UAE Central Bank Bans Bank Melli Iran Transactions With Iran

The Central Bank of the United Arab Emirates has prohibited all branches of Bank Melli Iran operating in the UAE from conducting financial transactions to and from Iran following regulatory examinations that identified violations of UAE laws, regulations and supervisory requirements.

The measure was announced on 23 September 2026 by the Central Bank of the UAE (CBUAE). The prohibition applies specifically to financial transactions between the UAE branches of Bank Melli Iran and Iran and expressly includes trade finance and fund transfers.

The CBUAE said the enforcement action followed examinations of the Iranian bank's UAE branches. Those examinations identified non-compliance with applicable regulations, legislation and supervisory decisions, including requirements relating to anti-money laundering, countering the financing of terrorism and countering the financing of proliferation.

The regulator based the action on Article 168(1)(c) of Federal Decree-Law No. 6 of 2025 concerning the Central Bank, the regulation of financial institutions and activities, and insurance business.

The announcement does not state that the branches have been permanently closed or that Bank Melli Iran has been completely prohibited from maintaining a physical presence in the UAE. Instead, the published measure specifically prohibits the affected branches from carrying out financial transactions to and from Iran.

Trade finance and fund transfers are expressly covered by the restriction. This means that transactions involving the financing of trade with Iran and the movement of funds between the UAE branches and Iran fall within the prohibition.

The CBUAE announcement does not disclose the individual transactions or customers that gave rise to the regulatory findings. It also does not specify a monetary penalty, identify a particular sanctions violation or announce a specific criminal investigation.

The action places additional restrictions on the ability of Bank Melli Iran's UAE branches to conduct Iran-related financial activity. Bank Melli Iran is one of Iran's largest banks and has historically maintained international branches and relationships to facilitate banking and trade-related activities.

The regulatory findings referenced by the CBUAE cover several areas of financial-crime compliance. Anti-money laundering controls are intended to prevent financial institutions from being used to process or conceal proceeds of criminal activity, while counter-terrorist-financing and proliferation-financing controls address risks associated with the movement of funds connected to terrorism and the proliferation of weapons of mass destruction.

For banks operating internationally, these obligations require controls capable of identifying and managing risks associated with customers, counterparties, transactions and jurisdictions. Cross-border payments can require additional scrutiny where the transaction involves jurisdictions, entities or sectors presenting heightened financial-crime or sanctions risks.

The CBUAE has supervisory and enforcement responsibilities over financial institutions operating in the UAE. Its announcement concerning Bank Melli Iran follows other recent regulatory actions involving foreign banks operating in the country.

The regulator's decision also comes amid increased scrutiny of financial connections involving Iran. International financial institutions have faced heightened requirements concerning sanctions compliance, customer due diligence, transaction monitoring and controls designed to identify attempts to circumvent restrictions through intermediaries or complex payment structures.

The prohibition announced by the CBUAE is distinct from sanctions imposed by another jurisdiction. The measure is a UAE regulatory enforcement action based on the CBUAE's examination findings and UAE legislation. The published announcement does not state that the decision was itself an implementation of a specific U.S. sanctions designation.

The CBUAE has not publicly provided details of the duration of the restriction, any conditions for its removal or whether the affected branches may apply for exemptions. It has also not published details identifying the particular compliance deficiencies discovered during the examinations.

The measure demonstrates the direct regulatory consequences that can follow from deficiencies identified during supervisory examinations. For banks with significant cross-border exposure, regulatory compliance encompasses not only traditional prudential requirements but also AML, counter-terrorist-financing and proliferation-financing controls.

Financial institutions processing transactions involving Iran may consequently need to assess the implications of the restriction for their correspondent banking relationships, payment flows, trade-finance arrangements and customer relationships involving Bank Melli Iran.

At present, the CBUAE announcement establishes the prohibition on financial transactions to and from Iran by Bank Melli Iran's UAE branches and identifies regulatory non-compliance as the basis for the enforcement action. It does not disclose further details concerning the underlying cases or transactions.

The restriction therefore represents a significant UAE supervisory measure against the Iranian bank while leaving the specific findings that led to the action undisclosed in the public announcement.

By fLEXI tEAM