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    CBUAE to Cease COVID Relief Support, Issues Guide on AML/CFT Screening

    September 23, 2021

    The Central Bank of the UAE (CBUAE) held a meeting that focused on plans for the gradual withdrawal of the extraordinary support measures that were introduced due to the COVID-19 pandemic. This includes the gradual and well-calibrated withdrawal of the Targeted Economic Support Scheme (TESS), the loan deferral component of which is set to expire by the end of 2021. However, the zero cost lending facility may be used to grant new loans until mid-2022. In the short term, CBUAE will leave unchanged the temporarily lowered reserve requirements for banks and the level of the loan-to-value ratio applicable to mortgage loans for first-time home-buyers. Also, the relief measures that allowed banks to maintain lower capital and liquidity buffers are sent to expire by the end of 2021. In a separate release, CBUAE published guidance on transaction monitoring and sanctions screening for the licensed financial institutions, along with a report on typologies in the financial sector.

    The typology report, produced by the Supervisory Authorities Sub-Committee, aims to identify and raise awareness of the emerging risks in the financial sector and to enable the concerned supervisory authorities and financial institutions to remain vigilant and address these risks in a timely manner. A pilot group of financial institutions was selected to identify the unique risks prevalent in the sector and exacerbated by the COVID-19 pandemic. The typologies identified in the report include the risk of money laundering and terrorist financing, fraud, bribery, corruption, charity and disaster fraud, cyber-attacks, and external fraud caused by the COVID-19 pandemic. The report observed that the risks derived from the typologies identified are additional to the risks of crimes related to money laundering and terrorist financing which outlined in the UAE’s National Risk Assessment and are likely to be prevalent across the wider financial sector. Among those risks are an increase in the use of unlicensed money service providers and a heightened risk of cyber-attacks. The report reveals effective methods of mitigation, identification, and resolution implemented by financial institutions, as well as trend analysis of risks observed.

    The guidance on transaction monitoring and sanctions screening aims to promote the understanding and effective implementation by licensed financial institutions of their statutory anti-money laundering and combatting the financing of terrorism (AML/CFT) obligations. The guidance came into effect on September 13, 2021 and requires licensed financial institutions to demonstrate compliance with the requirements within one month from the said date. As stipulated in the guidance, licensed financial institutions should establish and maintain effective transaction monitoring and sanction screening programs consisting of a well-calibrated risk-based framework, training and awareness of their employees and active oversight by their board. In addition, licensed financial institutions should ensure the ongoing enhancement of their transaction monitoring and sanctions screening systems based on their risks. The systems, including the related monitoring and screening models used should be subject to independent testing, validation, and auditing.

     

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    Keywords: Middle East and Africa, Banking, COVID-19, TESS, Credit Risk, Regulatory Capital, LTV, AML/CFT, Cyber Risk, Lending, Fraud Detection, CBUAE

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