Financial Crime World

UAE Banks Face New Regulatory Landscape as 2023 Amendments Kick In

The United Arab Emirates (UAE) has introduced significant changes to its banking regulations with the amendment of Federal Decree-Law No. 14/2018, effective from January 1, 2023. The revised law aims to enhance customer protection and financial infrastructure, while also redefining key terms and introducing new provisions.

Revised Definitions and Enhanced Customer Protection

Expanded Definition of Transfer Order

  • The definition of Transfer Order now includes fund transfers, securities settlements, and obligations release within the financial infrastructure system.
  • Digital currency has been included in the definition of Currency alongside traditional banknotes and coins.

Authority of Central Bank

  • The Central Bank has been granted authority to open and maintain various types of accounts, including those for licensed financial institutions and monetary authorities.
  • The Central Bank may now hold digital currency financial balances subject to specified regulations and controls.

Chapter 6: Customer Protection

Article 120 emphasizes customer protection by mandating the confidentiality of banking and credit information. All data concerning customers’ accounts, deposits, and transactions with Licensed Financial Institutions remain confidential and cannot be disclosed without written permission, except as permitted by law.

Article 121 Bis: Sufficient Guarantees

  • Licensed financial institutions are mandated to obtain sufficient guarantees for credit facilities provided to customers.
  • Failure to comply may result in legal consequences, including the rejection of claims or lawsuits related to credit facilities.

New Provisions and Guarantees

The Central Bank has established a specialized unit to address customer complaints and regulate the exchange of banking and credit information. Additionally, Article 121 outlines measures to further protect customers’ interests by mandating the Central Bank to establish comprehensive regulations for financial services and products provided by Licensed Financial Institutions.

Financial Infrastructure and Payment Operations

Article 124 outlines regulations on financial infrastructure, including:

  • The establishment of clearing and settlement systems
  • Retail payment operations
  • Exclusive authority over electronic banking operations and the regulation of retail payment systems

Enforcement Measures and Penalties

The revised Article 137 empowers the Central Bank to enforce penalties and measures in response to violations by Licensed Financial Institutions or Authorized Individuals. These measures include:

  • Warnings
  • Remedial actions
  • Restrictions on operations
  • Fines
  • License withdrawals

Conclusion

While the amendments aim to strengthen the banking sector and protect investors’ interests, they also present challenges in implementation and compliance. Navigating these new rules requires proactive measures, including robust risk management strategies and ongoing regulatory compliance efforts.