Financial Transaction Regulations in the UAE: Compliance and Reporting

Stay informed about the UAE’s financial transaction regulations, ensuring compliance and transparent reporting. Navigate the evolving landscape with confidence and integrity.

Country Overview

The wealthy and smart United Arab Emirates (UAE) is the region’s #1 fintech hotspot. Dubai, in particular, is set to compete with international digital hubs like Berlin, London, and Singapore. The reason is because they are rolling out financial transaction regulations The World Economic Forum’s Global Competitiveness Report 2020 ranks the UAE among the top ten in the world for its technology and communications technology (TCT) adoption and digital legal set. Also, strong cybersecurity has helped to solidify its fintech-friendly status. The UAE ranked #4 in the world on the Global Cybersecurity Index 2023, developed by the United Nations’ International Telecommunication Union. 

Although the COVID-19 virus drove a 6.1% shrinkage in the Emirati economy in 2020. This could possibly stall progress and allow for regional actors like Saudi Arabia to gain ground. However, the future of the UAE’s digital economy is all set. Digitalization continues at breakneck speed authorities are ambitious and venture capital giants are pouring in. The Emirati banking sector has continued to be strong amidst the health crisis. Also, the International Monetary Fund (IMF) is looking at a 2023 GDP growth rate of 3.1%.

As the UAE emerges from the COVID-19 trauma, it plans to revamp its economy by moving into innovative things like digital currency, blockchain, artificial intelligence, and things last but not least, big data. The UAE already ranks top in the Arab world, and #32 in the world, for innovation in the economy, according to the Global Innovation Index (GII) 2023, developed by Cornell University, INSEAD also the World Intellectual Property Organization (WIPO). 

These days, the UAE is focused on central bank digital currency (CBDC), a licensing system for providers of crypto assets, AML/CFT, data security in Abu Dhabi and a Dubai-based technology hub. As the state digitalizes, regulators have a window to support financial transaction regulations, especially among non-Emirati people. The UAE is the globe’s second-largest source of remittances, and its high total of migrant workers would benefit from low-cost and more accessible payment systems. 

The Abu Dhabi Global Market (ADGM) Organization of Data Protection (ODP) is the primary data body for the ADGM financial free zone.

The ADGM Financial Services Regulatory Authority (FSRA) aims to ensure fair, good and robust financial transaction regulations in the ADGM financial-free zone.

The Dubai Financial Services Authority (DFSA) controls the financial services matters in the Dubai International Financial Centre (DIFC) financial free zone. 

The Securities and Commodities Authority (SCA) controls and oversees the UAE’s financial transaction regulations.

Policy, Laws and Regulations

Law on Electronic Dealings and Trust Services

In September 2021 Federal Decree-Law Number. 46/2021 on digital Transactions and Trust Services was rolled out. This repealed the 15-year-old Federal Law No.1/2006 on E-commerce and trades. To support digital transformation work in the UAE, the new law promotes and facilitates all sorts of electronic transactions, protecting the rights of customers who have electronic transactions.

According to the law, trust services include things like creating electronic signatures; issuing certificates of verification for qualified electronic signatures; creating electronic stamps; giving certificates of authentication for qualified digital stamps; and issuing certificates of authentication for websites. 

The new law took effect on January 2, 2022. The law does give a one-year grace period for businesses to comply. 

Biometric Verification System, August 2021

UAE’s Ministry of Interior partnered with Abu Dhabi Islamic Bank to use biometrics for onboarding. Any bank’s mobile app can send a selfie to the Ministry of the Interior, and the picture is verified using body recognition technology and biometric matching. Onboarding also requires users to tap their Emirati ID card to their hand-held phones for data retrieval.

The Emirati government has displayed increasing interest in supporting the use of biometric technology to access services. In April 2021, the UAE rolled out a capability that enables residents to connect their faces with their UAE Pass digital IDs. People can now access online government services through facial recognition.

2023-2026 Strategy, 12 July 2021

The central bank kicked off its 2023–2036 Strategy, which aims to secure the UAECB’s place as one of the top ten central banks on the planet and promote digital transformation in the financial services area. Major plans include the making of a central bank cryptocurrency and a digital identity system. This as well as to further use the power of innovative technologies such as artificial intelligence and big data. The plan also aims to promote green initiatives in the country and strengthen financial inclusion. 

The Dubai International Financial Centre Innovation Hub

Thus, the hub was inaugurated by Deputy Ruler of Dubai and Head of the DIFC, Sheikh Maktoum. The Innovation Hub aims to bring together startups, tech unicorns, and big tech companies to cultivate Dubai’s fintech ecosystem. Startups will get financial support from the DIFC FinTech Hive’s accelerator system and the USD $100 million FinTech Fund. DIFC Governor Shahzaib Shah stated, “With a strong focus on promoting promising companies and innovative ventures, DIFC is improving the strategic and sustainable development of the country to be future-ready. The DIFC Innovation Hub is the Middle East’s dedicated zone for innovators and investors to take advantage of the extraordinary potential of new types of technology.”

Anti-Money Laundering also Countering the Funding of Terrorism Office, February 24, 2021

The UAE Cabinet approved the creation of the Executive Office of the Anti-Money Laundering and Ending the Financing of Terrorism. These will implement the National AML/CFT Strategy and National Action Plan (NAP). At this end, the Executive Office seeks to strengthen national and international harmony. Also, collaborate with the Gulf Cooperation Council, the Working Group on AML-CFT, G8 and the Financial Action Task Force (FATF). The aim is to improve information sharing between sectors and support legislative moves to improve the national AML/CFT framework. Also, work with the Ministry of Foreign Affairs thus International Cooperation in showing progress to the Higher Committee on AML/CFT.9

On 13 April 2023, the National Commission for Combating Money Laundering and Financing of Terror and Illegal Organizations (NAMLCFTC). They took up the AML/CFT for financial institutions and designated non-financial firms and professions. The guidelines seek to raise knowledge on adherence to AML/CFT regulations, as well as downsides and penalties for non-compliance.

Abu Dhabi Global Market Data Safety Regulations, 11 February 2021

The ADGM made some brand new data protection regulations. These new laws are modelled on the European Union’s General Data Protection Regulation (GDPR). This increases data subjects’ rights and sets up brand new obligations on data companies and controllers. The regulations apply to processors and managers of data in the ADGM, even if the processing of this occurs outside the ADGM. Data subjects have the right to have their records erased. Also, access, rectification, portability and the right to object. The regulations made a new Office of Data Protection (ODP), a data breach notification system. This includes record-keeping, requirements for data security and very hard non-compliance penalties.

Lawbreakers may face fines of up to USD $40 million. Businesses may be asked to appoint a data protection official in some scenarios. International movement of data may occur if the receiving person, business or jurisdiction adheres to a decent standard of data protection. Businesses made after 14 February 2021 had until 14 August 2021 to abide by the new regulations. Also, those established before 14 February 2021 have up to 14 February 2022 to comply with these laws. Until the end of the transitional period. Thus, the preexisting data protection regulations will still be in effect.

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