UAE Regulations: Combating Illegal Activities, Strengthening Collaboration

Financial institutions that have obtained a license and operate in the United Arab Emirates are required to adhere to newly imposed regulations against illegal financial activities.

These regulations, expected to be effective by the end of June 2023, mandate that financial institutions obtain confirmation from all their clients.

On May 31, the Central Bank of the United Arab Emirates (CBUAE) issued detailed instructions, clarifying the risks associated with digital assets and outlining the responsibilities of service providers involved in such transactions.

When formulating the regulations to combat money laundering and terrorism financing, the Central Bank of the United Arab Emirates in
corporated internationally recognized standards set by the Financial Action Task Force.

Under the latest guidelines, licensed financial institutions must obtain approval from the central bank before opening accounts for virtual asset service providers (VASPs).

The guidelines explicitly state that VASPs without
a national license from the bank will face restrictions on their operations within the country.

In addition to the usual customer verification procedures, licensed financial institutions are now required to gather information about their customers' business activities.

This additional step aims to develop a comprehensive customer profile, taking into account transaction types and volumes.

While licensed financial institutions primarily focus on traditional financial activities, they are actively establishing partnerships with various virtual asset service providers (VASPs).

These VASPs include banks, exchange firms, payment service providers, finance companies, insurance companies, and others.

Licensed financial institutions have a crucial role in monitoring the volumes of cryptocurrency transactions conducted by individual and non-institutional customers, particularly those associated with virtual asset service providers (VASPs).

Representatives from the United Arab Emirates and Hong Kong Central Banks recently held a bilateral meeting in Abu Dhabi. The purpose of the meeting, which took place on May 29, was to strengthen collaboration and promote an enhanced partnership between the financial services of both nations.

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This information is for educational purposes only and does not constitute investment advice. No person should rely on it to make any investment. Investing carries risks, including the loss of capital. All opinions expressed are subject to change without notice. Past performance is not indicative of future results. Always seek the advice of a licensed investment professional before making any investment.