The Central Bank of the UAE (CBUAE) has recently issued new guidance on anti-money laundering and combatting the financing of terrorism (AML/CFT) to Registered Hawala Providers (RHP) and Licensed Financial Institutions (LFIs) providing services to RHP.
Introduced on the 18th of August, will assist in the understanding and effective implementation of the statutory AML/CFT obligations for RHPs and LFIs, as outlined in Federal Decree-Law No. (20) of 2018 on AML/CFT and Cabinet Decision No. (10) of 2019. This guidance also takes Financial Action Task Force (FATF) standards and guidance into account, CBUAE said in a statement.
It added that the CBUAE permits legitimate hawala activity, being considered an important element in its continuous efforts to boost financial inclusion and bring the unbanked segment of the population into the regulated financial system.
Hawala in UAE is regulated by the Registered Hawala Providers Regulation issued by the CBUAE in 2019. All providers undertaking hawala activity in the UAE must hold a hawala provider certificate issued by the Central Bank.
According to the new guidance, RHPs are required to comply fully with UAE requirements relating to targeted financial sanctions and suspicious transaction reporting (STR). In addition, RHPs are also required to establish and maintain an effective AML/CFT compliance program designed to prevent misuse of this activity to facilitate money laundering or terrorist financing.
This should include a competent compliance officer, appropriate customer and agent due diligence, transaction monitoring, and record-keeping, the statement read.
It added that the registered hawala provider must maintain an account with a bank operating in the UAE to be used for settlement, and provide the CBUAE with its details.
CBUAE encourages LFIs to accept RHP customers and should manage any risk which may result from these transactions through the use of appropriate controls.
The new guidance said that the LFIs must not accept customers who are unregistered hawala providers based in the UAE, and must immediately report suspicious transaction reporting (SRR) to the UAE’s Financial Intelligence Unit, inform the CBUAE when they are detected, and closely monitor the relationship.
It is worth mentioning that Hawala is an unofficial and informal channel to transfer money mainly used among South Asian expatriates, including many Pakistanis. Using this channel, they give money to agents who then instruct their associates in the country to deliver it to the customer’s house. With UAE being one of the major markets for remittances, the introduction of new guidelines is aimed at monitoring money-laundering activity and curbing terror financing.
Talking about this the Governor of the CBUAE H.E. Khaled Mohamed Balama said, “The CBUAE will continue to keep a suitably close eye on licensed financial institutions in the country, including registered hawala providers to enhance their effectiveness in implementing AML/CFT measures to safeguard the UAE’s financial system”.
It is worth mentioning that the government of Pakistan launched Roshan Digital Accounts in September 2020, allowing expatriates to send money to Pakistan via official channels, in an attempt to regulate remittances, and it has been a successful initiative so far.