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UAE Central Bank issues new rule on funds held in dormant bank accounts. Image Credit: Gulf News Archive

Dubai: The Central Bank of the UAE (CBUAE) has issued the “Dormant Accounts Regulation”, which intends at establishing a framework for the control and protection of dormant funds held in banks.

“To ensure the funds in dormant accounts are kept safe and available whenever the customer seeks repayment, banks are expected to have in place appropriate governance policies and procedures,” the CBUAE said in a statement.

Dormancy is defined at customer level – and not at an individual account level - in this new regulation, which sets out a mechanism whereby customers can claim their funds from the bank and customers must be able to receive any balances due to them at any time regardless of the period the customer was dormant.

Added customer protection

The customer classified as “dormant” remains so for a period of 5 years after the last transaction on the account. Then the related funds in their account(s) must be transferred to the Central Bank for safeguarding.

This will not affect ownership of the account and the funds transferred to the Central Bank will always remain available to be reclaimed by the dormant customer, or his or her legal heirs, at any time through the customer bank.

“As part of our ongoing efforts towards enhancing our consumer protection function, we have introduced the Dormant Accounts Regulation to ensure the security of consumers’ dormant funds,” said Mubarak Rashed Al Mansoori, Governor of the Central Bank of the UAE. “The regulation introduced will safeguard dormant accounts and will make certain that consumers are able to access them at any time.”

No interest on dormant funds

It is imperative customers ensure that they do not fall “dormant” in accordance with the criteria set out in the new regulation. Funds transferred to the Central Bank will no longer attract any interest payments and the Bank will not be liable for any such payments on the transferred funds.

The egulation also makes it clear that the Central Bank will not be legally responsible or obligated in any manner for any claim by a customer regarding interest returns, profits, or other, in relation to any funds transferred to it.

“Through this regulation, we aim to further reinforce the UAE’s position as a leading financial services provider in the region, as well as foster an ideal banking environment for consumers,” said Al Mansoori.

“Consumer protection remains a focus of our overarching strategy and we are committed to continuously enhancing our regulative provisions to safeguard consumer rights.”

The ins and outs of a dormant account
A dormant account has had no financial activity for a long period of time, except for the posting of interest. In the UAE, a bank account becomes dormant when there is no customer-initiated activity for one year. Customer initiated activity include normal operations of the account such as withdrawals, payments and electronic transactions.
According to Emirates NBD’s website, a dormant account means all account(s) linked to a CIF (Customer Identification File) and have not been used for more than one year.
Under the dormant status, the account is blocked from all transactions and certain documents are needed in order to reactivate it. An account usually becomes dormant if the customer has a single account and there are no transactions for a period of 12 months.
In cases where the customer has multiple accounts, and none of the accounts under his CIF have had any transactions for more than 12 months, then the status of all his accounts will change to "dormant".

Notifications
Banks notify customers before changing the status of the account/s to inactive or dormant. As a standard practice, banks in the UAE send one letter before an account becomes "inactive" (after 9 months of inactivity) and another letter immediately after an account becomes inactive.
Once the account is termed dormant, as a precautionary measure, access and withdrawal restrictions will be placed to safeguard against any unauthorised activity if the account's status changes to dormant.

How to activate a dormant account?
Most banks require the customer to visit a branch in person to change the account from a dormant status to active. Customers are required to be present in the bank with commonly accepted identification documents such as the passport with valid UAE residence visa or any UAE government issued ID.
In the case of joint accounts, all account holders will need to personally visit the branch with their original passports and valid residence visas or any UAE government issued IDs.
Non-resident account holders can activate an inactive account by writing an official letter requesting activation with necessary supporting documents such as the address proof for non-residents, customer due diligence form of the account holders, FATCA/CRS [Foreign Account Tax Com-pliance Act/Common Reporting Standards] and self-declaration of the account holders and self-attested copies of passport of the account holders.
In the case of minor account holders, the guardian needs to personally visit the branch with original passport with valid UAE visa or UAE gov-ernment issued ID.
In the case of company accounts the request for activation should accom-pany a letter signed by authorized signatories requesting activation of account(s) and valid UAE trade license.
Banks usually notify customers through mails and SMS alerts at least one month ahead of an account turns dormant. Once the account turns dormant, the bank keeps on alerting customers.

Can a bank close a dormant account?
As per the new central bank regulations, a bank can’t close a dormant account at least for 5 years. Once classified as dormant, it remains so for 5 years after the last transaction on that account. Then the related funds in their account(s) must be transferred to the Central Bank for safeguarding.
This will not affect ownership of the account and funds transferred will always remain available to be reclaimed by the dormant customer, or his or her legal heirs, at any time through the customer bank.