Know Your Customer (KYC) Requirements in UAE

In today's global financial landscape, ensuring transparency and mitigating risks associated with money laundering, terrorist financing, and other illicit activities are paramount. Know Your Customer (KYC) requirements play a crucial role in safeguarding the integrity of the financial system.

1. Importance of KYC: KYC procedures are designed to establish the identity of customers, evaluate their risk profiles, and verify the legitimacy of their financial activities. By adhering to KYC regulations, financial institutions can maintain trust, prevent fraud, and comply with legal obligations. The UAE Central Bank recognizes the significance of KYC measures in safeguarding the country's financial stability.
2. Regulatory Framework: The Central Bank of the UAE serves as the primary regulatory authority overseeing KYC requirements. It issues guidelines and directives to banks, financial institutions, and designated non-financial businesses and professions (DNFBPs) to ensure compliance. The regulations encompass various aspects, including customer identification, due diligence, record-keeping, and ongoing monitoring.
3. Customer Identification Process: To establish the identity of customers, financial institutions in the UAE are required to obtain and verify certain documents. These typically include valid national identification cards, passports, or any other official identification documents issued by a competent authority. The verification process involves comparing the provided information with reliable and independent sources.
4. Enhanced Due Diligence (EDD): In cases where customers pose a higher risk, such as politically exposed persons (PEPs), correspondent banking relationships, or complex transactions, financial institutions are required to apply enhanced due diligence measures. This involves conducting more rigorous background checks, verifying the source of funds, and assessing the purpose of the relationship.
5. Record-Keeping and Retention: UAE financial institutions must maintain accurate records of all customer information, including identification documents, transaction details, and account records. The Central Bank mandates a specific retention period for these records (5 years), ensuring that they are available for inspection by regulatory authorities when required.
6. Ongoing Monitoring: KYC requirements in the UAE necessitate continuous monitoring of customer activities. Financial institutions are responsible for identifying and reporting any suspicious transactions or activities that may indicate money laundering, terrorist financing, or other illicit behavior. This ongoing monitoring ensures that potential risks are promptly addressed.
7. Penalties and Non-Compliance: The Central Bank of the UAE has the authority to impose penalties and sanctions on financial institutions and DNFBPs that fail to comply with KYC requirements. Non-compliance can result in fines, license revocations, reputational damage, or legal consequences. It is imperative for organizations to prioritize adherence to these regulations to maintain their standing and protect the financial system's integrity.

Document Retention

As per UAE law, all documents pertaining to accounts must be kept with the FI for a period of 5 years after account closure.

• Account opening records and documentary evidence of identity - at least 5 years after account closure
• Account ledger records - at least 5 years
• Individual transaction records - at least 5 years
• Results of any analysis undertaken (e.g., inquiries to establish the background and purpose of complex, usual large transactions) - at least 5 years after account closure
• Information after the account has been closed or after the last transaction - at least 5 years