The guidance, which comes into effect on Monday, will assist LFIs’ understanding of risks and effective implementation of their statutory AML/CFT obligations, and takes Financial Action Task Force (FATF) standards into account, CBUAE said in a statement.
Khalid Mohammed Balama, Governor of CBUAE, said the apex bank is committed to implementing high regulatory control over LFIs and their payment operations, including products, services, and exposure.
“The new guidance ensures that all LFIs in the UAE understand their AML/CFT responsibilities and have compliance programmes to mitigate risks payment-related risks.”
The issuance of new guidance comes in the wake of the imposition of financial sanctions on six banks operating in the UAE last week for failures to achieve appropriate levels of compliance regarding required due diligence and reporting procedures and standards.
On last Wednesday, the CBUAE also imposed financial sanctions on an exchange house due to a weak compliance framework regarding the required due diligence policies and procedures to prevent money laundering and financing of terrorism. The Central Bank imposed a fine of Dh5.2 million on the exchange house.
The latest CBUAE guidance requires LFIs to demonstrate compliance with its requirements within one month.
“The guidance focuses on the money laundering and the financing of terrorism risks relating to payments and preventive measures that LFIs should apply in order to mitigate such risks. As new payment products and services might bring risks to the financial system because of the rapid movement of funds between payment participants and across borders, and LFIs might be exposed to participants licensed by the CBUAE and those operating globally, LFIs should take a risk-based approach to mitigate and manage money laundering and the financing of terrorism risks,” said the statement.
The apex bank said LFIs should conduct a regular risk assessment to cover all the payment products, services, relationships, and exposure to domestic and foreign payment sector participants.
“LFIs are responsible for conducting due diligence on customers, monitoring all transactions processed or conducted through the LFIs, and reporting suspicious transactions to the UAE’s Financial Intelligence Unit. They should also have a sanctions compliance programme with operational systems that appropriately screen transactions and transmit required information throughout the payment cycle,” it said.
In correspondent relationships, LFIs should not process any payments for a correspondent unless they are entirely confident that the correspondent conducts appropriate screening. These preventive measures should be integrated into an LFI’s AML/CFT compliance programme and supported with governance and training.