NEW CENTRAL BANK DIRECTIVE ON POLITICALLY EXPOSED PERSONS

C O N F I D E N T I A L ABU DHABI 001109

SIPDIS
NOFORN

STATE FOR NEA/FO AND NEA/ARP

E.O. 12958: DECL: 11/23/2019
TAGS: EFIN PTER PREL ECON AE
SUBJECT: NEW CENTRAL BANK DIRECTIVE ON POLITICALLY EXPOSED PERSONS
TENTATIVE MOVE IN RIGHT DIRECTION

Classified by AMB Richard Olsen, reasons 1.4 (b, d).


1. (C) Summary: On 2 August 2009, the UAE Central Bank (UAECB),
issued a circular to local banks instructing them not to handle
accounts belonging to Politically Exposed Persons (PEPs). The
circular was issued in response to a shortcoming identified in the
UAE's Middle East-North Africa Financial Action Task Force (MENAFATF)
Mutual Evaluation issued on 9 April 2008. The UAECB circular
defined PEPs as "individuals ...entrusted with prominent public
functions in a foreign country;" the Central Bank later clarified
that GCC nationals would be excluded from this definition. (NOTE:
Internationally, PEPs usually refers to senior political figures or
persons holding important public positions, who by dint of their
authority and access to substantial public funds potentially pose a
money laundering risk. END NOTE.) While the language of the new PEPs
requirement is comparatively broad and top-down, it is a positive
first step bringing the UAE closer to international standards on
handling accounts of PEPs. Significantly, the new regulation gives
the Central Bank (and the UAEG more broadly) new authority to prevent
officials from countries of concern -- e.g., Iran -- from accessing
the UAE financial system. As with all matters pertaining to financial
regulation in the UAE, the efficacy of the new guidance will be
determined by the regulator's enforcement and implementation thereof.
End Summary.


2. (SBU) In its April 2008 MENAFATF review, the UAE was given a
non-compliant rating on its adherence to FATF Recommendation 6 for
not imposing any requirements on banks or other financial
institutions with respect to handling accounts of either domestic or
foreign PEPs, nor for identifying PEPs as a possible money-laundering
concern in the relevant articles of the UAE's primary money
laundering regulation Central Bank Circular 24/2000 (November 2000).
On 2 August 2009, the UAECB moved to address this deficiency by
issuing Circular 3802/2009 defining PEPs and instructing banks to
provide the UAECB with a list of accounts currently held on behalf of
identified PEPs, as well as to seek UAECB permission before opening
any new accounts. The circular initially defined PEPs as,
"individuals ...entrusted with prominent public functions in a
foreign country," but in a revision sent on 19 August 2009,
instructed financial institutions to exclude GCC nationals from the
definition of foreigners and, therefore, effectively from the
definition of PEPs. The revised circular, however, did expand the
affected institutions to include money exchangers, investment and
finance companies and other financial institutions, as well as to
expand the PEPs definition to include family members of primary PEPs.
Although the circular was issued by the UAECB's Banking Supervision
and Examination Department, responsibility for vetting the names the
banks submit will fall to the Anti Money Laundering and Suspicious
Cases Unit (AMLSCU),the UAECB's Financial Intelligence Unit,
according to Abdulrahim Al Awadi, head of the AMLSCU.


3. (C) Several embassy contacts including a UAECB examiner, the head
of compliance for a major international bank and the head of
compliance for a large UAE domestic bank expressed reservations about
the practicality of implementing the new directive. They noted that
the circular, while issued as an addendum to the primary anti-money
laundering regulations, lacks guidance on the specific money
laundering threats posed by PEPs and how PEPs scrutiny should be
integrated into banks' existing anti-money laundering procedures.
While the large international banks in the UAE should already follow
the established requirements of their home jurisdictions regarding
treatment of PEPs, local banks are more likely to relinquish
screening responsibilities to the Central Bank. Smaller local banks
are likely to rely on commercial PEPs databases such as World-Check
in order to identify possible PEPs accounts. Speaking unofficially,
the UAECB examiner noted that under the new procedure the UAECB
remains the primary arbiter of who is allowed to bank in the UAE.
The UAECB's ability to vet and provide timely guidance to banks also
remains an open question.


4. (C) Comment: While a positive first step, the circular may not
satisfy all concerns of the MENAFATF to allow full credit on the PEPs
requirement, unless the UAECB issues additional guidance or can
demonstrate an enforcement track record. Similarly, the carve-out for
GCC nationals could be problematic. However, the circular does give
the Central Bank new authority to take action against specific
individuals -- a tool that could increase responsiveness to specific
USG requests. End Comment.