Central Bank issues new regulations for money exchanges

Central Bank of UAE has issued the regulations on licensing and monitoring of exchange business to regulate, enhance exchange business profession, support its geographical spread and facilitate the provision of exchange services throughout the UAE based on solid foundations.

The Central Bank's Board of Directors has set a number of following definitions:

"Licensed person"; means any natural or juridical person authorised to conduct exchange business under these Regulations.

"Licence"; means licence issued by the Central Bank for the carrying out of exchange business.

"Exchange Business"; shall mean:

1.    Dealing in sale and purchase of foreign currencies and travellers cheques.

2.    Executing remittance operations in local and foreign currencies.

3.    Payment of wages through establishing a link to the operating system of "wages protection" (WPS).

4.    Other businesses licensed by the Central Bank.

"Exempted person"; means any entity which is defined as a "commercial bank" in accordance with Union Law No. (10) of 1980.

"Juridical person"; means an established entity in accordance with and recognised by the Federal Laws of the United Arab Emirates and the laws of the Emirate in which it is so incorporated or an entity established in and recognised under the laws of other UAE authorities.

"Paid Up Capital"; shall mean cash paid by the owner (or partners) into the account of the entity, as per requirements of these Regulations.

"Remittances Intermediate Account" shall mean an account where remittance funds are deposited temporarily, prior to execution of remittance.

"Agent"; shall mean a natural or juridical person appointed by the owner (or the partners) of the entity to manage the entity or to perform a specific task for its benefit.

The terms defined in Federal Law No. (10) of 1980 shall, unless otherwise defined herein, bear the same meanings when used herein.

According to article (2): Licensing is Compulsory. No person, whether natural or juridical, shall carry on exchange business in the United Arab Emirates unless he is licensed in writing by the Governor of the Central Bank or a person authorised by the Governor to do so in accordance with these Regulations or unless he is exempted from the provisions thereof.   

Article (3): Application for Licence. Any natural or juridical person may submit an application for a licence to the Central Bank to carry out exchange business. Such application shall be made on the form prescribed from time to time by the Central Bank and attached to it the following documents:

A statement setting out the nature and scale of the exchange business which the applicant intends to carry on, plans of the applicant for the future development of that business and the particulars of the applicant's arrangements for the management of that business.

Name of applicant and his address, a brief statement about his qualifications and experience, copies of UAE ID of the partners, or copies of passports of foreign partners, and a copy of the UAE family book, with the originals of such documents for inspection.

An undertaking to provide, in case the application is approved, a bank guarantee drawn in favour of the Central Bank issued by a bank licensed in the UAE of value equal to 100 per cent of the paid up capital.

Capital. An undertaking to comply with:

a.    The provisions of Union Law No.10 of 1980, Regulation No. 24/2000 regarding Procedures for Anti-Money Laundering Combating of Terrorist Financing and any other resolutions or instructions issued by the Central Bank.

b.    To render his documents and records accessible to the Central Bank’s supervisors and examiners.

Any other information or documents required by the Central Bank for the purpose of processing the licence application.

Article (4): Conditions for Granting of Licence

The Central Bank may, after studying a licence application duly made in accordance with these Regulations and after being provided with all such information, documents and reports as may be required, grant or refuse to grant the licence.

A licence shall not be granted unless the following criteria are fulfilled with respect to the applicant:

Paid-up capital of the licence applicant is not less than Dh2,000,000 (Dh2 million) for carrying on purchase, sale and exchange of foreign currencies in the form of bank notes, coins  and travelers cheques, and not less than Dh5,000,000 (Dh5 million) for carrying on remittance business within and outside the UAE in addition to sale and purchase of foreign currencies and travelers cheques, and not less than Dh10,000,000 (Dh10 million) for carrying on payment of wages through connecting to the Central Bank's system in addition to remittance business and sale/purchase of foreign currencies and travelers cheques, and not less than Dh50,000,000 (Dh50 million)  if the applicant is a Limited Liability Company (LLC), regardless of the activity. The paid-up capital shall be increased by 10% for opening each additional branch.

The applicant must be a UAE national of not less than 21 years of age with full mental capacity and in case of applications made by companies the share of UAE nationals in the capital of the company shall not be less than 60% of the total paid up capital.

A licensed person may not transfer ownership of the licence, for remuneration or otherwise, to any other party.

