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Exchange house slammed with $1.4 million fine by Central bank of UAE for compliance gaps

Exchange house slammed with $1.4 million fine by Central bank of UAE for compliance gaps

Exchange house slammed with $1.4 million fine by Central bank of UAE for compliance gaps :

Exchange house slammed with $1.4 million fine by Central bank of UAE for compliance gaps

The Central Bank of the UAE recently slammed a fine on an exchange house within the country for failing to comply with anti-money laundering regulations. The banking regulator slammed the exchange house in question with a fine amounting to $1.4 million. The penalty is in accordance with UAE’s law on combating money laundering. The law also prohibits the financing of terrorism and criminal organizations.

According to a statement released by UAE’s Central Bank, they issued the financial sanction following some examination findings conducted by the bank. The examination revealed that the exchange house in question had a weak compliance framework. In particular, the bank found that the exchange house had inadequate due diligence policies and procedures to prevent terrorism financing and money laundering.

UAE’s Strict Anti-Money Laundering Regime

This regulatory penalty further demonstrates UAE’s strict anti-money laundering stance. UAE, the second biggest economy in the Arab world, has consistently put in place to prevent money laundering. The country also takes a similarly strict stance on the financing of terrorism. Over the years, UAE has issued various regulations to prevent various financial crimes.

Last year, the UAE Central Bank issued guidelines to help licensed exchange houses combat terrorism and money laundering financing. The guidelines were to assist with the enforcement of the statutory Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations that exchange houses had. The guidelines were also intended to help these exchange houses understand the risks associated with money laundering.

In addition, UAE established an Executive Office of Anti-Money Laundering and Counter-Terrorism Financing last year. This is an agency set up to deal with money launderers as well as individuals and organizations financing terrorists and organized crime. In the same vein, Dubai has set up a special court focused on combating money laundering and other financial crimes. Similarly, the Ministry of Economy has set up an anti-money laundering department. This department is responsible for ensuring all non-financial businesses and professionals comply with local laws.

Clearly, these laws and executive measures are intended to strengthen the integrity of the UAE financial system.

The Increased Focus on Exchange Houses

As previously explained by the Central Bank Governor Khaled Balama, the Central Bank of UAE wants exchange houses in the UAE to understand their AML/CFT responsibilities. In addition, the bank regulator wants these exchange houses to implement adequate programs to identify and mitigate AML/CFT risks. This way, the exchange houses can fully comply with their statutory obligations.

The increased focus of the bank regulator on exchange houses in the UAE has also been explained. According to the bank, exchange houses are regarded as highly important in terms of risks in the UAE. The regulator has further noted that this risk is increased significantly by the exposure of exchange houses to cash and cross-border transactions. Thus, the central bank has mandated all licensed exchange houses to take a risk-based AML/CFT approach. This entails conducting a regular risk assessment process.

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