The UAE Central Bank Considering Bank Fines

Over the last few years, the UAE Central Bank has steadily been making amendments to its banking laws which were first passed over 30 years ago. From limiting fees UAE banks can charge customers, to the mortgage cap law and the Al Etihad Credit Bureau, the Central Bank is set to make another major amendment to UAE banking laws in the coming months. First reported by The National, the UAE Central Bank is making reforms that could allow it to fine banks that operate in the country. Circumstances leading to fines and the possible cost of penalties are unknown as the discussions are still in preliminary stages at the moment.

It is believed that the forced account closures at Standard Chartered’s UAE operations has contributed to these reforms. Standard Chartered is not the first bank in the UAE to close client bank accounts, as HSBC took similar actions in June 2013. However, the UAE Central Bank does not seem impressed, to say the least, with how some banks have been dealing with their SME (small & medium enterprise) clients. Standard Chartered is said to have given one month notices to these clients, telling them to close their accounts with the bank and make other arrangements. The reason for the closure of these accounts comes on the heels of increased pressure from US regulatory authorities who recently issued a USD 300 million fine to the bank in connection to transactions conducted with high-risk clients. The bank had considered selling parts of its SME business assets but interested buyers quickly turned away at the potential risk of more penalties as well as the tight deadline imposed by the US regulators.

As a result of the settlement with the New York Department of Financial Services, Standard Chartered agreed to close some customers’ accounts that posed a perceived high-risk for possible money laundering schemes. The UAE Central Bank commented on the situation at that time by saying that Standard Chartered is liable to legal action because of the “material and moral damage falling on them.” The UAE Central Bank noted that Standard Chartered’s UAE branches committed “no significant violations” of international money laundering rules.

Due to this case, the UAE Central Bank has been considering reform to their banking laws in an effort to protect their consumers’ rights within their borders. Levying fines against banking institutions that violate their regulations would curtail further incidents. However, how such a law would effect UAE residents remains to be seen, although one can assume account-opening policies will become more stringent. 

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