June 1, 2023

CBUAE Obliges LFIs To Verify Identity of Users by End of June

Central Bank of UAE

Central Bank of UAE

The Central Bank of the UAE (CBUAE) issued new rules for licensed financial institutions (LFIs), which are now required to verify the identity of their users within a month by the end of June, according to Cointelegraph.

The CBUAE published 44-page guidance for LFIs on threats and vulnerabilities related to virtual assets and virtual assets service providers. The new rules aim to combat money laundering, financing of terrorism, and illicit organizations, for banking institutions engaging with crypto in the UAE. The new rules also come in line with the Financial Action Task Force global standards.

According to the CBUAE’s definition of LFIs, they could be national banks, branches of foreign banks, exchange houses, finance companies, payment service providers, registered hawala providers, insurance companies, agencies, and brokers, which are dealing with virtual asset providers (VASPs).

So LFIs have to submit a request to the central bank to open accounts for each VASP on a case-by-case basis and any collaboration with them without a national license is prohibited.

According to the rules, the financial institutions should be aware of the types and volumes of transactions the customer is expected to engage in by creating a profile for him before proceeding to the verification process.

The LFIs are obliged to monitor the volumes of non-institutional, individual customers’ crypto transactions with VASPs from high-risk jurisdictions. In these cases, customers can only transfer virtual assets to their own accounts outside the UAE-licensed VASP ecosystem.

Earlier, the CBUAE and the Hong Kong Monetary Authority (HKMA) held a bilateral meeting in Abu Dhabi as they tackled bolstering cooperation in the areas of financial infrastructure, financial market connectivity between the two jurisdictions, and virtual asset regulations and developments.

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