Licensed Financial Institutions (LFIs) are required to verify the identity of all customers under new regulations from the Central Bank of the United Arab Emirates (CBUAE). The update will go into effect "within one month" at the end of June.
On May 31, the CBUAE issued guidance on risks “related to virtual assets and virtual asset service providers” for LFIs. A 44-page document lays out new rules for anti-money laundering and combating the financing of terrorism for banking institutions operat ing in the UAE with cryptocurrencies. It takes into account the global standards of the Financial Action Task Force. In the definition of a central bank, an LFI is any non-cryptocurrency financial institution that has a relationship with a Virtual Asset Provider (VASP), including bank the s , finance companies, exchanges, payment service providers, registered hawala providers, and insurance company.
According to the guidelines, LFIs should submit requests of no objection to the opening of accounts for each VASP to the central bank on a case-by-case basis. Any cooperation with VASPs without a state license is prohibited.
As well as going through a general verification process for clients before entering into any relationship, LFIs are required to "understand the nature of the client's business". This step suggests creating a client profile, including the type of transactions the client is expected to age in and the volume of transactions. LFIs are also obliged to monitor cryptocurrency trading volumes with VASPs by non-institutional individual clients from “high risk jurisdictions.” In these cases, customers can only transfer virtual assets to their own accounts outside the VASP ecosystem licensed in the UAE.
Meanwhile, CBUAE representatives met with counterparts from the Hong Kong Monetary Authority to discuss cooperation in digital asset regulation. The two central banks also pledged to facilitate discussions on “joint fintech development plans and knowledge-sharing efforts” with each region 's respective innovation hub.
