financial Sanctions and Suspicious Transaction Reporting are other critical elements of the AML/CFT program.

“The CBUAE’s new standards and guidelines will undoubtedly guarantee that all regulated exchange houses in the UAE are aware of their AML/CFT duties, and they can serve as a top-level of defense in detecting and mitigating financial crimes,” said Raghunath T, Director- Management Consultancy, HLB HAMT.

The new CBUAE guidelines will assist financial institutions in understanding and effectively executing a comprehensive anti-money laundering and counter-terrorist financing compliance programmes. To counteract the financial crimes that are progressively invading our society, we must keep a close eye on them. AML/CFT policies, when correctly implemented with the help of a professional firm can decrease the negative consequences of illegal economic activity while simultaneously enhancing financial market stability and resilience.

HLB HAMT is a renowned consultancy firm conducting independent assessments of anti-money laundering, counter-terrorism financing, and sanctions compliance frameworks in a variety of industries. Our squad of experts can assist you in creating, implementing, and improving your compliance regime for exchange houses, banking, insurance, and other designated non-financial businesses.

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