Anti-money laundering guidelines issued by CBUAE to Registered Hawala Providers 
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UAE Central Bank Issues Guidelines on Anti-Money Laundering to Hawala Service Providers

The UAE Central Bank has issued a new guideline on anti-money laundering to registered Hawala Providers and Licensed Financial Institutions (LFI) providing services to Hawala service providers.

The objective of the guideline is to ensure a better understanding of their statutory obligations under the UAE anti-money laundering legal and regulatory framework for effective performance.

Scope of the new CBUAE anti-money laundering and combating terrorism financing guidelines

The new UAE Central Bank anti-money laundering guideline shall apply to all licensed natural or legal persons under the supervision of the UAE Central Bank in the following categories.

  • Registered Hawala Providers (RHP)
  • National bank, branches of foreign banks
  • Exchange houses 

Overview of activities or businesses of Hawala and their role in the UAE

In the UAE, Registered Hawala Providers are supervised by the CBUAE, who examines their businesses, agents, and customers as deemed appropriate to ensure that they comply with their obligations under the law

Hawala business is a business where arrangements are made to transfer and receive funds or their equivalent value and settle true trade and cash. Hawala Providers are referred to as money transmitters. Although Registered Hawala Providers use the banking medium to settle their businesses, one of the most distinguishing features about the business from other transmitters is the use of other settlement methods such as trade, cash, and long-term net settlement.

In the UAE, Registered Hawala Providers are only permitted to provide well-defined services such as non – commercial personal remittance and money transfer services supporting the commercial operation. They are not allowed to accept deposits, exchange currencies, or buy or sell travelers’ cheques.

The Hawala business is structured around their customer’s satisfaction in moving money across the border, and this could be an avenue for money laundering as criminals could hijack it. Furthermore, despite the minimal use of the formal financial system in their businesses, Hawala Providers still require the services of Licensed Financial Institutions in the UAE to conduct most of their international transfers, which could expose such Licensed Financial Institutions to money laundering crimes. Thus, the UAE Central Bank, in support of the laudable efforts of the UAE Government to combat money laundering and terrorism financing in the country, has issued guidelines to all Registered Hawala Providers and Licensed Financial Institutions rendering services to Hawala Providers in the UAE. 

Anti-money laundering guidelines issued by CBUAE to Registered Hawala Providers 

Under the anti-money laundering guideline of the Central Bank UAE to Registered Hawala Providers in the UAE, they are saddled with various obligations to detect and combat money laundering in the country. They are required to fully comply with the obligation to implement Targeted Financial Sanctions (TFS) in the UAE in line with the provision of Cabinet Decision No. (74) of 2020.  Hawala Providers in the UAE are required to know that it is a crime to provide services to any person whose name appears on the United Nations Consolidated sanction list or the UAE list.  Under the law, they are restricted from sending money on behalf of a listed person or providing them with the funds sent to them by someone else. They are prohibited from engaging on behalf of listed persons in any transaction whatsoever. Their obligations are as follows;

Duty to register 

The CBUAE anti-money laundering and combating terrorism financing guidelines state that Hawala Provider in the UAE must register on the Executive Office’s website to keep themselves abreast of updated listing and delisting of individuals or entities in both the United Nations Consolidated List and Local List. By registering on the said Executive website, they receive automated notification on any changes to the list. They can promptly note changes relating to the listing and delisting of names on the sanction list. Hawala Providers in the UAE are required to be up to date with both the United Nations Sanction List and Local List and promptly note changes to the sanction lists. 

Duty to screen the name of their customer against the sanction list 

Under the anti-money laundering guidelines of the CBUAE, Hawala Providers are required to always check the names of their customers against the sanction list to verify that their names are not listed. They are required to carry out this duty before they send money or receive money. Hawala Providers must also always screen the individual their customer is sending money to or from whom money is received.  They are further required to screen the beneficial owner of their customers in case the customers are legal persons. The law also requires them to screen the counterpart executing the transaction at the other end. 

Anti-Money Laundering Laws and Penalties in the UAE

Duty to immediately freeze the fund of a listed person

Registered Hawala Providers are required to immediately within twenty-four (24) hours upon confirming a match on the Sanction List through their screening exercise, freeze the funds of the listed person without informing the person. They must hold the funds and not release them to anyone except to the UAE Government. If the financial institutions hold the funds, Hawala Providers are required to notify the financial institution immediately. The law requires that Hawala Providers suspend any transaction immediately after a match is found and keep records of the information, they used to confirm the name on the sanction list.

Duty to report any listed person to the appropriate authority 

 Registered Hawala Providers in the UAE are required to report any match on the sanction list to the Federal Intelligence Unit through the goAML platform. They are also required to report any action they have taken, such as freezing of funds or prohibition of availability of funds to the listed person within two (2) business days of discovering the match.

The CBUAE anti-money laundering guidelines issued to Registered Hawala Providers in the UAE is to ensure that in the course of their business activities that are not exposed to geographical, product, service, and delivery channel money laundering risk. 

Becoming a registered Hawala provider in the UAE

In the UAE, no person, either natural or legal, shall carry out the business of Hawala except the Central Bank UAE issues a Hawala Provider Certificate to such person and registered in the CBUAE Hawala Provider Register. Any natural or legal resident officially residing in the UAE, excluding all UAE nationals, can apply for registration to become a Registered Hawala Provider.

Are you a Registered Hawala Provider in the UAE or intend to become a Registered Hawala Provider, contact us now for more information? Our team of AML experts will help you.

M. Al Khairy, LL.B., has extensive experience in providing legal advice to the firm’s business clientele. His primary area of practice is corporate law, covering a variety of aspects such as commercial transactions, property, trade, administrative, and litigation.
He is a high-calibre expert with technical knowledge and industry experience, which is why the firm is able to provide incisive advice corporate clients need. Al Khairy is also highly experienced in undertaking procedural formalities and providing counsel pertaining to company liquidation. Read more