Anti-Money Laundering Regulation and Practice of Islamic Banks in the United Arab Emirates: A Case Study

Kumar Ajay ()
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Kumar Ajay: Department of Law, University of Dubai, Dubai, United Arab Emirates

The Law and Development Review, 2020, vol. 13, issue 2, 473-497

Abstract: Banks are key institutions in the economic development of a country, but they are prone to money laundering (ML) as well. Such incidents could lead to sanctions and loss of reputation. To mitigate such risks, banks are required to follow Anti-Money Laundering (AML) regulations. Presently, there are no separate or specific AML regulatory requirements for Islamic banks (IBs). Apart from regulations, understanding practices also help explicate compliance to laws (spirit), by those who apply it. Since the AML practices of IBs have not been systematically analysed, we look at their practices (the United Arab Emirates) to understand whether they have adopted specific AML processes. Owing to the lack of literature on such practices, a survey was carried out using a standard questionnaire. The questionnaire was supplied to the AML/compliance departments, and the results are based on a sample size of three banks. The survey results show that the IBs adopt Know Your Customer (KYC) and Customer Due Diligence (CDD) to check laundering. Crucially, questions pertaining to the AML risk arising from the potential vested interest/s (theoretical) that the IBs themselves are likely to have in the venture remain unanswered.

Keywords: Anti-Money Laundering; Islamic finance; law and development; regulation; United Arab Emirates (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/ldr-2020-0048

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