UAE Implements Customer Verification for Financial Institutions

According to new regulations issued by the Central Bank of the United Arab Emirates (CBUAE), licensed financial institutions (LFIs) would be required to verify the identities of all customers.

The modification will be implemented “within a month,” by the end of June.

On May 31, the CBUAE published guidance for financial institutions regarding risks “related to virtual assets and virtual asset service providers.”

A 44-page document specifies the new rules on anti-money laundering and combating the financing of terrorism for banking institutions in the United Arab Emirates that engage with cryptocurrencies.

It takes into account the global standards of the Financial Action Task Force.

LFIs, as defined by the central bank, are all non-crypto financial institutions that establish a relationship with virtual asset service providers (VASPs), such as banks, finance companies, exchange houses, payment service providers, registered hawala providers, and insurance companies.

According to the guidance, LFIs must submit a case-by-case request to the central bank for permission to open accounts for each VASP.

Without a national license, collaboration with VASPs is prohibited.

In addition to the general verification process before establishing a relationship with a customer, LFIs would be required to “understand the nature of the customer’s business.”

This step suggests creating a customer profile that includes the types and volumes of transactions expected from the customer.

The LFIs would also be required to monitor the volume of crypto transactions conducted by non-institutional, individual customers with VASPs from “high-risk jurisdictions.”

In such instances, customers may only transfer virtual assets to their accounts outside the UAE-licensed VASP ecosystem.

In the meantime, CBUAE representatives met with Hong Kong Monetary Authority counterparts to discuss cooperation on digital asset regulations.

Additionally, the two central banks agreed to facilitate discussions on “joint fintech development initiatives and knowledge-sharing efforts” with each region’s innovation hubs.