A licensed person who is a natural person shall exercise direct oversight of the businesses of the establishment, and if he holds the position of Chief Executive Officer, he shall not be entitled to hold a similar position at another establishment.

No licence shall be granted unless the applicant disposes of the necessary personal reliability and professional qualifications as determined by the Central Bank as follows:

Personal Reliability: The applicant, or any of the founding members, shall be of good conduct and behaviour and shall not have been convicted for any offence involving dishonour or dishonesty or violence, and shall not have failed to honour his liabilities towards banks or other creditors and shall not have been declared bankrupt or reached a settlement with his creditors nor has been subjected to attachment of his assets or put under judicial receivership.

Professional Qualifications: The applicant or the person who is or shall be manager or controller of the exchange business shall have the appropriate theoretical knowledge of exchange business and the necessary management experience. The Central Bank must be provided with the CVs of the manager in charge and heads of major sections for review and the documents relating thereto.

Nominees for key positions shall be interviewed by a special committee at the Central Bank to assess their competence and their technical/managerial capabilities, and test them, or some of them, if necessary. A special committee at the Central Bank shall also interview the owner/partners to ensure they have the required knowledge and business plan.

On reviewing an application for a licence made by any company consideration shall be given to any matters relating to another company within the same group or regarding any manager or controller thereof as concerns personal reliability or professional qualifications.

Article (5): Notice of Granting or Refusing an Application. Where the Central Bank grants an application for a licence or rejects it, it shall give a written notice to the applicant accompanied by reasons in case of rejection.

Article (6): Scope of Licence: in the licence issued by the Central Bank the following shall be observed:

a- It shall be granted for a period of one year, renewable thereafter; and

b- It should contain such conditions as the Central Bank may deem appropriate.

Article (7): Revocation, Restriction and Variation of Licence: the Central Bank by a resolution of its Board shall have the right at any time to revoke, vary, restrict or withdraw any condition imposed on any licence after obtaining the comments of the licensed person on the reasons calling for such revocation, variation, restriction or withdrawal.

The Central Bank by a resolution of its Board shall have the right to revoke the licence if:

It appears to the Central Bank that there has been a breach of any of the continuing obligations referred to in Article 8 herein below, or if any condition of the licence is not complied with; or

The licensed person is in breach of these Regulations or Federal Law No.(10) of 1980 or any instructions or circulars issued by the Central Bank or if any of the conditions of the licence is not fulfilled or is incapable of fulfillment; or

The Central Bank has been provided with false, misleading or inaccurate information by or on behalf of the licensed person or any director, controller or manager of it; or

The interests of customers or potential customers of the licensed person are in any way threatened, whether by the manner in which the licensed person is conducting or intends to conduct its business or for any other reason; or

An order for the liquidation of the business of the licensed person or any of its major shareholders has been made by a competent judicial authority; or

A judicial receiver or manager or any similar officer of the licensed person's undertaking has been appointed; or

A bankruptcy order or judgement has been made in respect of the licensed person; or

The licensed person did not commence its exchange business within six months from the date of licence; or

The licensed person suspends its activities for a period of three consecutive months; or

The licensed person, in the opinion of the Central Bank, is unable to pay its debts as they fall due or the value of its assets is, in the opinion of the Central Bank, less than the amount of its liabilities, taking into account its contingent and prospective liabilities; or

Execution or other process is issued on a judgment decree or order to sell his assets or part thereof by any court and is returned unsatisfied in whole or in part; or

The relevant local authorities withdrew any licence issued in favour of the licensed person.

Licensed Person. Article (8): Appointment of an Audit Firm and Publication of the Entity's Audited Accounts.

The licensed person must appoint an audit firm as is acceptable to the Central Bank and maintain proper accounting records and submit these to the Central Bank in such form as required.

The licensed person shall submit to the Central Bank, within a period not exceeding three months from the date of closing of its financial year, a signed copy of its year end audited accounts, including the auditors report thereon for approval by the Central Bank for publication. The financial year of a licensed person must begin on 1st January and end on 31st December.

Article (9): Continuing Obligations. The licenced person shall fully abide by the following obligations:

That the total of his assets shall not, at any time, exceed ten times the paid up capital, and the capital shall not, at any time, be less than the limits approved in accordance with Article (4) (2) (a) of these Regulations.

