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02 December 2023

Bank not liable for reporting deals...

The Central Bank has authority to order the freezing of suspected funds (FILE)

By Mohammed Al Sadafy

The Dubai Court of Cassation has established a new legal principle on combating money-laundering. Financial institutions operating in the UAE are now legally obliged to report suspicious transactions related to money laundering to the Central Bank.

The court emphasised that the institutions are exempt from any liability stemming from the report of such suspicious transactions as long as it is not proven that the reporting was with bad intent to harm the owner of the account or transaction.

The court said the Central Bank is the only body entrusted with the examination of cases reported to it and take the necessary action thereon. 

The court added that the Central Bank has authority to order the freezing of suspected funds for not more than 7 days if it considers that the suspicion of money laundering is based on justifiable reasons. It needs to then inform the Attorney General to take necessary action.

This new legal principle came when the Court of Cassation looked into an appeal filed by a lady who requested that her bank be compelled to pay Dh10,000,943 plus interest as her account was frozen.

She explained that the balance of her account stood at Dh6.943 million when she received a letter from the bank stating her account was frozen on the instructions of the Central Bank. She said this resulted in adverse effects and claimed the amount plus benefits from the date of freezing the account until the payment, which is estimated at Dh4 million.

The Court of First Instance had ruled to dismiss the case, but the plaintiff appealed and the Court of Appeal upheld the ruling.

The Court of Cassation refused the appeal of the plaintiff and issued the new legal principle.

The Court of Cassation said the court papers were very clear that there was no bad intent from the bank to inform the competent authority (Central Bank).