New Guidance to Registered Hawala Providers

The Central Bank of the UAE (CBUAE) has issued a new guidance on anti-money laundering (AML) and combatting the financing of terrorism (CFT) to Registered Hawala Providers (RHP) and Licensed Financial Institutions (LFIs) that provide services to the RHP. The new guidance, which came into effect on 18 August 2021, takes the standards and guidelines of the Financial Action Task Force (FATF) to assist the understanding and effective implementation of the statutory AML/CFT obligations for RHPs and LFIs in the UAE.   

Unless otherwise noted, this Guidance applies to all natural and legal persons which are licensed and supervised by the CBUAE in the following categories: 

• Registered Hawala Providers 
• National banks
• Branches of foreign banks
• Exchange houses

The guidelines apply to all Financial Institutions, and the members of their boards of directors, management, and employees, established and/or operating in the territory of the UAE and their respective Financial and Commercial Free Zones, whether they establish or maintain a Business Relationship with a Customer, or engage in any of the financial activities and/or transactions or the trade and/or business activities outlined in the regulations on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations.

Registered Hawala Providers are only permitted to provide well-defined services, like non-commercial personal remittances and money transfer services to support commercial operations. However, they are NOT permitted to engage in any of the following transactions: 

• Receive deposits
• Exchange currencies 
• Purchase or Sell travelers’ cheques
• Provide any financial services other than money transfers
• Execute transactions involving or on behalf of any other hawala provider in the UAE 

Hawaladars’ business model is built around satisfying customers’ needs to move money rapidly across borders, but in recent years the hawala providers have been repeatedly abused to transfer illicit funds, including funds involved in terrorist financing. Consequently, the Registered Hawala Providers are asked to comply fully with UAE requirements relating to targeted financial sanctions and suspicious transaction reporting (STR).

RHP are further required to:

• Establish and maintain an effective AML/CFT compliance program designed to prevent the misuse of this activity to facilitate money laundering or terrorist financing. This program should include a competent compliance officer, appropriate customer and agent due diligence, transaction monitoring, and record-keeping.
• Must maintain an account with a bank operating in the UAE to be used for settlement, and provide the CBUAE with its details. 
• CBUAE encourages LFIs to accept RHP customers and should manage any risk which may result from these transactions through the use of appropriate controls. 
• LFIs must not accept customers who are unregistered hawala providers based in the UAE, and must immediately report an STR to the UAE’s Financial Intelligence Unit, inform the CBUAE when they are detected, and closely monitor the relationship.

Any business venture in the UAE regardless of its size is required to follow the guidelines of the concerned authorities. For the past 17 years, Flying Colour Accounting and Tax Services have been assisting its clients to be compliant with the updating laws and regulations of the country. Please feel free to mail your queries at info@flyingcolour.com or contact us at +971 4 4542366.