That the management of the licensed person be conducted by such persons as have been previously approved by the Central Bank as per process. Any violation on the part of the person in charge of management who is an authorised signatory shall be considered a criminal offence if what he signed proved untrue or misleading, and his employment contract should contain an article to such effect.

That the licensed person's legal status, its ownership and capital or its premises shall not be altered without the prior written approval of the Central Bank.

That the licensed person shall not merge or amalgamate or enter into a joint venture with any person or entity, without the prior written approval of the Central Bank.

That exchange business shall only be conducted from premises approved by the Central Bank, and no other non-exchange activity of whatsoever nature is undertaken in the same premises.

That the trade name, for the licensed person, shall not include the word "Bank" "Financial Institution", "Investment / Commercial / Real Estate Company" or any other description that indicates activities other than exchange business.

That branches of the licensed person shall not be established without the prior written consent of the Central Bank and no permission for a new branch shall be granted unless the financial conditions of the licensed person are sound and the licensed person has not committed any violations.

That dealings between the licensed person and his customers shall be supported by official receipts for all exchange transactions and that notice should be posted in a prominent spot,  advising customers of the necessity of obtaining receipts regarding all sales or purchases of foreign currencies or travellers cheques or remittances conducted through the licensed person, and that another notice posting rates applicable to foreign currency should be posted prominently.

That issuance of remittances should be in its name and signed by persons duly authorized by it.

That the entity should have in place electronic systems to support (SMS) service for all remittance transactions, whereby remitters and beneficiaries are notified.

That the licensed person shall not encumber any of its assets without the prior written approval of the Central Bank.

That any partner of the licensed person shall not withdraw any amount from the business in excess of his share of the net annual profit.

That shareholders, partners, directors, managers, or controllers of the licensed person may not borrow from or lend to the licensed person and they may not have current accounts or any other accounts with the licensed person.

That each licensed person must establish a Remittances Intermediate Account. Funds available in the Remittances Intermediate Account must only be used for settlement of remittances and not for any other purposes.

That the Remittances Intermediate Account, and any other accounts designated by the Central Bank, should be audited by the external auditor on monthly basis and results of the audit should be kept in a separate record.

That the licensed person shall provide, upon the Central Bank's request, all data, information or statistics, at any time and for any specified period and such information shall be identical to the records of the licensed person and it shall be regarded and treated as confidential information.

That the licensed person shall obtain the necessary local licences and commence its activities within six months of the date of issuance of the licence by the Central Bank under these Regulations and the Central Bank shall be provided with a copy of the licence issued by the local authorities as soon as it is obtained.

That an application for renewal of licence shall be made within a period of not less than two months before the expiry of the original licence or any renewal thereof.

That the licensed person shall at all times comply with all the laws in force in the U.A.E. including the Civil Law, Companies Law and Criminal Law, and in particular the provisions relating to counterfeit coins and bank notes for which any violation shall be duly reported to the authorities concerned.

Article (10): Supervision and Examination:

The Central Bank reserves the right to examine the activities of the licensed person at any time it finds it appropriate to ensure adherence to the provisions of these Regulations.

Article (11): Amendments:

The Central Bank may make the amendments it deems necessary to these Regulations from time to time.

Article (12): Application of Regulations:

These Regulations shall apply to all entities carrying on exchange business in the UAE and licensed in accordance with these Regulations. Exchange establishments/companies licensed in accordance with Central Bank’s Board of Directors Resolution No. 123/7/92 issued on 29/11/1992 shall be required to reconcile their positions with the requirements of these Regulations, within a period of two years from its date of issuance.

The Governor may decide on initiatives which support financial inclusion in the UAE, by lowering the capital requirements stated under Article (4-2-a) of these Regulations, provided the Board of Directors is notified of decisions made in this respect, in due course.

The Central Bank’s Board of Directors Resolution No. 123/7/92 issued on 29/11/1992 and amendments thereto shall be cancelled and replaced with these Regulations.

Article (13): Interpretation of Regulations: 

Any clarification or interpretation of the provisions of these Regulations may be sought from the Legal Division at the Central Bank whose interpretation shall be final.

Article (14): Publication and Effective Date

These Regulations shall be published in the official gazette in both Arabic and English Languages and become effective from date of publication, and shall be communicated to whomsoever is concerned for implementation. 

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