UAE grey list: UK banks close expat accounts

Reuters

• Concerns over financial crime
• UK deems grey list states ‘high risk’
• Banks must perform due diligence

In March last year the Paris-based Financial Action Task Force, an international watchdog, cited “strategic deficiencies” in the systems the UAE uses to counter financial crime and placed the country under enhanced supervision.

But burgeoning trade, bumper airline profits and double-digit rent increases have made it difficult to discern much in the way of a material impact of the UAE’s being added to FATF’s so-called grey list. 

Now, 18 months on, at least one group living in the UAE is being significantly affected.

UK banks are shutting the accounts of some British expatriates in their home country on the grounds that they live in a risky jurisdiction.

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Documents shared with AGBI by one resident in Dubai showed that Britain’s Nationwide Building Society is closing an account he has held for 25 years because it categorises the UAE as “high risk”.

“Nationwide has reviewed and decided to close your account in line with its financial crime risk appetite,” read one of the emails sent to the person, who wishes to remain anonymous.

“As part of this decision, we noted that you are residing in a country which is currently categorised internationally as ‘high risk’.”

Ongoing impact

The UK Financial Conduct Authority reported there had been a sevenfold increase in the number of bank accounts closed last year, rising to nearly a thousand a day. 

The government of the UK has a policy whereby any country included on the grey list is added to its own roster of high-risk territories.

This means British banks have a legal requirement to apply enhanced due diligence to their existing customers and any new clients domiciled in that country, including residents.

Independent research carried out by AGBI shows that many of the UK’s biggest lenders, including Nationwide, HSBC and Barclays, have moved to close the UK accounts of some UAE-based clients in recent months.

“The UAE being on the FATF grey list is undoubtedly a major factor in the decisions of banks [to close these accounts],” said Keren Bobker, a Dubai-based independent financial advisor and senior partner at Holborn Assets, who assists clients with opening bank accounts abroad.

“Most UK bank accounts are only available for residents and that has always been the case with a handful of exceptions,” she said.

“The issue we are seeing now is that UK banks are closing the existing, and longstanding, accounts of non-residents. This is certainly the case with many of my clients.”

Rupert Connor, partner at Abacus Financial Consultants in Dubai, said the addition of the UAE to FATF’s grey list has had an impact.

The due diligence involved when UAE residents want to open accounts with financial services companies that are based outside of the country “is extreme in terms of tracing where the funds came from, how they were earned, and so on”, he said.

via Reuters

An industry expert, who specialises in international illicit finance and asked to remain anonymous, confirmed that, although there is no obligation for UK banks to terminate the accounts of existing customers, the risk profile of new customers will have changed dramatically as a result of the grey-listing.

They added that the UK government’s estimated cost of reviewing a file under enhanced due diligence for high-risk countries is £17 ($21.23). This “is laughable – industry estimates are £100 to £1,000 per file review”. 

Improving compliance

The UAE has made progress in seeking to come off the grey list.

In June, FATF said the country was “compliant” with 15 of 40 of its recommendations, “largely compliant” with 24 recommendations and “partially compliant” with only one recommendation.

The country has no “non-compliant” ratings, FATF said.

Ahead of a meeting in Abu Dhabi last week between Ursula von der Leyen, president of the European Commission, and UAE President Sheikh Mohammed bin Zayed al Nahyan, reports said she planned to ramp up demands that the UAE stop being a gateway for Russia to circumvent EU sanctions triggered by the invasion of Ukraine.

Drew Harris, Ireland’s police chief, last week held talks with the head of Dubai Police to discuss legal avenues for the deportation of the Kinahan brothers, Christopher Jr and Daniel.

The Kinahans are believed to be residing in the UAE and form part of the Kinahan transnational crime cartel.

A British government minister told AGBI in July that the UK is helping the UAE deal with shortcomings highlighted by the FATF as part of the Gulf state’s strategy to move off the grey list.

“Our officials have very strong links in terms of assisting the UAE in how to improve systems and internal compliance and what sort of transparency is needed in order to evolve this situation,” Lord Johnson, a minister of state in the UK’s Department for Business & Trade, said.