As the world powers get ready to lift sanctions on Iran, a top banker in the UAE said the banks have to carefully understand this change as they prepare to relax their systems and enable the expected business activity.
“It is one of the tougher sanctions that financial institutions face. Banks have to continuously keep their eyes on the change, understand and manage it over time as it unfolds. It can get quite complicated,” Waheed Rathore, chairman of the Compliance Committee at the UAE Banks Federation told Gulf News.
Six major world powers and Iran came to an agreement in July to remove sanctions on the country in exchange for curbs on its nuclear program. The sanctions are likely to be eased in the coming months.
US President Barack Obama secured a victory on Wednesday as Senate Democrats clinched the necessary votes to ensure the Iran nuclear agreement survives in Congress.
The UAE which has a large Iranian population and robust trade ties before sanctions were put in place is likely to benefit. Last year, trade between the two countries reached $18 billion, its highest level since the record $20 billion in 2011 before sanctions began to dent trade relations between the two countries, Iranian Ambassador to the UAE Mohammad Reza Fayyaz recently told Gulf News.
“I think the world will benefit including the UAE. It is going to be a process wherein multiple commitments have to be met before the actual lifting of sanctions happen,” Rathore said.
“As the change unfolds, there will be useful information sharing at the committee level benefiting the larger industry from experiences of local and foreign banks on this subject. “Non-compliance has been observed to result in penalties and regulatory actions.”
Increasing tax reporting requirements from multiple jurisdictions is a key challenge for the UAE banks, he said.
“We had the US Foreign Account Tax Compliance Act (FATCA) and now there is OECD [Organization for Economic Cooperation and Development] Common Reporting Standards (CRS). This will demand lots of compliance resources and increases the costs and fatigue for banks.”
The cost of compliance has increased massively in the last six to eight years. Banks have to perpetually invest sizeable amounts of money in systems, resources, skill sets, training within the compliance function. It is likely to be more burdensome for the smaller financial institutions.
Established in 1982, the UAE Banks Federation is a professional representative body of 50 member banks operating in the UAE.
The federation advocates banks’ interests, and enhances cooperation and coordination among them, in order to promote and upgrade the UAE’s banking industry for the benefit of the banking sector, its customers, and the national economy.
