The UAE’s exchange houses involved in the Dh164 billion remittance industry are ramping up measures to combat money laundering, as a federal decree comes into effect with more stringent regulations, including fines of up to Dh5 million.
"These standards have been established in order to upgrade the whole industry level in the way the exchange houses conduct business, which is also to make it on the same level accepted in the international financial community," Osama Al Rahma, chief executive of Al Fardan Exchange and vice chairman of the Foreign Exchange & Remittance Group, told The National on Sunday.
In an anti-money laundering meeting led by FERG – a charity organisation comprised of 70 money exchange companies – industry players and tax auditors discussed ways to improve compliance. There are approximately 100 exchange houses in the UAE, according to FERG.
As required by the Central Bank of the UAE, money exchange companies will implement a new reporting software system called “goAML,” which is used by 50 financial intelligence units around the world and developed by the United Nations Office on Drugs and Crime. Training on the new system took place at the FERG meeting.
The Central Bank was not immediately available for comment when contacted by The National.
The exchange houses also conducted internal audits last year through auditors like PwC and KPMG in preparation for the regulations.
“We all know that there are areas for development and these have been identified and we believe the exchange houses are working on these,” said Katerina Pagoni, associate director of risk consulting at KPMG, during a panel on anti-money laundering/risk assessment of exchange houses. “The areas that we would say should be focused on most is the risk assessment process and the compliance programme.”
The federal decree on anti-money laundering and countering the financing of terrorism, which came into effect on November 30, outlined stricter penalties for violations. These include: a warning, administrative fines between Dh50,000 and Dh5 million, a ban for a period of time, restrictions on management executives and licence cancellation.
Previously, the penalties did not include fines. In July of last year, the Central Bank downgraded the licences of seven exchange houses after the companies violated regulations, including anti-money laundering rules. The companies were banned from carrying out transactions related to remittances or wage payments.
In line with the new decree, the Central Bank established an independent Financial Information Unit, which is tasked with receiving and investigating all reports of suspected illicit activity submitted by financial institutions and other corporate establishments.
"The efforts taken by the regulator, the efforts taken by FERG, the efforts taken by individual exchange houses have made a lot of difference," Rajiv Raipancholia, chief executive of Orient Exchange and FERG treasurer, told The National. "If implemented properly, a lot of work can be done."