New laws for UAE money exchange firms

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New laws for money exchange firms
UAE Central Bank is in the process of designing new legislation to tighten the regulation of money exchange houses.

Media reports suggest the UAE Central Bank is designing new legislation to tighten regulations for money exchange houses in the country.

This, after the closure of two such companies for violating industry rules. The licenses of two exchanges, namely Al Hilal Exchange and Asia Exchange Centre, were revoked for “major regulatory violations.”  Al Hilal Exchange has also been accused of breaching money laundering compliance rules. The U.S. has also sanctioned Al Hilal Exchange for being in breach of money laundering laws and “providing financial services to previously designated Iranian banks.”

Initial details show the Central Bank is considering increasing the minimum capital required to operate an exchange house. The regulator may also push for stricter money laundering legislation. According to Osama Al Rahma, the general manager of Al Fardan Exchange and chairman of the Foreign Exchange and Remittance Group; “New regulations will benefit the industry. Some of the current rules date from 1992 and technology and services within the industry have changed a lot since then. In the payment sector new products are being developed and rules have to be in place to regulate that.”

Under existing capital requirements framed in 1992, exchange houses with an unlimited liability are required to have a minimum capital of Dh1 million to operate as a money exchange business, while Dh2 million is the minimum limit to operate as a money exchange and remittance business. In case a business wants to run as a limited liability, the capital requirement increases to Dh 50 million.

The exchange industry has grown significantly since then and now handles transactions worth billions of dollars on an annual basis. The industry offers services including payment of wages, bills and global remittances. Customers are now able to benefit from new services and products, such as online transactions via ATMs, internet and mobile phones. Some exchange firms can offer customers an opportunity to invest in bonds and other savings schemes.

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