Central Bank of the UAE (CBUAE) has instructed non-registered Hawala suppliers operating in the UAE to register for a Hawala supplier certificate before 2nd December.
This decision is in compliance with the Registered Hawala Providers Regulation which ensures that these activities are carried out only by registered dealers in the UAE.
The new directive represents the efforts of the CBUAE to ensure transparency of all financial transactions and to comply with the country’s anti-money laundering and countering financing procedures for terrorism. In the mandatory registration process, Hawala providers will be officially recognized to function alongside other remittance networks, including money exchange houses.
“The CBUAE is committed to further strengthening the framework of a robust financial system in the UAE through appropriate regulations and processes to ensure complete transparency and appropriateness of all financial transactions originating from the UAE. To that end, the registration system for Hawala providers is especially significant as we are strengthening our efforts to maintain best-in-class reporting systems, especially concerning improving the Anti-Money Laundering and Countering Financing of Terrorism systems within the country. We are committed to ensuring that only registered Hawala providers operate in the UAE, following the law and as per the certificate issued by the CBUAE.”
CBUAE warned that relevant legal proceedings will be taken after the expiry of the grace period, in compliance with the effective penal provisions. Under UAE banking law, it is an offence punishable by imprisonment and fine to provide or encourage Hawala activities without registering in the ‘Hawaladars Registry’ at the Central Bank. Moreover, these businesses could also face administrative closure.
What is meant by Hawala?
Hawala is an informal way of moving money without any tangible amount actually being transferred. The Interpol defines Hawala as “money transfer without movement of money.”
“Trust” is another meaning for Hawala. It is used today as an alternative payment mechanism that operates beyond conventional banking structures. Transactions are made without promissory notes between hawala brokers because the mechanism is heavily dependent on trust and balancing of books by hawala brokers.