Financial Crime World

Compliance Procedures for Financial Institutions in UAE: A Guide

Introduction

The Central Bank of the United Arab Emirates (CBUAE) has issued a new guidance note aimed at assisting licensed financial institutions (LFIs) in the country with their statutory obligation to mitigate risks related to payments. This guide highlights key takeaways for LFIs to ensure compliance with regulatory requirements.

Compliance Program Governance

According to the CBUAE guidance, LFIs should incorporate the following considerations into their governance frameworks:

  • Clear allocation of anti-money laundering (AML) and combating the financing of terrorism (CFT) responsibilities among LFIs
  • Allocating responsibilities is particularly important when some LFIs involved in a payment will not form a relationship with the ultimate customer or beneficiary

Customer Due Diligence (CDD)

The guidance emphasizes that Payment Sector participants should generally establish relationships with their customers rather than treat all customers as occasional or walk-in customers. In these scenarios, LFIs must perform CDD, which includes:

  • Customer Identification and Verification: Verify the identity of the customer
  • Beneficial Owner Identification: Identify the beneficial owner(s) of the customer
  • Understanding of the Nature of the Customer’s Business and Purpose of the Business Relationship: Understand the nature of the customer’s business and purpose of the business relationship
  • Ongoing Monitoring: Monitor the customer’s activity on an ongoing basis

Transaction Monitoring (TM)

In the case of extended, intermediated transaction chains such as those frequently seen in the Payment Sector, each LFI involved is ultimately responsible for monitoring all transactions processed or conducted through the LFI. Although LFIs cannot outsource their responsibility to report suspicious activity, they can outsource certain aspects of TM.

Training

Where a payment service or product relies on the use of agents for delivery, it is critical that they are appropriately trained to recognize red flags for illicit activity and carry out the elements of the AML/CFT program for which they are responsible.

Risk Assessment

LFIs are required to identify, assess, and understand the money laundering (ML) and financing of terrorism (FV) risks to which they are exposed and how they may be affected by those risks. An appropriate risk assessment should consider all the payment services that an LFI provides, and the LFI’s direct relationships to Payment Sector participants, both domestic and foreign.

Consulting Services

Deloitte Professional Services (DIFC) Limited offers a range of consulting services to help LFIs design and enhance their compliance programs, including:

  • Compliance Program Review and Enhancement: Review and enhance the existing compliance program
  • Governance Policy and Process Drafting: Draft governance policies and processes
  • Compliance Program Governance Review and Validation: Review and validate the compliance program governance

To learn more about Deloitte’s compliance services in the UAE, please contact Muzzi Ebrahim at +971 52 883 5537 or muebrahim@deloitte.com.