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Jun 2020

UAE: Regulators act jointly to stress use of FinTech to prevent money laundering

Source: Middle East Insurance Review | Jun 2020

UAE regulators have asked financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs) to utilise reliable technology and FinTech tools to comply with anti-money laundering (AML) rules and combat the financing of terrorism (CFT).
 
This advisory – issued jointly by the UAE Central Bank, Insurance Authority, Ministry of Economy, Ministry of Justice, Securities and Commodities Authority, Abu Dhabi Global Markets and Dubai Financial Services Authority – covers the handling of financial crime risks in the wake of the COVID-19 pandemic.
 
Acknowledging that it will be more difficult for businesses to adhere to identify and verify processes due to remote working models amidst restricted operations during the COVID-19 pandemic, the UAE regulators asked FIs and DNBFPs to use FinTech, RegTech, and SupTech to the fullest extent possible.
 
“FIs and DNFBPs should also take into consideration the published FATF (Financial Action Task Force) on Digital ID, which highlights the benefits of trustworthy digital identity for improving the security, privacy, and convenience of identifying people remotely for both onboarding and conducting transactions while also mitigating money laundering and terrorist financing risks,” said the advisory, adding that businesses can also utilise the UAE government’s validation gateway, the UAE Pass or Emirates IDs.
 
“Where an FI or DNFBP is unable to make use of such technology, exception handling provisions acceptable by the supervisory authorities can be utilised. However, the supervisory authorities expect such businesses to maintain a record of when these provisions were legally vetted and invoked and for senior management to be aware of such events, as part of the AML risk management framework,” the statement said.
 
The regulators also advised FIs and DNFBPs to revisit their risk assessment and control frameworks and revise their internal policies, procedures, and/or control measures as necessary where such enhancements are warranted.
 
AML measures need to be stepped up
The joint statement by the regulators was also in response to the FATF report published in April 2020 that warned that the UAE has not been doing enough to crack down on money laundering (ML) and terrorist financing.
 
Paris-headquartered FATF issued its warning following a major review of the UAE’s economic crime controls. The report said the UAE is exposed to significant ML and terrorism financing (TF) risks and to proliferation financing (PF).
 
“The UAE is considered a cash-intensive economy, which exposes the country to certain inherent ML/TF risks. As identified in the NRA, the large size and openness of the UAE’s financial sector, large amount of remittances, cash in transactions, the highly active trade in gold and precious metals and stones, as well as the large proportion of foreign residents present in the UAE, and the country’s geographic proximity to countries de-stabilised by conflict or terrorism, as well as countries subject to UN sanctions, present additional inherent vulnerabilities to ML/TF/PF abuse,” the report said. M 
 
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