Licensed financial institutions (LFI) willing to work with crypto companies in the UAE will be required to obtain special permission from the Central Bank of the United Arab Emirates (CBUAE) and conduct regular identity verification of all customers in accordance with new AML rules.
The Central Bank of the United Arab Emirates (CBUAE) updated the regulatory requirements for licensed financial institutions (LFI) conducting any activity with a virtual asset provider (VASP). The special guidance sets out new anti-money laundering and counter-terrorist financing rules that will take effect by late June 2023.
According to the guidelines, LFIs are obliged to request the CBUAE’s approval to open accounts for each VASP. The central bank will review and authorize any activity with each VASP. Any cooperation by LFIs with VASPs without a national license is prohibited.
In addition to the general VASP verification process before establishing a relationship, LFIs will be required to “understand the nature of the customer’s business.” This step involves creating a customer profile that includes an assessment of the volumes and types of transactions in which the LFI plans to be directly involved. LFIs will also be required to track the volume of transactions involving virtual assets of individual customers from “high-risk jurisdictions.” In such cases, customers may only transfer virtual assets to their personal account outside the UAE’s licensed VASP system.
It’s worth noting that LFIs, as defined by the central bank, include all financial institutions that establish relationships with virtual asset providers (VASP), including banks, payment service providers, exchanges, insurance companies, and registered providers.
The infrastructure for digital assets in the UAE is recognized as one of the most business-friendly, and the country generally dominates the Web3 economy. However, the policy on cryptocurrencies varies greatly from emirate to emirate. For example, the Ras Al Khaimah authorities announced plans to create a free economic zone for crypto companies, while the Dubai government tightened control over crypto license applicants.
