Why does de-risking by banks increase money laundering risk in UAE DNFBP sectors?
De-risking is named in the second National Risk Assessment as one of the factors making DNFBP sectors vulnerable, specifically the DPMS sector. Where financial institutions withdraw or refuse banking services to a category of business, that business does not stop trading. It moves further towards cash.
The consequence is a supervision problem rather than a customer problem. Activity that runs through a bank account generates transaction monitoring alerts, screening hits and an audit trail available to supervisors and to the FIU. Activity that runs through cash generates none of those things.
This is why the NRA groups de-risking with cash intensity and non-standardised registration as the three drivers of DNFBP vulnerability. All three describe the same underlying problem, which is reduced visibility over what the sector is actually doing.
Legal Reference (source document):
· UAE Money Laundering and Terrorist Financing National Risk Assessment, 2nd NRA (2024)
· National Anti-Money Laundering and Combatting Financing of Terrorism and Financing of Illegal Organizations Committee
Scope note: de-risking is a commercial decision by financial institutions. The NRA records its risk effect without prescribing a remedy.
Further reading: How DNFBPs meet UAE AML requirements
Related questions on amlfaqs.com:
· Which UAE DNFBP sectors have not been misused for terrorist financing?
· Which DNFBP sectors did the UAE NRA flag as most vulnerable to financial crime?
· Which sectors must register on the UAE goAML platform?