Sanctions on Iran, a historic trading partner of the UAE, have also meant that banks need to attend more closely to their local dealings. Mona Al Marzooqi / The National
Sanctions on Iran, a historic trading partner of the UAE, have also meant that banks need to attend more closely to their local dealings. Mona Al Marzooqi / The National

Region’s banks squeezed by compliance costs



Compliance costs for banks in the Middle East are soaring, as a global crackdown on money laundering and higher international capital requirements squeezes their resources, a new report from Thomson Reuters said.

Four out of five financial services companies in the Middle East polled by Reuters said that they expected compliance costs to rise over the next year.

Major regulatory changes are leading banks to take on more compliance staff, experts said.

They include the implementation of the US Dodd-Frank Act, a major legislative response to the 2008 subprime mortgage crisis, updates to the Foreign Account Tax Compliance Act, and a new global standard of risk management, the Basel III accords, that requires banks to hold more high-quality capital as a buffer against losses.

Greater enforcement of the Anti-Money Laundering Countering the Financing of Terrorism Act (AML-CFT), a US measure to ensure that bank funds do not end up in terrorists’ bank accounts, also means that the UAE’s banks must be particularly careful to scrutinise their international payment systems.

“These are increasing banks’ compliance costs by very large amounts,” said Nasser Saidi, the former Lebanese finance minister and former chief economist at the Dubai International Financial Centre.

“The trouble is that banks not only have to invest in resources and the human capital side, which is expensive, but you simply don’t have enough people with the right training in the region.”

Because UAE banks clear large volumes of trades in dollars through New York, they are forced to follow US rules – meaning that recent changes in America are hitting lenders here.

“A bank can become liable if suddenly the justice department determines that you have allowed payments for a non-US company that happens to be on a terrorist list,” said Mr Saidi. “This can be quite expensive.”

A legal precedent was set last September when a jury found Amman-based Arab Bank liable for damages in a New York court for providing financial assistance to Hamas. Arab Bank is appealing the verdict.

In the UAE, a tightening of Central Bank rules on lending has further created demand for trained compliance officers. Personal loans and mortgages have both been capped, while new technical measures for balance sheet and treasury management have made compliance officers' jobs more complicated.

“Stricter lending standards and new regulations in terms of retail loans have been introduced in the UAE,” said Jaap Meijer, an equities analyst at Arqaam Capital in Dubai.

“Capital management is now more sophisticated – requiring more frequent updates on liquidity and mismatch positions [differences in the maturities of securities held on a bank’s balance sheet].”

abouyamourn@thenational.ae

Follow The National's Business section on Twitter

From Zero

Artist: Linkin Park

Label: Warner Records

Number of tracks: 11

Rating: 4/5

The Settlers

Director: Louis Theroux

Starring: Daniella Weiss, Ari Abramowitz

Rating: 5/5

A Cat, A Man, and Two Women
Junichiro
Tamizaki
Translated by Paul McCarthy
Daunt Books 

How has net migration to UK changed?

The figure was broadly flat immediately before the Covid-19 pandemic, standing at 216,000 in the year to June 2018 and 224,000 in the year to June 2019.

It then dropped to an estimated 111,000 in the year to June 2020 when restrictions introduced during the pandemic limited travel and movement.

The total rose to 254,000 in the year to June 2021, followed by steep jumps to 634,000 in the year to June 2022 and 906,000 in the year to June 2023.

The latest available figure of 728,000 for the 12 months to June 2024 suggests levels are starting to decrease.

Anghami
Started: December 2011
Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
Sector: Entertainment
Size: 85 employees
Stage: Series C
Investors: MEVP, du, Mobily, MBC, Samena Capital

Dr Afridi's warning signs of digital addiction

Spending an excessive amount of time on the phone.

Neglecting personal, social, or academic responsibilities.

Losing interest in other activities or hobbies that were once enjoyed.

Having withdrawal symptoms like feeling anxious, restless, or upset when the technology is not available.

Experiencing sleep disturbances or changes in sleep patterns.

What are the guidelines?

Under 18 months: Avoid screen time altogether, except for video chatting with family.

Aged 18-24 months: If screens are introduced, it should be high-quality content watched with a caregiver to help the child understand what they are seeing.

Aged 2-5 years: Limit to one-hour per day of high-quality programming, with co-viewing whenever possible.

Aged 6-12 years: Set consistent limits on screen time to ensure it does not interfere with sleep, physical activity, or social interactions.

Teenagers: Encourage a balanced approach – screens should not replace sleep, exercise, or face-to-face socialisation.

Source: American Paediatric Association