The Central Bank issues new guidelines to combat money laundering and combat the financing of terrorism

The Central Bank of the United Arab Emirates issued new guidelines on countering money laundering and combating the financing of terrorism for licensed financial institutions, which include banks, finance and exchange companies, insurance companies, agents and brokers.

The guidelines, which enter into force immediately, contribute to enhancing the licensed financial institutions’ understanding of the risks and the effective implementation of their legislative obligations related to combating money laundering and terrorist financing, taking into account the standards issued by the Financial Action Task Force (FATF) in this regard.

Licensed financial institutions are required to comply with the requirements in the new guidelines in accordance with the notification issued by the relevant UAE Central Bank.

The guidelines focus on the use of digital identity systems in authorized financial institutions to manage and address due diligence requirements and obligations required towards all customers.

It also focuses on mechanisms for employing the digital identity to carry out internal due diligence procedures on a regular and continuous basis towards natural persons, while defining mechanisms for identity verification, registration and certification when using these systems, and benefiting from best technological practices, adequate governance rules, and precisely defined policies and procedures in this regard.

Licensed financial institutions must take advantage of the data generated by the authentication and authentication (for example, Internet Protocol addresses) to apply due diligence procedures towards customers on an ongoing basis, and monitor their transactions, with the aim of detecting any suspicious behavior or transaction taking place to and from sanctioned or high-risk countries. .

Licensed financial institutions may rely on a third party to identify and verify the identity of the customer during the introduction phase of new customers, while ensuring:

(1) Licensed financial institutions obtain all relevant information from the third party.

(2) Take the necessary steps to ensure that the third party provides copies of the client's documents and information used in the CDD procedures.

(3) Take the necessary steps to ensure that the third party adheres to the requirements of due diligence procedures towards customers and record-keeping requirements stipulated in Cabinet Resolution No. (10) of 2019 regarding the executive regulations of Federal Decree-Law No. (20) of 2018 in the matter of combating money laundering and combating Financing terrorism and illegal organizations.

Licensed financial institutions must take appropriate measures to address the technological and security challenges that may result from digital identity systems, as they must impose the necessary safeguards to reduce the risks of identity verification and registration, including cyber attacks, security breaches, and the use of stolen identity details or Counterfeit or forged, due to the increasing complexities and cyber violations.

Authorized financial institutions are also required to impose an appropriate level of assurance and adequate assessments of the digital identity systems used, in addition to implementing the required assurance protocols regarding the accuracy of the digital identity systems, with appropriate reviews, either directly, or by issuing systems audit reports by issuing assurance certificate details from a relevant expert body.

“We are working closely with licensed financial institutions to ensure that they comply with and fully understand the guidelines issued by the Central Bank on a regular basis,” said Central Bank Governor Khaled Mohamed Balama.

He added, "The new guidelines regarding the use of digital identity for due diligence procedures towards customers contribute to strengthening the framework for combating money laundering and combating terrorist financing, and reduce potential risks to protect the financial system in the country."

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