AML rules for digital assets to come into effect in UAE

The Central Bank of the United Arab Emirates (CBUAE) has introduced new regulations that require licensed financial institutions (LFIs) to verify the identities of all customers. These new rules will come into effect by the end of June, within a month of the announcement. The CBUAE has published guidance for LFIs on the risks associated with virtual assets and virtual asset service providers (VASPs). This 44-page document specifies the new rules on Anti-Money Laundering and Combating the Financing of Terrorism for banking institutions engaging with cryptocurrency in the UAE. The guidance takes into account global standards set by the Financial Action Task Force.

LFIs are defined as all non-crypto financial institutions that establish a relationship with VASPs, including banks, finance companies, exchange houses, payment service providers, registered hawala providers, and insurance companies. According to the guidance, LFIs should request non-objection from the central bank to open accounts for each VASP on a case-by-case basis. Any collaboration with VASPs without a national license is prohibited. LFIs must understand the nature of the customer’s business and monitor the volumes of non-institutional, individual customers’ crypto transactions with VASPs from high-risk jurisdictions.

Meanwhile, the CBUAE has met with their counterparts from the Hong Kong Monetary Authority to discuss cooperation on digital asset regulations. The two central banks have also pledged to facilitate discussions on joint fintech development initiatives and knowledge-sharing efforts with each region’s respective innovation hubs.

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