UAE Central Bank outlines the risks of virtual asset management

The Central Bank of the United Arab Emirates has issued an instruction outlining the risks involved in dealing with virtual assets and virtual service providers (VASPs).

The new rules in the instruction are expected to strengthen controls on money laundering and terrorist financing. They are aimed at licensed financial institutions such as banks, insurance and financial companies, as well as exchange offices and payment service providers.

Under the new UAE Central Bank rules, licensed financial institutions (LFIs) will have to identify and verify the identity of all customers. LFIs will have to submit requests to the UAE Central Bank before opening an account for VASPs. However, any association with a VASP without a national licence will be prohibited.

LFIs will be required to “understand the nature of the customer’s business”, i.e. create a profile of the customer, including the types and volumes of transactions in which the customer is expected to engage. Organisations will be required to monitor the volume of non-institutional cryptocurrency transactions of individual customers with VASPs from “high-risk jurisdictions”.

The UAE Public Prosecutor’s Office has warned the public against unlicensed fundraising – fines for such violations are as high as AED 1 million. In addition, offenders face up to five years imprisonment. Thus, the prosecutor’s office is stepping up the fight against financial and digital currency-related crimes.

Pursuant to Article 41 of Federal Decree No. 34 of 2021 on Combating Rumours and Cybercrimes, anyone who promotes cryptocurrency, collects funds from the public for the purpose of investing them, managing them, using them, without having a licence will be prosecuted by law.

Fines will range from AED 250,000 to AED 1 million. In addition, the perpetrators will have to return all the funds collected. The reminder was part of an information campaign to raise legal awareness among the public.

The prosecutor’s office had earlier reminded the public of heavy fines – up to AED 500,000 – for misleading people through advertisements or promotions. According to Article 48 of Federal Decree-Law No. 34 of 2021 on combating rumours and cybercrime, offenders face a fine of between AED 20,000 and 50,000 and/or imprisonment.

Offences include the promotion of digital or virtual currencies that are not registered in the UAE, including by an unlicensed company. The prosecutor’s office has issued a reminder as part of an ongoing campaign to promote legal literacy among the public.

Source: UAE Central Bank

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