The OFAC designation of two currency exchange houses in Dubai this week contained the revelation that one of them had assisted Iran, over a three-month period in 2012, in obtaining $55m for its foreign exchange needs. In other words, the NBFI assisted Iran in evading global sanctions. It lost its government-issued license just this month, meaning that it was quietly permitted to operate openly in the UAE, without timely regulatory or law enforcement response. What's wrong with this picture ?
If that is the best that the UAE can do when there is a massive, overt operation to assist Iran in obtaining US Dollars, and the government simply practices what can only be described as willful blindness, then you will want to consider red-lining all non-bank financial institutions in the UAE, because the combination of the longtime financial relationships with Iran, coupled with regulatory inaction, means that the lure of compensation from Iranian commerce trumps global sanctions every time.
I leave it to you to choose, (A) or (B), or both:
(A) Consider all non-bank financial institutions ( especially foreign exchange, currency houses, money service businesses, and currency transmitters) in the United Arab Emirates to be high-risk.
(B) Raise Country Risk for the United Arab Emirates. If the UAE will not act within a reasonable period of time after obvious sanctions violations are occurring, then they may be other areas of its financial sector that could be cause for concern. If your bank clients, or your institution, have financial exposure there, consider the attendant risks before increasing your exposure.
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