Dubai: The Central Bank of the UAE (CBUAE) has published the ‘Typologies in the Financial Sector’ report that identifies new risks to financial sector.
The report aims to identify and raise awareness of emerging risks in the financial sector and enable Financial Institutions (FIs) to remain vigilant and address these risks.
CBUAE alongside the concerned supervisory authorities have released this report as a key reference on pandemic-related typologies to the financial institutions, so they can mitigate these risks
Identifying new risks
The typologies identified in the report include the risk of:
- money laundering
- terrorist financing
- disaster fraud
The use of unlicensed money service providers (UMSO) for money laundering has increased during the COVID-19 pandemic. UMSOs do not move funds for each transaction but balance the books over a period, conducting a ‘money transfer without money movement’.
Although people will move funds legitimately through UMSOs due to speed and convenience, the anonymity of UMSOs offer means they are particularly appealing for financial criminals.
The use of virtual currencies (VCs) may be intensifying during the COVID-19 pandemic, as every criminal earning VC illegally, looks for ways to covert third party proceeds into cash or other assets. Whilst most banks’ AML policies do not allow for banking of VC exchanges, most banks do use some of the third party payment providers and payment gateways, which in turn may deal with VCs.
Citizenship by Investment schemes
Citizenship by Investment (CBI) schemes offered by countries located in the Caribbean region pose potential financial crime risks to the financial sectors in the UAE. Although CBI schemes may be pursued for legitimate purposes, in particular visa-free access to the EU, CBI schemes pose corruption, money laundering and tax evasion risks.