The UAE Central Bank building in Abu Dhabi. The UAE has made significant progress in combating money laundering and financing of terrorism over the past few years. Photo: Central Bank of the UAE
The UAE Central Bank building in Abu Dhabi. The UAE has made significant progress in combating money laundering and financing of terrorism over the past few years. Photo: Central Bank of the UAE
The UAE Central Bank building in Abu Dhabi. The UAE has made significant progress in combating money laundering and financing of terrorism over the past few years. Photo: Central Bank of the UAE
The UAE Central Bank building in Abu Dhabi. The UAE has made significant progress in combating money laundering and financing of terrorism over the past few years. Photo: Central Bank of the UAE

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UAE Central Bank revokes licence of Dirham Exchange for anti-money laundering misconduct

The banking regulator also removed the registration of Hawala provider RMB Commercial Brokers

The National

August 09, 2023

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The UAE Central Bank has revoked the licence of UAE-based exchange house Dirham Exchange and struck its name from the register, as the banking regulator continues to crack down on financial misconduct.

It also revoked the registration of Hawala provider RMB Commercial Brokers.

The administrative sanctions followed an appeals procedure in line with laws regulating the combating of money laundering crimes, financing of terrorism and financing of illegal organisations, the Central Bank said on Wednesday.

Sanctions were levied against the two companies after examinations conducted by the Central Bank found “serious regulatory misconduct, including anti-money laundering misconduct and collusion in evading the central bank's instructions to the exchange house not to engage in remittance transactions with certain countries”.

“The findings showed that they had a weak compliance framework and failed to comply with their regulatory obligations and to report regulatory breaches to the CBUAE.”

The UAE has made significant progress in combating money laundering, the financing of terrorism and weapons proliferation over the past few years.

Last month, the UAE announced plans to establish federal prosecution offices dedicated to money laundering and other economic crimes.

The new offices are viewed as a “first step towards investigating and cracking down on economic crimes and money laundering”, state news agency Wam said at the time.

They will deal with corporate crimes, bankruptcy, regulation of competition, financial markets, intellectual property and trademarks, and customs evasion offences.

The Arab world's second-biggest economy has sought to counter the threat posed by economic crimes.

UAE authorities have extradited 899 criminals since 2020, of whom 43 were involved in money laundering. Ten of those were terrorists or were financing terrorist activities.

The UAE has issued fines of more than Dh115 million ($31.3 million) in the first quarter of this year in its fight against money laundering and the financing of terrorism.

Last month, the UAE’s Executive Office of Anti-Money Laundering and Countering the Financing of Terrorism held a workshop with the World Bank to boost its framework against financial crimes.

During the workshop, the UAE authorities discussed, identified and evaluated money laundering and terrorist financing risks to draft effective mitigation policies.

Our legal consultants

Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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