Confidentiality of Banking Information in the UAE

Banking Secrecy and Shareholder Protection in the UAE

In the UAE, banking secrecy is strictly adhered to, ensuring a high level of confidentiality for business beneficiaries' data. Shareholder protection in the UAE and the security of deposits are guaranteed by the state, evidenced by a continuous influx of investors arriving in the UAE from various countries for business and investment purposes.

Confidentiality Principles in the UAE

Strict adherence to banking secrecy makes the UAE one of the most convenient and secure jurisdictions for business and investment. However, this is not a one-sided process: in exchange for business security, transparency is required. To avoid serious consequences, carefully familiarize yourself with the current legislation or seek advice from tax/legal consultants before registering a legal entity. It is crucial to obtain complete information in advance about the reporting requirements, tax implications, and tax obligations your business will need to comply with.

In the UAE, it is essential to strictly follow legislation, rules, and requirements of regulatory bodies. Only honest businesses can count on complete confidentiality. The downside of such an approach is the complexity of dealing with counterparts. Most likely, you will only have information about the validity of a partner's license. Finding out about debts, legal disputes, or assessing the financial condition of a counterpart is impossible.

The Level Consulting experts are ready to advise you on opening and running a business in the UAE. We assist in the company registration process, provide services for opening a bank account in the UAE, and obtain residency visas for the company owner and employees. Our experts have years of experience in solving complex legal and financial issues, ensuring the optimal solution for your business.

Key Characteristics of the United Arab Emirates Regarding Confidentiality Preservation:

• Information about company directors and beneficiaries is non-public. Shareholder information is not entered into any registries.
• The UAE does not support illegal tax evasion, as many types of taxes are absent in the country.
• The state adheres to globally accepted security standards and creates conditions to counter money laundering obtained through criminal means.

KYC and AML Policies

Banking services in the UAE are provided under KYC/AML regulations. Know Your Customer is a user identification system, and Anti-Money Laundering comprises measures to prevent terrorist financing, money laundering, detection of illegal sources of income.

Application of KYC/AML standards involves thorough verification of account owners, database collection, and monitoring transaction history. Despite strict compliance with norms by UAE banks, client information does not reach third parties.

Common Reporting Standard (CRS)

CRS is an automatic information exchange standard aimed at preventing tax evasion. Russia has been following CRS requirements since 2016, and UAE authorities have implemented the automatic exchange mechanism since 2018.

Basic CRS Operating Principles:

• Determination of tax residency.
• Verification and confirmation of the account owner's identity, monitoring for suspicious financial transactions.
• Confirmation of the center of vital interests: permanent residence, presence of sufficient income sources.
• Collection of data on bank accounts for submission to internal tax authorities.
• Recalculation of taxable income. Fiscal authorities can compare the declaration with collected data and impose additional taxes if discrepancies are found.

Despite joining CRS, banks do not transmit transaction information through automatic exchange. UAE credit and financial institutions guarantee client confidentiality and strictly adhere to banking secrecy. Requests for personal information from foreign authorities directed to UAE banks and registries undergo a series of procedures. Data transmission will occur only if a UAE court makes a positive decision on information disclosure, which happens extremely rarely and is usually associated with the need to investigate criminal offenses.

Advantages of the UAE Banking System

The UAE banking system is stable and well-protected from external influences. Monetary funds of both local residents and foreign depositors are legislatively protected. Banks utilize advanced technologies, ensuring high-speed transactions. Moreover, transaction costs are relatively low, and due to the dirham being pegged to the dollar, savings on currency conversion can be achieved.

To maintain confidentiality, it is recommended to obtain tax residency status, confirm the center of interest in the UAE, and establish economic presence. Businesses need to register as taxpayers, timely submit all required reports (depending on the type of business), and declarations.

Note: This translation is a general interpretation, and for legal or official purposes, it is recommended to consult with a professional translator or legal expert familiar with both languages and the specific legal terminology of the UAE.