Challenges in customer due diligence for banks in the UAE

Author:Dina ElYacoubi
Position:Thomas Jefferson School of Law, San Diego, California, USA
Pages:527-539
SUMMARY

Purpose The purpose of this paper is to unpack the customer due diligence (CDD) vulnerabilities and to examine and analyze the UAE specific dynamics that make the country exposed to these threats. This research also intends to put on the table suitable solutions and remedial action steps that the UAE government, regulators and financial institutions (FIs) can adopt. Design/methodology/approach This study is qualitative in nature. Findings Despite the impressive... (see full summary)

 
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Challenges in customer due
diligence for banks in the UAE
Dina ElYacoubi
Thomas Jefferson School of Law, San Diego, California, USA
Abstract
Purpose The purpose of this paper is to unpackthe customer due diligence (CDD) vulnerabilities and to
examine and analyze the UAE specic dynamics that make the country exposed to these threats. This
research also intends to put on the table suitable solutions and remedial action steps that the UAE
government,regulators and nancial institutions (FIs) can adopt.
Design/methodology/approach This study is qualitativein nature.
Findings Despite the impressive regulatoryframework and the satisfactory practices by FIs, there still
remains some UAE specic challenges that make it difcult to undertake CDD for certain customers. The
challengesthat were identied include difculties in Arabic names,complications in identifying the benecial
owners, impediments in establishing the source of wealth/funds,concerns with politically exposed persons,
the increasingcost of compliance that resulted in a patternof de-risking within FIs.
Research limitations/implications The international bodies whose mandate is to formulate the
necessary anti-money laundering and combating the nancing of terrorism policies and regulations
for global implementation together with Association of Certied Anti-Money Laundering Specialists
(ACAMS) have published sufcient studies on CDD-related issues in the UAE. Yet on the other hand,
very limited literature was found by independent scholars. This paper will, therefore, largely
reference publications by Financial Action Task Force, the International Narcotics Control Strategy
Report and ACAMS. It will also include works by respected law rmsthathaveoperationsinthe
UAE, local publications, government documents, academic papers by the International Monetary
Fund and the World Bank, legal journals and others.
Originality/value Illicit actors exploit the UAEs relatively open business environment, a
multitude of global banks and exchange houses and global transportation links to undertake illicit
nancial activity [...] the UAE does not have any major anti-money laundering (AML) deciencies.
However, the monitoring of FIs for AML purposes, particularly in the area of CDD, could be improved.
This paper unpacks the CDD vulnerabilities and analyzes the UAE specic dynamics that make the
country exposed to these threats. This research also puts on the table suitable remedial action steps
that the UAE government, regulators and FIs can adopt.
Keywords AML/CFT Framework, CFT
Paper type Research paper
1. Introduction
The Financial Action Task Force (FATF) and other key stakeholders, in particular
the Basel Committee on Banking Supervision (BCBS), place customer due diligence
(CDD) at the heart of an effective anti-money laundering and combating the nancing
of terrorism (AML/CFT) framework. CDD is intended to ensure that nancial
institutions (FIs) know the person on whose behalf they are holding funds for or
conducting transactions for and to identify any potential risk that he/she may pose.
CDD is identifying who the customer is and verifying his/her identity on the basis of
documents, data and/or information obtained through reliable sources. This requires
the validation of customers name, address, date of birth and other ofcial
identication. An effective CDD undertaking requires the following:
Customer due
diligence
527
Journalof Money Laundering
Control
Vol.23 No. 2, 2020
pp. 527-539
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-08-2019-0065
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm

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