Under the new rules of the Central Bank of the United Arab Emirates (CBUAE), licensed financial institutions will be required to verify the identity of all their customers. The update will go into effect “within a month”, at the end of June.
On May 31, the CBUAE published guidance for LFIs on risks “related to virtual assets and virtual asset service providers.” In a 44-page document, specify the new anti-money laundering and anti-terrorist financing rules for banking institutions that handle cryptocurrencies in the UAE. It takes into account the global standards of the International Financial Action Task Force.
LFIs, as defined by the central bank, are all non-crypto financial institutions that establish a relationship with Virtual Asset Providers (VASPs), including banks, finance companies, exchange houses, payment service providers, registered hawala providers and insurance companies.
According to the guidelines, LFIs must submit a no-objection request to the central bank for each value-added service provider on a case-by-case basis. Any collaboration with VASP without a national license is prohibited.
In addition to the general process of verifying customers before establishing any relationship, LFIs would need to “understand the nature of the customer’s activity.” This step suggests creating a customer profile, including the types and volumes of transactions you are expected to make.
LFIs would also be required to monitor individual non-institutional client cryptocurrency transaction volumes with VASPs from “high-risk jurisdictions.” In these cases, customers will only be able to transfer virtual assets to their own account outside of the UAE-sanctioned VASP ecosystem.
For their part, representatives of the CBUAE met with their counterparts from the Hong Kong Monetary Authority to discuss cooperation on the regulation of digital assets. The two central banks also pledged to facilitate discussion on “joint fintech development initiatives and knowledge sharing efforts” with the respective innovation centers in each region.
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