The CBUAE renewed its commitment to combating terrorist funding and ensuring regulated financial institutions ("FI's") comply with their sanctions obligations during its two day summit this week in Abu Dhabi. The Central Bank welcomed 400 guests including the UAE’s Federal Authorities, the United Nations Department of Political and Peacebuilding Affairs (DPPA) and the U.S. Treasury attaché.
A key announcement of the summit was that the CBUAE will launch a new supervisory process to test the adequacy and effectiveness of FI's sanction screening systems. Details of how this new process will work and what exactly the CBUAE will change have not been released but FI's should continue to ensure their sanctions compliance frameworks are integrated throughout their compliance function, are up to date with best practice procedures, and are customised to the size and exposure of the institution.
The CBUAE has been very forthcoming in recent years with its suggestion for FI's to use technology to ensure sanctions compliance. Given the sheer magnitude of FinTech firms with new offerings available to enhance sanctions screening processes, FI's would be wise to look into how these offerings can make a sanctions program more efficient, effective and cost-effective. And when a compliance process becomes more cost-effective, mitigation of risk becomes more affordable, allowing FI's to consider higher risk business, potentially contributing to the bottom line.
FI's would also be wise to review KYC procedures for non-financial businesses. Non-financial businesses are expected to have robust sanctions regimes and have been under more scrutiny in recent years by the regional and international regulators. OFAC has been very clear that it will not hesitate to go after non-financial businesses which violate sanctions due to weak sanctions programs, as well as the FI's who facilitate those sanctioned transactions.
"The objective of this summit is not only to demonstrate our commitment against terrorism, but to call on financial institutions to identify ways to strengthen their knowledge and improve their control framework. Our country is a global financial and trade hub in a volatile region – therefore, we must ensure that the correct systems and technological tools are in place to combat proliferation and terrorist financing."