Since the Kingdom of Saudi Arabia, the United Arab Emirates, Egypt and the Kingdom of Bahrain announced on Monday 5 June 2017 that they would sever diplomatic ties with, and cut off transport links to, Qatar (see our e-bulletin here), the UAE government, port authorities and financial services regulators in the UAE have made a number of announcements to provide direction and clarification. The update below sets out the recent instructions issued by the UAE Central Bank and the Dubai Financial Services Authority.
1. THE RESOLUTION
On 8 June 2017 the UAE Government issued Cabinet of Ministers Resolution No.18 of 2017 (the Resolution) which updates the list of designated terrorist organisations and individuals maintained pursuant to Federal Law No. 7 of 2014 on the Combating of Terrorism Offences (the Designated List). Similar action has been undertaken by Saudi Arabia, Egypt and Bahrain to update their respective lists of designated terrorist organisations and individuals.
The UAE Central Bank responded swiftly to the Resolution by issuing two circulars, Circular No. 156 of 2017 and Circular No. 157 of 2017 both issued on 9 June 2017 to UAE banks, main branches of foreign banks, money changers, finance and investment companies (Central Bank licensees). Similarly, the DFSA, via a "Dear SEO" letter issued on 12 June 2017, has confirmed that DFSA authorised firms are required to comply with the requirements of the Resolution.
The Resolution and directions and clarifications provided by the Central Bank and the DFSA require Central Bank licensees and DFSA authorised firms to:
- search for and freeze any accounts, deposits, investments or other financial instruments;
- identify and report any credit facilities or safe deposit boxes or any financial transfers executed at any time; and
- deny access to safe deposit boxes and stop any financial transfers;
in the name of any individual or entity appearing on the Designated List,
Detailed reports must provide information relating to withdrawals and transfers in and out of existing and closed accounts including the names of depositors/transferors, beneficiaries and their sources. The reports must be supported by documents including account opening forms, documents authorising a person to open and or operate accounts including the account mandate form, signing authority or power of attorney, account statements since opening of the account, deposit, withdrawal and transfer slips, swift confirmations and other forms of fund transfer confirmation, documents verifying source of funds, credit facility application forms, term sheets or offer letters and related documents, cheques and other relevant documents connected to the customer/client relationship or dealings on the account.
The above information must be provided from the date of opening such accounts to the current date. The deadline for filing such reports to the Central Bank's Financial Intelligence Department was 15 June 2017.
The Central Bank has also identified six financial institutions based in Qatar which hold accounts for individuals or entities named in the Designated List, and now requires enhanced customer due diligence to be undertaken in relation to activities or transactions between any of the specified Qatari financial institutions, Central Bank licensees/authorised firms and their customers, as well as other parties. The Qatar financial institutions specified in the Central Bank circular are:
- Qatar Islamic Bank;
- Qatar International Islamic Bank;
- Barwa Bank;
- Masraf Al Rayan;
- Qatar National Bank; and
- Doha Bank.
As noted in our previous e-bulletin, while there is currently no ban on transfer of payments between UAE and Qatari financial institutions, in light of the above directions issued by the UAE Central Bank and the DFSA, UAE and DFSA financial institutions should treat Qatar as a high risk jurisdiction and on that basis classify customers accordingly. Going forward a prudent firm will therefore need to consider:
- whether it is necessary to undertake enhanced due diligence on Qatari customers in particular to ensure compliance with UAE and DIFC laws and regulations;
- exercising a greater degree of diligence in relation to transaction monitoring during the customer relationship including in relation to customers undertaking transactions involving payment flows to or from Qatar; and
- documenting and maintaining records which corroborate that funds transfers are connected to specific transactions or events which are consistent with the customer's business.