Central Bank of the United Arab Emirates (CBUAE) enforces new regulations requiring licensed financial institutions (LFIs) to verify customer identities

The Central Bank of the United Arab Emirates (CBUAE) has proposed stronger regulations for licensed financial institutions (LFIs) and their interaction with virtual assets and virtual asset service providers (VASPs) in an effort to improve financial security and combat criminal activity. These rules aim to strengthen anti-money laundering and counter-terror financing initiatives in the financial environment of the UAE and are in line with international standards established by the Financial Action Task Force.

Verifying Customer Identities

A New Condition The new regulations will require LFIs in the UAE to confirm the identity of each and every one of its clients. This policy aims to increase accountability and transparency in the financial sector. By the end of June, the CBUAE anticipates that these regulations will have been put into effect.

Compliance Guidelines for LFIs

The CBUAE has published extensive recommendations covering the hazards related to virtual assets and VASPs in a 44-page document. The specific policies and guidelines that LFIs must follow when dealing with crypto-related activity are laid out in this document. LFIs can match their procedures with global standards by adhering to these rules.

Definition of LFIs and Collaboration with VASPs

LFIs are a broad category of non-crypto financial organizations that collaborate with VASPs, according to the CBUAE definition. This includes financial institutions like banks and finance firms as well as payment service providers like payment processors and registered hawala providers. LFIs must request non-objection approval from the central bank individually in order to work with VASPs. The use of unauthorized VASPs in collaboration is strictly forbidden.

Enhanced Customer Verification and Monitoring

LFIs must fully comprehend the nature of a customer’s business in addition to the basic customer verification process. To do this, a profile that includes the kinds and quantities of transactions the consumer is anticipated to conduct must be created. Additionally, LFIs must keep an eye on the volume of crypto transactions made by non-institutional, individual clients with VASPs, especially those coming from high-risk regions. Customers are only able to transfer virtual assets outside of the UAE-licensed VASP ecosystem in such circumstances.

International Collaborations and Fintech Development

The CBUAE has proven that it is dedicated to promoting global collaboration in the regulation of digital assets. Recently, representatives from the CBUAE and the Hong Kong Monetary Authority met to discuss how they may work together to regulate digital assets. The central banks also pledged to facilitate conversations on cooperative fintech development projects and knowledge exchange.

In order to prevent illegal activity and protect the integrity of the financial system, the Central Bank of the UAE has introduced harsher requirements for licensed financial institutions. The CBUAE seeks to boost anti-money laundering and counter-terror funding initiatives in the UAE by enforcing client identification verification procedures and supplying thorough instructions. The UAE’s commitment to supporting fintech innovation and creating a safe and open financial ecosystem is further evidenced by the cooperation with international counterparts.