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Under new regulations from the Central Bank of the United Arab Emirates (CBUAE), licensed financial institutions (LFIs) will be required to identify and verify the identity of all customers. The update will take effect “within a month”, that is, by the end of June.
On May 31, the CBUAE published guidance for the LFI on the risks “associated with virtual assets and virtual asset service providers.” The 44-page document sets out the news Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) regulations for banking institutions dealing with cryptocurrencies in Emirates. It takes into account the global standards of the Financial Action Task Force (FATF).
LFI, as defined by the Central Bank, is essentially all non-cryptocurrency financial institutions that establish relationships with virtual asset providers (VASPs): banks, financial companies, exchange offices, payment service providers, registered hawala providers and insurance companies.
Related: UAE cryptocurrency infrastructure is more ‘business-friendly’ than US, says chief executive
According to the guidelines, LFIs must submit a no-objection request to the central bank to open accounts for each VASP on a case-by-case basis. Any cooperation with VASP without a national license is prohibited.
In addition to the general client screening process prior to establishing any relationship, LFIs will also need to “understand the nature of the client’s business.” This step prompts you to create a client profile, including the types and volumes of transactions in which the client is expected to participate.
LFIs will also be required to track non-institutional cryptocurrency transaction volumes of individual customers with VASPs from “high-risk jurisdictions.” In these cases, for example, one could only transfer virtual assets to one’s own account outside of the UAE-licensed VASP ecosystem.
Meanwhile, CBUAE representatives met with their counterparts from the Hong Kong Monetary Authority to discuss their cooperation in regulating virtual assets. The two central banks also committed to facilitating discussions on “joint fintech initiatives and knowledge sharing efforts” with the respective innovation hubs of each region.