UAE Central Bank Imposes Lender With $1.6m fine for AML violations

A bank operating in the United Arab Emirates has been fined DH5.8 million ($1.6 million) for breaching AML laws, which cover financial crimes such as anti-money laundering (AML) and counter-terrorism financing (CFT).

This penalty shows the Emirate’s enthusiasm for taking initiatives to better regulate the financial sector to bring financial stability and integrity.

The Banking Regulator stated on 1st August 2024:

“This is pursuant to Article 14 of the Federal Decree Law No (20) of 2018 on anti-money laundering and combating the financing of terrorism and financing of illegal organizations.” 

The Central Bank did not disclose the financial institution’s identity.

UAE’s efforts to comply with AML/CFT rules

The United Arab Emirates (UAE) is the second-largest economy in the Arab world and has recently implemented enormous AML measures to strengthen the financial stability and integrity of the banking system.

It has introduced strict rules, regulations, and laws to protect financial institutions from financial crimes such as money laundering( ML) and combating the financing of terrorism (CFT).

Last year for licensed financial organizations, The central bank proposed new updated  AML/CFT guidelines for banks, finance companies, exchange houses, insurance companies, agents, and brokers.

Significance of these initiatives

The UAE’s Executive Office of Anti-Money Laundering and Counter-Terrorism Financing was established in 2021 to handle criminals, including money launderers, as well as businesses and individuals who are accused of financing terrorism and other crimes.

Compliance with local laws, in addition to AML/CFT, has been a must-do in all non financial organizations and for experts by the Ministry of Economy in 2020 while setting up an anti-money laundering (AML) department.

The recent revelations from Dubai Leaks, in a related development, exposed a lack of  AML/CFT compliance and the integration of illegal funds by using illicit activities in the Real Estate market. This emphasizes the necessity of AML measures and regulations in financial organizations.

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The imposition of a $1.6 million fine by the Central Bank indicates the UAE’s strong commitment to preventing financial crimes and enhancing financial stability and integrity by protecting them from money laundering and terrorism financing.

A big achievement for UAE

According to the report, UAE was removed from the Financial Action Task Force (FATF)’s grey list in February after exhibiting outstanding performance in following AML/CFT rules.

FATF is an international organization that fights financial crimes such as money laundering (ML) and terrorism financing. In 2022, the UAE was on the grey list for weak AML/CFT compliance.

UAE was taken off the grey list after being extensively monitored, and improvements in its economy were found by following AML rules and regulations.

The Central Bank stated it ensures all financial organizations, such as banks, their shareholders, and members, follow and comply with AML/CFT rules, laws, measures, and regulations to safeguard the integrity and transparency of the banking industry and Emirates financial system.

Impact of Penalty on Financial Organisations

This fine has warned other financial organizations operating in the UAE, emphasizing the need for robust AML regulations, compliance with AML/CFT laws, and severe repercussions for breaching AML laws.