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UAE: banks fined in anti-money laundering crackdown

UAE: banks fined in anti-money laundering crackdown

Eleven banks have been fined a combined US$12.5 million for their failure to comply with the UAE’s anti-money laundering regulations.

The country’s central bank did not name the banks involved in the enforcement action. In a statement it said: “All banks operating in the UAE have been allowed ample time by the [central bank] to remedy any shortcomings and were instructed in the middle of 2019 to ensure compliance by the end of that year,” the authority says. It adds that the institutions were warned “that further shortcomings would result in penalties”.

The central bank says it “will continue to impose further administrative and/or financial sanctions, as per the law, in cases of non-compliance”.

The breaches took place in late 2019, a few months after the regulator had warned them to clean up their acts in the light of a Financial Action Task Force (FATF) review in 2020 that was highly critical of the UAE’s anti-money laundering regime.

It said: “The UAE’s strategic geographical location between continents, in proximity to conflict zones and its own jurisdictional complexity of seven Emirates, two financial free zones and 29 commercial free zones, further increase the UAE’s risk of attracting funds with links to crime and terror.”

The FATF castigated the country’s authorities for “minimal” implementation of UN sanctions and “lacklustre efforts” to tackle trade-based money laundering.

The UAE’s effectiveness in penalising firms for facilitating financial crime, as well as investigating and prosecuting money laundering, were deemed ‘low’ – the task force’s lowest score.

Some financial crime experts believe the sanctions against the banks are not tough enough, with the average fine handed to each bank totalling little more than US$1 million.

“I think it’s a good sign that they are beginning to take enforcement action,” says Lakshmi Kumar, policy director at Global Financial Integrity (GFI) – a think tank focused on illicit financial flows, corruption and money laundering.

“One thing I would be concerned about is the deterrence value of these fines. When the US fined HSBC, it was less than 5% of their pre-tax profit in 2012. It is safe to say that fines of [a few] million are meaningless given the size and scale of operations of these financial institutions,” she added.