Covid exacerbates money laundering risks: CBUAE

The Central Bank of the UAE said on Sunday that the Covid-19 pandemic has exacerbated money laundering and terrorist financing risks that are prevalent in the financial sector.

In a report titled “Typologies in the Financial Sector", the CBUAE also identified the increased risks of fraud, bribery, corruption, charity and disaster fraud, a heightened risk of cyber-attacks, and external fraud caused by the pandemic.

The report observed that there is an increase in the use of unlicensed money service providers as well as e-commerce to launder money.

Khaled Mohamed Balama, governor of CBUAE, said the report is part of “ongoing efforts to address money laundering and terrorist financing trends and typologies emerging from the Covid-19.”

“Widespread lockdowns have resulted in a significant surge in e-commerce. Due to limited ability to move funds and goods during the pandemic, illicit actors are turning to e-commerce as a money laundering tool,” the CBUAE said.

The number of so-called money mules - people who receive illicit funds into their bank accounts to hold or withdraw and wire elsewhere, taking a commission for their services - increased, with accounts in the majority of cases belonging to low-income individuals from Africa and Asia, the bank said.

The report identified fraud risks such as companies or individuals submitting false claims to qualify for government stimulus support measures.

“As we continue to monitor and learn more about the spread of Covid-19 in our communities, we have recently observed heightened external fraud threat, especially with cybercriminals exploiting both traditional and digital channels, to remotely perpetrate cyber-enabled fraud attacks at scale in a rapidly evolving environment,” the CBUAE said.

The report seeks to identify and raise awareness of the emerging risks in the financial sector and enable the concerned supervisory authorities and financial institutions to remain vigilant and address these risks in a timely manner. The report comes as the CBUAE steps up efforts to combat illicit financial flows.

The Financial Action Task Force, an intergovernmental anti-money laundering monitor, said last year that “fundamental and major improvements” were needed to avoid it placing the UAE on its “grey list” of countries under increased monitoring.

The report was produced by the Supervisory Authorities Sub-Committee, which is chaired by CBUAE. The sub-committee 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).

issacjohn@khaleejtimes.com