Supervisor of Banks letter—The banking system’s activity vis-à-vis the United Arab Emirates
The Banking Supervision Department published a letter to the banking system relating to the advantages in strengthening relations with the United Arab Emirates, emphasizing the risk management involved in this activity, particularly regarding bank transfers.
Supervisor of Banks Yair Avidan said: “We are pleased to be partners in the historic process of advancing peaceful and economic relations between the two countries. These relations carry economic advantages for both countries, and a built-in part of advancing economic relations is promoting banking relations between the countries. We must remember that alongside the opportunities, we must be strict about risk management, including understanding the business and banking environment and maintaining proper controls. We believe that the letter will help in advancing these important goals.”
On September 15, 2020, a peace agreement was signed in Washington between Israel and the United Arab Emirates. The appendix to the agreement contains a protocol signed on September 1, 2020 regarding the advancement of economic relations between the countries, including regarding banking services, with the recognition that for the purpose of that economic cooperation, infrastructure is needed that will enable bank transfers to be made directly between the Israeli banking system and banks operating in the UAE, for both trade and investments. This must take into account the international standards regarding the prohibition of money laundering and the prohibition of terrorism financing, for the purpose of cooperation between the relevant authorities in both countries with the aim of reducing risks in this area.
The United Arab Emirates is an international trade and financial center, through which there is widespread economic activity and in which investments are made in various fields. Our assessment therefore is that significant economic cooperation is expected between the two countries.
The letter outlines a number of measures to create an operating environment with less risk in activity vis-à-vis the UAE, particularly activity alongside the trade that is expected between the countries, such as making bank transfers and providing guarantees and credit statements. The aim is to enable the advancement of banking activity that will support economic activity and trade between the countries, with stringent risk management that will require the allocation of adequate resources to learn the business environment, get acquainted with the relevant financial institutions, and carry out on-going controls.
By the BANK OF ISRAEL, Office of the Spokesperson and Economic Information
October 21, 2020