AML rules for digital assets also go into effect in UAE

From the end of June, a new rule from the Central Bank of the United Arab Emirates (CBUAE) will require licensed financial institutions (LFIs) to verify the identity of all their customers.

Guidelines have been published

On May 31, the CBUAE has guidelines published for Licensed Financial Institutions (LFIs) regarding the risks associated with virtual assets and virtual asset service providers. The document, totaling 44 pages, specifies the new anti-money laundering and counter-terrorist financing rules for banking institutions involved in cryptocurrencies in the United Arab Emirates (UAE). These rules are in line with the global standards of the Financial Action Task Force.

According to the central bank’s definition, FVCs include all non-crypto financial institutions that enter into a relationship with virtual asset providers (VASPs). This includes banks, finance companies, bureaux de change, payment service providers, registered hawala providers and insurance companies.

Under the guidelines, licensed financial institutions (LFIs) must submit individual requests to the central bank for approval to open accounts for each virtual asset provider (VASP). It is prohibited to cooperate with VASPs that do not have a national license.

Understand customer business model

In addition to the usual client verification process before entering into a relationship, LFIs are required to “understand the client’s business model”. This means that a profile of the customer is drawn up, including the expected nature and size of the transactions that the customer will carry out.

FVCs are also required to monitor the volumes of cryptocurrency transactions from non-institutional individual clients with VASPs from “high-risk” countries. In such cases, clients can only transfer virtual assets to their own account outside the VASP ecosystem licensed in the United Arab Emirates (UAE).

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At the same time, representatives from the CBUAE met with their counterparts from the Hong Kong Monetary Authority to discuss regulatory cooperation for digital assets. Finally, the two central banks have also pledged to facilitate discussions on “joint fintech development initiatives and knowledge-sharing efforts” through their respective innovation hubs.

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