The Central Bank of the United Arab Emirates has imposed financial sanctions totalling 2.62 million dirhams on five banks and two insurance companies operating within the country. These penalties were levied due to non-compliance with the reporting procedures mandated by the Common Reporting Standard and the Foreign Account Tax Compliance Act .
The CRS, developed by the Organisation for Economic Co-operation and Development , is a global standard for the automatic exchange of financial account information between jurisdictions. It requires financial institutions to identify and report accounts held by foreign tax residents to their local authorities, facilitating international efforts to combat tax evasion. Similarly, FATCA, enacted by the United States in 2010, mandates that foreign financial institutions report information about financial accounts held by U.S. taxpayers to the U.S. Internal Revenue Service , aiming to prevent tax avoidance by U.S. citizens using foreign accounts.
Despite being granted ample time to align their operations with these international standards, the sanctioned institutions failed to meet the required compliance levels. The CBUAE highlighted deficiencies in due diligence processes and inaccuracies in financial reporting as primary reasons for the penalties. The specific names of the banks and insurance companies involved have not been disclosed.
A spokesperson for the CBUAE stated, “The Central Bank remains committed to upholding the integrity and transparency of the UAE’s financial system. Ensuring compliance with international tax reporting standards is paramount to maintaining our position as a reputable global financial hub.”
This enforcement action underscores the CBUAE’s dedication to adhering to global initiatives that enhance the transparency and integrity of tax systems. By imposing these sanctions, the Central Bank aims to deter financial institutions from neglecting their compliance obligations and to reinforce the UAE’s commitment to combating tax evasion on an international scale.
Financial institutions operating in the UAE are urged to review and strengthen their compliance frameworks to ensure adherence to CRS and FATCA requirements. The CBUAE has indicated that it will continue to monitor and enforce compliance, with further sanctions possible for those failing to meet the necessary standards.
