First Of All,
Significant changes affecting banks and investors have been brought about by Federal Decree-Law No. 54/2023 and its recent modifications, as well as Federal Decree-Law No. 14/2018 on the Central Bank and the Organization of Financial Institutions and Activities. Important definitions and laws have been updated, and new clauses aimed at strengthening customer protection and financial infrastructure have been included. Investors in the banking industry face a number of difficulties in comprehending and adjusting to these changes.
Changes to the Definitions:
The definitions of phrases like “Transfer Order” and “Currency” have undergone significant changes. The modified law states that a Transfer Order can now include directions for fund transfers, securities settlements, and obligations release inside the financial infrastructure system. In a similar vein, digital currency is now included in the definition of currency in addition to conventional coins and banknotes.
Opening an Account and Checking Your Money:
The Central Bank has the power to create and manage a variety of accounts, including ones for monetary authorities and financial organizations that have been granted licenses, thanks to amendments to Article 42. Furthermore, subject to certain rules and restrictions, the Central Bank may now Search For Legal Articleshold bank balances in digital money.
Improved Security for Customers:
Customer protection is emphasized in Chapter 6 of the UAE financial Law, especially in Article 120 about the privacy of credit and financial data. It requires that all information pertaining to clients’ accounts, deposits, and dealings with Licensed Financial Institutions be kept private and not shared without consent, unless required by law. This secrecy applies to everyone who has access to such material, even after the commercial connection has ended. In order to maintain compliance with legal and regulatory standards, the Central Bank is entrusted with supervising the exchange of financial and credit information. There are several exceptions, such as disclosures mandated by law enforcement, auditor responsibilities, and commercial law duties such as stopping the funding of terrorism and money laundering.
Article 121 also describes steps to further safeguard the interests of customers. It requires the Central Bank to create detailed guidelines governing the kinds of financial services and goods that Licensed Financial Institutions are allowed to offer. In addition, the creation of a dedicated division attends to client grievances.
Article 121 bis: Introduction
Credit Facility Guarantees: Article 121bis, which requires regulated financial institutions to secure adequate guarantees for credit facilities offered to clients, is a noteworthy addition. Legal repercussions for noncompliance could include lawsuits or claims pertaining to credit facilities being rejected.
Payment operations and financial infrastructure:
Regulations pertaining to financial infrastructure, such as the creation of systems for clearing and settlement and retail payment operations, are outlined in Article 124. The Central Bank is the only body with jurisdiction over retail payment systems regulation and electronic banking operations.
Consequences and difficulties:
The financial environment in the United Arab Emirates has undergone a paradigm shift as a result of these amendments, and both banks and investors must fully comprehend and comply with them. Among the difficulties are adjusting to updated definitions, making sure that stricter client protection laws are followed, and negotiating the intricacies of financial systems and payment processing.
Penalties and Enforcement Procedures:
The Central Bank is able to impose fines and other sanctions in response to transgressions by Licensed Financial Institutions or Authorized Individuals under the updated Article 137 of the UAE banking law. Among these are warnings, corrective actions, operational limitations, fines, and license revocations. Furthermore, the article levies penalties like:
1.] levying a financial penalty for any shortage in the Mandatory Reserve equal to (400) basis points over the Central Bank’s regular base interest rate.
2.] levying a fine equal to one to ten times the amount of the illegal enrichment that the infringing Licensed Financial Institution earned.
3.] levying a fine of up to AED 200,000,000 (two hundred million) on the licensed financial institution that violated the rules.
4.] levying a fine of up to AED 2,000,000 and not less than AED 100,000 on the offending Authorized Individual.
In every situation, the decision’s content, justifications, effective date, and the option to appeal to the Grievances and Appeals Committee may be sent to the violation within 15 business days of the decision’s release.
In summary:
The amendments’ goals are to safeguard investors’ interests and bolster the banking industry, but they also pose implementation and compliance issues. To effectively navigate these new regulations, proactive steps are needed, such as continuous regulatory compliance initiatives and strong risk management plans.