AML rules for digital assets to come into effect in UAE

Under new rules from the Central Bank of the United Arab Emirates (CBUAE), licensed financial institutions (LFIs) would be required to verify the identities of all customers. The update will come into effect “within a month” by the end of June. 

On May 31, the CBUAE published guidance for LFIs on risks “related to virtual assets and virtual assets service providers.” A 44-page document specifies the new rules on Anti-Money Laundering and Combating the Financing of Terrorism for banking institutions engaging with crypto in the UAE. It takes into account Financial Action Task Force global standards.

LFIs, in the central bank’s definition, are all the non-crypto financial institutions establishing a relationship with virtual asset providers (VASPs), including banks, finance companies, exchange houses, payment service providers, registered hawala providers and insurance companies.

Related: UAE infrastructure for crypto is more ‘business-friendly’ than the US, says exec

According to the guidance, LFIs should submit a request to the central bank for non-objection to open accounts for each VASP on a case-by-case basis. Any collaboration with VASPs without a national license is prohibited.

Besides the general verification process for customers before establishing any relationship, LFIs would be required to “understand the nature of the customer’s business.” This step suggests creating a profile of the customer, including the types and volumes of transactions the customer is expected to engage in.

The LFIs would also have an obligation to monitor the volumes of non-institutional, individual customers’ crypto transactions with VASPs from “high-risk jurisdictions.” In these cases, customers can only transfer virtual assets to their own account outside the UAE-licensed VASP ecosystem.

Meanwhile, CBUAE representatives met with their counterparts from the Hong Kong Monetary Authority to discuss cooperation on digital asset regulations. The two central banks also pledged to facilitate discussions on “joint fintech development initiatives and knowledge-sharing efforts” with each region’s respective innovation hubs.

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