UAE Central Bank Imposes Transaction Ban on Bank Melli Iran Over AML Violations

The UAE Central Bank has prohibited Bank Melli Iran from executing financial transactions between its UAE branches and Iran following investigations that revealed the Tehran-based lender breached anti-money laundering regulations.

Announced on Thursday as part of the regulator's strict enforcement initiatives, the ban encompasses trade finance as well as fund transfers to and from Iran. Bank Melli Iran stands as one of the nation's major lenders and operates eight branches in the UAE, which includes a regional office according to its official website.

The Central Bank stated that the decision stemmed from violations regarding non-compliance with existing regulations, laws, and supervisory mandates in the UAE concerning money laundering, terrorism financing, and proliferation financing.

Following examinations, authorities determined that all branches of Bank Melli Iran operating in the UAE must be barred from handling any financial transactions to and from Iran, including fund transfers and trade finance.

This enforcement action follows last month's decision by the UAE to suspend all trade, commercial exchange, and financial transactions with Iran due to regional security threats, following attacks on UAE-owned tankers and Tehran's refusal to engage in talks with the US.

Bilateral non-oil trade has historically been worth tens of billions of dollars, with the UAE serving as a crucial trading partner for Iran despite long-standing regional political tensions.

The UAE has consistently advanced initiatives to regulate its financial sector, introducing strict measures to combat illicit financial activity, including the 2024-2027 National Strategy for Anti-Money Laundering, Countering the Financing of Terrorism and Proliferation Financing.

Additionally, the central bank previously issued AML/CFT guidelines for licensed financial institutions, emphasizing digital identification systems for customer due diligence.

The regulator maintains an active crackdown on financial entities breaching domestic regulations. Last month, the UAE Central Bank initiated a special examination into Egypt's Banque Misr following US warnings regarding money-laundering concerns. Furthermore, in June, a foreign bank branch in the UAE received a Dh20 million ($5.44 million) fine for severe, repeated failures under its AML/CFT and sanctions framework.