Pandemic fuels financial crime, Central Bank of UAE says

The Covid-19 pandemic, which rocked financial markets and triggered economic chaos last year, has increased the risk of money laundering and terrorist financing, fraud, cyber attacks, bribes and corruption throughout the financial system, according to the UAE Central Bank.

The abuse of e-commerce services to commit fraud, the use of virtual currencies for money laundering, corporate fraud schemes, an increase in the number of unlicensed money service providers and related scams. charity and disaster are some of the trends that emerged during the pandemic, the regulator said in Typologies in the financial sector, a report released on Sunday.

The banking regulator has selected several financial institutions to observe certain activities in the market and asked them to actively engage with the authorities.

The risks arising from the identified typologies are added to the risks of crimes linked to money laundering and the financing of terrorism. These have already been described in the UAE’s national risk assessment and are “likely prevalent throughout the financial sector,” the central bank said in a separate statement.

“This report is part of our ongoing efforts to tackle specific money laundering and terrorist financing trends and typologies emerging from the Covid-19 pandemic in the financial sector,” said the Governor of the Central Bank, Khaled Balama.

“Although these risks are still in the early stages of identification, the CBUAE, alongside the relevant supervisory authorities, has published this report as a key reference on the typologies and indicators related to the pandemic to financial institutions, so that they stay on top of and be able to mitigate these emerging risks, which ultimately help preserve the integrity of the UAE’s financial system. ”

The Pandemic Typologies Report was prepared by the Supervisory Authorities Subcommittee, which is chaired by the Central Bank and includes Abu Dhabi Global Market, Dubai Financial Services Authority, Executive Office for Combating money laundering and terrorist financing (AML / CFT) and the United Arab Emirates Financial Intelligence Unit (FIU).

The United Arab Emirates have put in place strict measures to combat money laundering and this year created an agency dedicated to identifying those responsible and those suspected of financing terrorists and organized crime. The Central Bank also regularly issues guidelines on how financial institutions can assess money laundering risks.

In July, the banking regulator published guidelines governing the implementation of AML / CFT-related sanctions. In August, he issued instructions to hawala providers registered in the UAE and financial institutions that provide services to them.

Earlier this month, the Central Bank asked financial institutions, including lenders, to develop internal policies, controls and procedures to manage money laundering risks.

The typology report will help financial institutions identify risks associated with Covid and implement effective mitigation methods to keep the financial system healthy, the Central Bank said.

Among the risks identified by the report is a likely increase in the use of professional money laundering services. These use a variety of methods, including those that do not require the physical movement of cash or goods.

“Criminals who previously relied on self-executed money laundering programs can now seek help from PML,” the report said.

Widespread lockdowns have resulted in a significant increase in e-commerce. Due to the limited ability of people to move funds and property during the pandemic, “illicit actors are turning to e-commerce as a tool for money laundering,” according to the report.

Criminals can use fake digital storefronts that look like legitimate merchants. They can also use “intermediary companies” or “transaction laundering” – illicit businesses using a legitimate merchant’s platform to process illicit payments.

“This is called ‘money laundering in the digital age’, which is extremely difficult for financial institutions to detect,” the report adds.

The Central Bank said the number of “money dumb” used to launder ill-gotten funds has also increased, which is a direct result of the financial distress.

The use of virtual currencies may also intensify during the Covid-19 pandemic, as criminals who illegally earn virtual currencies would ultimately seek ways to convert third-party products into cash or other assets.

Other Covid risks include increased and unexplained cross-border cash flows to high-risk jurisdictions, terrorist organizations seeking to raise funds under the guise of Covid-related relief activities, online exploitation of impoverished communities or in financial difficulty and forced labor.

This report is part of our ongoing efforts to tackle specific money laundering and terrorist financing trends and typologies emerging from the Covid-19 pandemic in the financial sector.

Khaled Balama, Governor, CBUAE

“The citizenship-by-investment programs offered by countries in the Caribbean region present potential financial crime risks to financial sectors in the UAE,” the report said.

“Although CBI programs can be pursued for legitimate purposes, in particular visa-free access to the EU, UK and other countries, CBI programs present risks of corruption, punishment, money laundering and tax evasion. “

Growing reliance on remote working technology and models has also exposed digital vulnerabilities, as phishing attacks, hacking, malware intrusions, and fraud resulting from potential breaches of information containing information. personal data is increasing.

“This is an important factor to consider when documents containing confidential customer and / or financial information are shared among staff through a distributed working environment,” the report said.

“Organizations need to prepare for potential business disruptions and proactively assess their cyber hygiene practices followed by their remote workforce, enterprise wide. “

Updated: September 19, 2021, 2:34 PM