UAE Central Bank identifies new risk sectors
BANK TAKES STEPS TO ADDRESS MONEY LAUNDERING, TERRORIST FINANCING
The Central Bank of the UAE (CBUAE) has published the ‘Typologies in the Financial Sector’ report that identifies new risks.
The new report is produced by the Supervisory Authorities Sub-Committee, which is chaired by CBUAE and includes Abu Dhabi Global Market and Dubai Financial Services Authority, the Executive Office for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), and the UAE Financial Intelligence Unit (FIU).
The report aims to identify and raise awareness of the emerging risks in the financial sector and enable the concerned supervisory authorities and Financial Institutions (FIs) to remain vigilant and address these risks in a timely manner.
The typology report detects the most common risks among FIs and best practices to face them. A pilot group of FIs was selected to identify the unique risks prevalent in the sector and exacerbated by the Covid-19 pandemic.
Targets
“This report is part of our ongoing efforts to address money laundering and terrorist financing-specific trends and typologies emerging from the Covid-19 pandemic in the financial sector. Although these risks are still in the early stages of identification, CBUAE alongside the concerned supervisory authorities, have released this report as key reference on pandemic-related typologies and indicators to the financial institutions, so they remain abreast of and be able to mitigate these emerging risks, which ultimately contribute to safeguarding the integrity of the UAE financial system,” said Khaled Mohammad Balama, Governor of CBUAE.
The typologies identified in the report include the risk of money laundering and terrorist financing, fraud, bribery, corruption, charity and disaster fraud, cyberattacks and external fraud caused by the Covid-19 pandemic.
The use of unlicensed money service providers (UMSO) for money laundering has increased during the Covid-19 pandemic. UMSOs do not move funds for each transaction but balance the books over a period, conducting a ‘money transfer without money movement’. Although people will move funds legitimately through UMSOs for reasons of speed and convenience due to speed and convenience, the anonymity UMSOs offer means they are particularly appealing for financial criminals.
Citizenship by Investment (CBI) schemes offered by countries located in the Caribbean region pose potential financial crime risks to the financial sectors in the UAE.
Although CBI schemes may be pursued for legitimate purposes, in particular visa free access to the EU, the UK and other countries, CBI schemes pose corruption, sanction, money laundering and tax evasion risks. The report observed that the risks derived from the typologies identified are additional to the risks of crimes related to money laundering and terrorist financing which outlined in the UAE’s National Risk Assessment and are likely to be prevalent across the wider financial sector.
Among those risks are an increase in the use of unlicensed money service providers and a heightened risk of cyberattacks.
The report reveals effective methods of mitigation, identification, and resolution implemented by FIs, as well as trend analyses of risks observed.