After the Central Bank of the United Arab Emirates (UAE) issued a banking license to Russia's MTS Bank, governments in Europe and the United States responded with disbelief.
This action has heightened western suspicions that the Gulf state is becoming a sanctuary for dirty Russian money. In addition, the licensing of MTS is one of the few instances in which the Emirates have granted approval under these conditions.
The license will allow MTS to operate in the UAE outside of the reach of western sanctions. According to reports, authorization was granted in response to an increase in demand for financial services from Russian expats.
This is the first foreign bank license issued by the UAE to a Russian lender in recent years.
A source with knowledge of the decision stated that "It’s all about the business case [and] the number of Russians living here now."
According to reports, Russian citizens have complained of difficulties creating accounts with current banks, particularly corporate facilities.
Since sanctions were implemented following the war of Iraq, the United States and other European governments have become concerned about the UAE's financial ties with Russia.
Last week, US Treasury undersecretary for terrorism and financial intelligence Brian Nelson highlighted the subject of the Russian bank's license during a visit to Abu Dhabi.
"[He] conveyed broad concerns about financial connectivity with Russia, even via non-sanctioned banks," according to a source familiar with the meeting.
In a statement made before to his departure, Nelson reaffirmed the United States' commitment to enforcing sanctions.
Continued the statement, "permissive jurisdictions" may lose access to developed markets if they fail to undertake appropriate due diligence on sanctioned businesses.
This is a timely development for the UAE, which was placed under heightened monitoring by the Financial Action Task Force last year.
As a result of the presence of assets belonging to sanctioned Russian billionaires, there are concerns that the UAE and Russia would develop deeper illegal financial ties.
Financial institutions are pressured to implement western sanctions in order to maintain correspondent banking links with U.S. and European lenders.
According to a person with knowledge of MTS's operations, the license will make it easier for Russians to register bank accounts and create a new route for money to enter the UAE.
Ilya Filatov, the chairman of the bank, traveled to the UAE last week to prepare for the launch of its services.
By fLEXI tEAM
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