UAE Central Bank Fines Exchange House Dh2M for AML Violations

The Central Bank of the United Arab Emirates (CBUAE) has fined a UAE-based exchange house AED 2 million for violating the country’s anti-money laundering and counter-terrorism financing (AML/CFT) laws. The penalty was imposed after the regulator identified serious failures in the firm’s compliance framework, highlighting inadequate due diligence and poor internal control measures.

This enforcement action is part of a broader effort by UAE authorities to strengthen the country’s financial integrity and align with global AML standards set by the Financial Action Task Force (FATF). Given the UAE’s ambition to be a leading global financial hub, such regulatory crackdowns reinforce the importance of robust AML compliance programs in high-risk sectors like exchange houses.

What Are Exchange Houses and Why Are They Important in the UAE?

Exchange houses are financial institutions that specialize in money transfers, foreign currency exchange, and remittance services. In the UAE, they play a major role because many residents especially expatriate workers use them to send money back to their home countries.

These businesses handle large volumes of cash and frequent cross-border transactions, which makes them useful but also potentially risky when it comes to money laundering. Because of this, exchange houses are considered “financial institutions” under UAE law and are strictly regulated by the Central Bank of the UAE (CBUAE).

To operate legally, exchange houses must:

1. Be licensed by the CBUAE

2. Follow strict Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures

3. Report any suspicious transactions to the UAE Financial Intelligence Unit (FIU)

Given the size and role of the remittance market in the UAE, one of the largest globally, the Central Bank keeps a close watch on compliance within this sector.

Details of the Violation: What Led to the Dh2 Million Fine

In June 2025, the Central Bank of the UAE (CBUAE) announced that it had imposed a Dh2 million (AED 2,000,000) penalty on a UAE-based exchange house for violating the country's anti-money laundering (AML) regulations.

Although the Central Bank did not disclose the name of the company, it confirmed that the fine followed a formal investigation which revealed serious compliance failures. These failures breached key parts of:

• Federal Decree-Law No. (20) of 2018 on AML/CFT: This is the UAE’s main anti-money laundering law. It requires all financial institutions, including exchange houses, to monitor transactions, identify risks, and report suspicious activities.
  

• Cabinet Decision No. (10) of 2019: This regulation provides the implementing regulations and outlines how institutions must apply AML laws, including how to conduct due diligence, recordkeeping, staff training, and internal audits.

Such violations typically involve:

• Not properly identifying or verifying customers (KYC failures)

• Ignoring or delaying the reporting of suspicious transactions

• Weak compliance systems or lack of ongoing monitoring processes

The Central Bank emphasized that this action is part of a wider push to strengthen AML oversight and ensure that financial institutions help protect the UAE’s financial system from criminal misuse.

How the UAE Central Bank Enforces AML Compliance

The Central Bank of the UAE (CBUAE) is the main regulator responsible for making sure that all licensed financial institutions including banks, exchange houses, and fintech firms comply with anti-money laundering (AML) and counter-terrorism financing (CFT) laws.

Its AML enforcement role includes:

• Issuing regulations and guidance to licensed financial institutions

• Supervising and inspecting compliance programs across sectors

• Investigating potential violations of AML/CFT laws

• Taking enforcement actions, including imposing fines, suspending licenses, or even revoking them

The Central Bank operates under a risk-based supervision model. This means it focuses more attention on high-risk sectors such as exchange houses due to their heavy involvement in cash and cross-border transfers, which are more vulnerable to abuse.

The CBUAE also collaborates with:

• The UAE Financial Intelligence Unit (FIU), which handles suspicious transaction reports (STRs)

• The Ministry of Justice, for enforcement of financial crime laws

• International bodies like the Financial Action Task Force (FATF), to ensure that the UAE meets global AML standards

In recent years, the Central Bank has increased its inspections and tightened its enforcement activities. This is especially important as the UAE continues working to address FATF recommendations and remove itself from the FATF grey list, a status that impacts international financial confidence.

What Are the Penalties for AML Non-Compliance in the UAE?

AML violations in the UAE can lead to serious financial and legal consequences, especially for regulated institutions like exchange houses, banks, and other financial service providers.

Under Federal Decree-Law No. (20) of 2018 and Cabinet Decision No. (10) of 2019, the UAE authorities are empowered to impose various penalties depending on the severity and nature of the violation.

Common penalties include:

• Fines ranging from AED 50,000 to AED 5 million per violation

• Suspension or revocation of licenses

• Restrictions on business operations, such as freezing accounts or limiting services

• Criminal charges against responsible staff or company executives, including prison terms of up to 10 years in extreme cases

• Reputational damage, which can affect the institution’s standing with clients, partners, and regulators

For example, in February 2023, the Central Bank fined six exchange houses a total of AED 17.3 million for failing to maintain proper AML controls, a sign that penalties are not just theoretical, but part of an ongoing enforcement strategy.

The penalty in the current case — AED 2 million — reflects a mid-level enforcement action, likely due to serious but non-criminal failures in compliance programs.

How to Avoid AML Violations: Insights for UAE Financial Institutions

The recent Dh2 million fine against the UAE exchange house offers important lessons for AML officers, fraud investigators, and financial institutions operating in the UAE and MENA region.

1. Strengthen Customer Due Diligence (CDD) and KYC Processes

Properly identifying customers and understanding their transaction patterns is fundamental. Enhanced due diligence is especially crucial for high-risk clients or unusual transactions to prevent misuse.

Read more: Identity Verification in the UAE: Processes and Key Insights

2. Implement Strong Transaction Monitoring and Reporting

Financial institutions must have effective systems like FOCAL platform to detect suspicious activities and submit timely Suspicious Transaction Reports (STRs) to the UAE Financial Intelligence Unit (FIU). Delays or failure to report can trigger severe penalties.

Read more: Politically Exposed Persons in the UAE and AML Compliance

3. Develop Comprehensive AML Compliance Programs

Regular staff training, independent compliance audits, and clear internal policies are essential to maintaining a culture of compliance and readiness for regulatory scrutiny.

Read more: Sanction Screening in the UAE: What to Do if a Customer is Listed

4. Maintain Accurate and Up-to-Date Records

Proper documentation of customer information and transaction history supports audits and investigations. Missing or outdated records are common compliance failures.

Read more: IBAN Verification in the UAE: Regulatory Challenges and Best Practices

5. Understand Regulatory Expectations and Updates

AML laws and regulations in the UAE evolve to meet international standards. Staying informed of changes from the Central Bank and other authorities ensures ongoing compliance.

6. Prepare for Regulatory Inspections and Enforcement Actions

Institutions should regularly review and test their AML programs to identify gaps before regulators do. A proactive approach reduces risks of fines and reputational harm.

AML Compliance Solutions for UAE Financial Institutions to Prevent Penalties

With FOCAL’s advanced customer verification and due diligence tools, institutions can quickly and accurately onboard clients while continuously assessing risk, ensuring they meet strict regulatory requirements effortlessly. Their case management and transaction monitoring solutions streamline the detection, investigation, and reporting of suspicious activities, saving time and reducing operational burdens.

By leveraging FOCAL’s end-to-end AML compliance solution, financial institutions not only stay fully compliant with UAE Central Bank regulations but also protect their reputation and build trust with regulators and customers alike, all while improving efficiency and lowering compliance costs.