18 Apr 2023

UAE's Proactive Approach to VASP & VA Compliance: A Clear Path for Financial Institutions

As the UAE continues to strengthen its position as a leading financial and economic center, it has taken significant steps to establish a proactive and transparent approach to Virtual Asset Service Providers (VASPs) and Virtual Assets (VAs) compliance. 

 

Recently, the Central Bank of the UAE (CBUAE) released updated Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidance for Licensed Financial Institutions (LFIs), bringing clarity and transparency to the regulatory landscape. In this article, we explore the key highlights of the UAE's new guidance and the benefits it offers to VASPs and LFIs.

 

VASPs in the UAE: Regulated and Flourishing

 

The UAE has established a regulatory framework for VASPs that varies in degrees and dimensions across different regulatory authorities. These include the UAE Securities and Commodities Authority (SCA), the Virtual Asset Regulatory Authority (VARA), the Financial Services Regulatory Authority (FSRA), the Dubai Financial Services Authority (DFSA), and the CBUAE. These authorities regulate VASPs at the federal and regional levels, ensuring comprehensive oversight.

 

Attractiveness of the UAE for VASPs

 

The UAE's appeal to VASPs is attributed to various factors. Its status as a global financial and economic center, coupled with cutting-edge technological infrastructure, preferential tax regimes, and forward-thinking regulatory environments, make it an ideal destination for VASPs seeking to operate in a secure and transparent ecosystem. Furthermore, the UAE government has streamlined the process of setting up VASP operations, offering tax exemptions and legal protections.

 

The Guidance: A Path to Compliance - Covering Essential Aspects of VA Service Provision

 

The new guidance released by the CBUAE addresses crucial aspects of VA service provision, ensuring compliance with AML regulations and safeguarding customers. It outlines requirements such as Know Your Customer (KYC) registration, capital adequacy, fraud prevention, customer due diligence, and reporting obligations. These measures are designed to protect customers, maintain proper records, and enable regular financial reporting.

 

Registration and Ongoing Supervision

 

VASPs must register with the UAE Central Bank before commencing operations. The registration process entails providing detailed information about their business activities and personnel. Once registered, VASPs will be subject to ongoing supervision by the Central Bank, which includes regular monitoring of their operations and compliance with applicable laws and regulations.

 

Key Takeaways from the Guidance Subheading: Enhancing Clarity and Understanding

 

The new guidance offers key takeaways that enhance clarity and understanding for LFIs and VASPs operating in the UAE. These include: 

  • Clear definitions of VASPs and VAs 
  • Identification of activities leading to VASP categorization 
  • AML/CFT risks faced by VASPs and VAs 
  • LFIs' exposure to AML/CFT risks when dealing with VASPs and VAs, and 
  • An explanation of regulatory authorities' responsibilities. 

 

Additionally, the guidance emphasizes the importance of Customer Due Diligence, ongoing transaction monitoring, and a risk-based approach to AML compliance.

 

How KYC-Chain Supports Compliance Efforts - A Comprehensive Onboarding Workflow Solution

 

If your LFI or VASP operates in or seeks to enter the UAE market, KYC-Chain’s end-to-end onboarding workflow platform offers a comprehensive solution. Our platform enables secure and efficient KYC checks that ensure compliance with the UAE's evolving AML/CFT and KYC rules and regulations. 

 

With KYC-Chain, you can streamline your onboarding process by customizing a user’s identity journey. This allows you  to carry out the necessary ID document verification, ID data verification, AML screening, company KYB checks and wallet screening through one single platform.

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