The financial service sector has witnessed regular updates of rules and regulations by the Central Bank of UAE in order to curb terror financing and money laundering. Spearheaded by the goals of Committee UAE’s Public-Private Partnership Sub Committee, the Central Bank has been issuing guidelines to be followed by banks, finance companies, exchange houses, insurance companies, agents and brokers. Names of the eight banks have not been disclosed by the banking authority yet.
Article 137 of the Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organisation of Financial Institutions and Activities, and the Central Bank notices regarding the beneficiaries of the Nationals Defaulted Debts Settlement Fund facilities enables the Central Bank to take various actions at its own discretion against banks who fail to comply. The said eight banks failed to pay heed to an explicit direction of the CBUAE not to grant any loans or credit facilities to the beneficiaries of loans granted by the Nationals Defaulted Debts Settlement Fund (NDDSF), including credit cards.
Previous sanctions
Earlier this year, the Central Bank cancelled the license of Russia’s MTS Bank. In its statement, it said, “this decision comes after considering the available options regarding the new status of the MTS Bank and taking into account the sanctions risks associated with the bank.” One such episode of sanctions had also taken place in July 2022 over six unidentified banks. Reason being, they failed to follow the reporting protocols. This was done while implementing OECD’s Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information and Common Reporting Standard calls on financial institutions to report information to the relevant authorities in a state, both ratified by the UAE.
The bigger goal
The efforts of UAE are centred at ensuring stronger financial transparency. 2021 Pandora reports suggest that massive and unaccounted money flows into the country. Meeting the need for better regulation, the government also announced the introduction of corporate tax from 1st June, 23. This made it the fourth country of the GCC to be instituting federal corporate tax. The impact of UAE’s far and few measures, only time will tell. However the ongoing situation of employing discretion with the powers vested in the Central Bank vide Article 137 is a timely alarm for banks to not underestimate pointed compliance.
