Central Bank of UAE Issues New Guidance for Financial Institutions on Customer Due Diligence Procedures

The Central Bank of the United Arab Emirates (CBUAE) has issued a new guidance for licensed financial institutions (LFIs) to strengthen their customer due diligence procedures when dealing with legal persons and arrangements. This updated guidance aims to enhance the effectiveness of anti-money laundering (AML) and combating the financing of terrorism (CFT) measures in the UAE.

Key Requirements of the New Guidance

• Verification of Customer Identity: LFIs must now obtain and verify the identity of all individuals controlling ownership interest of 25% or more in legal persons. For legal arrangements, they must verify the identity of the settlor, trustee, beneficiaries, and any other individuals in control.
• Ongoing Monitoring: The CBUAE has emphasized the importance of ongoing monitoring to ensure that customer due diligence information is accurate, complete, and up-to-date.
• Enhanced Due Diligence Procedures: LFIs are required to implement risk-based customer due diligence processes, omnichannel customer data management, and continuous monitoring.

New Requirements for Licensed Financial Institutions

• Customer Risk Assessments: LFIs must conduct customer risk assessments that incorporate elements of the customer risk assessment for individuals, but applied to the legal person or arrangement customer itself and to the individuals prominently associated with it.
• Policy Development and Employee Training: LFIs must develop and enhance policies and procedures, as well as provide training for employees on new regulations.

Expert Opinion

According to Muzzi Ebrahim, Partner at Deloitte Professional Services (DIFC) Limited, “The new regulations are designed to help LFIs manage money laundering and terrorism financing risks posed by legal persons and arrangements. The increasing complexity of financial crimes in the UAE has necessitated this updated guidance.”

Action Required from Licensed Financial Institutions

• Review and Enhance Policies and Procedures: LFIs must review and enhance their policies and procedures, including risk-based customer due diligence processes, to comply with the new regulations.
• Invest in Technology and Training: LFIs must invest in technology and training to ensure that they can effectively manage customer data and identify potential risks.

Professional Advice

Deloitte is urging LFIs to seek professional advice on how to apply the principles set out in the guidance to their specific circumstances, ensuring compliance with the updated regulations.