The Central Bank of the UAE downgraded the licences of seven exchange houses on Monday after the companies violated regulations such as anti-money laundering rules.
The exchange houses are now banned from carrying out any transactions related to remittances or wage payments, the Central Bank said in a statement on Monday. They can only deal in the sale and purchase of foreign currencies and traveller's cheques, it added.
“This decision comes after the failure of these exchange houses to regularise their status during the grace period granted by the Central Bank,” the financial institution said, explaining that the companies “violated the Central Bank’s regulations, including anti-money laundering regulations”.
Remittances are a rich source of business for exchange houses in the UAE. In the first quarter of this year, the amount sent by expatriates to their home countries rose by 17 per cent to Dh43.5 billion compared with Dh37.1bn a year ago, according to the state-run Wam news agency.
Indian workers led the remittances with Dh16bn, followed by Pakistanis, Filipinos and Omani expatriates. About 70 per cent of remittances were done through money exchanges.
The Central Bank's licence downgrade decision has affected seven exchanges: Taher Exchange, Al Hadha, Al Hemriya Exchange Company, Dubai Express Exchange, Sanaa Exchange, Cosmos Exchange and Bin Bakheet Exchange.
Abdul Salim, an accountant at Sanaa Exchange located near the Dubai Gold Souk, says the exchange house did not know why the Central Bank had downgraded their licence.
"I don't know why this has happened," said Mr Salim. "The Central Bank stopped all remittances and salary payments last week. My manager is out of the country and when he comes back he will meet the Central Bank - then we will know what the reason is. This is having a big effect on business. The business is facing a big problem."
The Central Bank said “it will not tolerate violations of financial institutions to its regulations and instructions”, and urged UAE consumers not to remit funds or pay wages via the exchange houses mentioned.