The Central Bank of the United Arab Emirates (CBUAE) has introduced new regulations requiring licensed financial institutions (LFIs) to verify the identities of all customers. These rules are set to take effect by the end of June.
On May 31, the CBUAE released guidance for LFIs regarding the risks associated with virtual assets and virtual asset service providers (VASPs). The 44-page document outlines the Anti-Money Laundering and Combating the Financing of Terrorism rules that banking institutions in the UAE must adhere to when engaging with cryptocurrencies. The guidelines align with the global standards set by the Financial Action Task Force.
LFIs, as defined by the central bank, include non-crypto financial institutions that establish relationships with VASPs, such as banks, finance companies, exchange houses, payment service providers, registered hawala providers, and insurance companies.
According to the guidance, LFIs must seek approval from the central bank on a case-by-case basis before opening accounts for each VASP. Collaboration with unlicensed VASPs is strictly prohibited.
In addition to the standard customer verification process, LFIs are required to understand the nature of the customer’s business. This involves creating a profile that assesses the types and volumes of transactions the customer is expected to engage in.
LFIs also have an obligation to monitor the volumes of crypto transactions made by individual customers with VASPs from high-risk jurisdictions. In such cases, customers are only allowed to transfer virtual assets to their own accounts outside of the UAE-licensed VASP ecosystem.
Meanwhile, representatives from the CBUAE and the Hong Kong Monetary Authority recently held a meeting to discuss collaboration on digital asset regulations. The two central banks have also pledged to facilitate discussions on joint fintech development initiatives and knowledge-sharing efforts with their respective innovation hubs.
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