UAE: Fines announced for owners, managers of unlicensed virtual asset service providers

The supervisory authorities note that suspicious parties are employing diverse and innovative ways of carrying out fraudulent schemes

by

Waheed Abbas

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Published: Mon 6 Nov 2023, 2:25 PM

Last updated: Mon 6 Nov 2023, 11:50 PM

The anti-money laundering branch of the Central Bank of the UAE on Monday issued guidelines to deal with unlicensed virtual asset service providers (VASPs).

The National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC) says VASPs operating in the UAE without a valid licence will be subject to civil and criminal penalties including, but not limited to, fines against the entity, owners, and senior managers.

Firms that demonstrate willful blindness in dealing with unlicensed VASPs, and have weak anti-money laundering, combating financing of terrorism (AML/CFT) and counter-proliferation financing controls could also be penalised.

“The new guidance on combating the use of unlicensed virtual asset service providers comes at a time when virtual assets become more accessible through digital channels. As our digital economy matures, our work on combating all kinds of financial crimes intensifies through raising awareness of their risks and emphasising the importance of compliance with relevant regulations and legislation to ensure the integrity of the UAE's financial system,” said Khaled Mohamed Balama, Governor of the Central Bank of UAE and chairman of the NAMLCFTC.

The guidelines were issued in cooperation with other regulatory bodies in the country such as the Dubai Financial Services Authority, Abu Dhabi Global Market, Securities and Commodities Authority, Ministry of Justice, Ministry of Economy and Virtual Assets Regulatory Authority.

The supervisory authorities noted that suspicious parties are employing diverse and innovative ways of carrying out fraudulent schemes.

Some of the most prominent indicators of fraudulent companies are the lack of a regulatory licence, no physical presence, unrealistic promises/Ponzi schemes, poor website and communications, pressure to invest quickly, investments in unlicensed products (virtual assets), no consumer protection, lack of regulatory disclosure, no record of compliance, social engineering, fraudulent ICO, fake wallets and exchanges, illicit use of virtual currencies and purchase or sale of freehold property/real estate, among others.

The new guidelines will help LFIs, designated non-financial businesses and professions (DNFBPs), and VASPs to improve their governance and operational processes, the Central Bank said.

These will also guide firms to consult the FATF Report on Red Flag Indicators of Money Laundering and Terrorist Financing regarding virtual assets and specifically require them to remain vigilant of the various fraudulent methods unlicensed virtual asset services firms adopt. They will also help firms to manage money laundering, financing terrorism, and proliferation financing risks effectively. These rules will ensure due diligence is conducted to identify instances of forged documents and sanctions evasion in line with the FATF regulations.

The companies are also required to identify instances whereby investors/customers are actively seeking or repeatedly utilising the services of unlicensed virtual asset service providers.

The regulators asked entities to carefully analyse transactions to distinguish new high-risk patterns and adjust their systems of monitoring and alerts to adopt new rules for reporting.

The Central Bank said companies should report suspicious transactions and activities to the UAE Financial Intelligence Unit (FIU).

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