Abu Dhabi, UAEWednesday 1 April 2020

UAE Central Bank in talks with Pakistan counterpart to assess breach of money laundering laws

The regulator said it is has 'zero tolerance' for money laundering and terrorism financing

The UAE Central Bank directed banks to replenish ATMs with new banknotes of all denominations to prevent the spread of coronavirus. Sammy Dallal / The National
The UAE Central Bank directed banks to replenish ATMs with new banknotes of all denominations to prevent the spread of coronavirus. Sammy Dallal / The National

The Central Bank of the UAE is in consultations with its counterpart in Islamabad and will sanction a Pakistani lender operating in the emirates if it deems the bank has breached its anti-money laundering (AML) laws.

The central bank has “zero tolerance for non-compliance with AML regulations,” and expects “high standards of AML compliance from all banks, including the branches of foreign banks operating in the UAE,” according to a statement on Wednesday.

“We are in close contact with the home regulator of the Pakistani bank, the State Bank of Pakistan, and will take appropriate regulatory action once we have verified the findings,” it said.

The UAE regulator’s response comes after media reports alleged that State Bank of Pakistan (SBP) discovered that the UAE operation of one of the South Asian nation’s largest banks displayed “significant irregularities” in dealings with politically exposed clients and screening some transactions.

The findings in a report by Pakistan’s central bank, finalised in the first half of 2019, was conducted after the Financial Action Task Force (FATF), a global watchdog for illicit financial activities, put Pakistan on its monitoring list, Bloomberg reported earlier this week.

Employees in some of its UAE branches allegedly helped certain customers disguise transactions by issuing pay orders in their own names, while gaps in risk profiling and monitoring reflected an “ineffective compliance function and compliance culture”, the SBP said. In an earlier draft version of its inspection report, also seen by Bloomberg, the central bank said UAE staff skirted rules when opening an account for Duduzane Zuma, the son of former South African President Jacob Zuma, and for relatives of Gabonese President Ali Bongo.

However, the Pakistani central bank’s final inspection report said the lender took some remedial measures.

In September last year, New York’s banking regulator fined the Karachi-based bank for weak anti-money-laundering controls and sanctions compliance and ordered it to surrender its license, effectively removing the lender from the US financial system.

Pakistan was put on the FATF monitoring list in June 2018 and has pledged to improve compliance with global anti-money laundering and counter-terrorism financing controls.

“Despite a high-level commitment from Pakistan to fix these weaknesses, Pakistan has not made enough progress,” Xiangmin Liu, the FATF president said in October last year. “Pakistan needs to do more and it needs to do it faster.”

The UAE, which is home to more than 50 local, regional and international banks has strict laws to deal with money laundering and financing of terrorism.

Last June the UAE become the first GCC country to launch 'goAML', a reporting platform developed by the United Nations to curb organised crimes. More than 900 entities including, banks, insurance companies and money exchange centres, are part of the platform to help the central bank prevent money laundering, financing of terrorism and other illicit financial activities, the state news agency Wam said in a statement at the time.

Updated: March 18, 2020 06:34 PM

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