UAE grants Russian lender rare banking licence

The United Arab Emirates (UAE) has issued a banking license to Russia’s MTS Bank, a move that could escalate concerns among western nations over the rise of the Gulf state as a potential financial haven for Moscow. The decision by the central bank was taken to meet the increasing demand for financial services from Russian expatriates residing in the UAE.

In recent years, tens of thousands of Russians have relocated to the UAE, particularly Dubai, to escape financial restrictions in Europe or dodge the military draft back home. However, they have faced difficulties in opening bank accounts, especially corporate facilities, with existing lenders in the country. MTS Bank is the first foreign bank to receive a license in the UAE in several years.

The US and European nations have grown apprehensive about the UAE’s financial interaction with Russia since sanctions were escalated following the Ukraine invasion. The US Treasury under-secretary for terrorism and financial intelligence, Brian Nelson, raised concerns about the license granted to the Russian bank during his recent visit to Abu Dhabi. Nelson met with government counterparts and financial institutions to emphasise the US’s commitment to enforce its sanctions rigorously.

MTS Bank, a subsidiary of Russia’s largest mobile operator, and the UAE central bank declined to comment on the matter.

The development comes at a crucial time for the UAE, which is set to receive a decision from the Financial Action Task Force (FATF), the global anti-money laundering watchdog, on its status. The Middle East’s financial hub is hoping to demonstrate that it has tightened its financial compliance and boosted its criminal enforcement efforts, so as to be removed from the FATF’s so-called grey list.

Despite denials from Abu Dhabi officials, the presence of assets belonging to sanctioned Russian oligarchs has raised suspicions of deeper illicit financial links between the UAE and Russia. The authorities are urging financial institutions to enforce western sanctions to reduce the risk of losing correspondent banking relationships with US and European lenders.

Frustrated with the perception of the US’s detachment from the Middle East, the Gulf state has been realigning its relations with a multipolar world view that includes Russia and China, a growing trading and investment partner. The issuance of the license to MTS Bank is expected to ease access to bank accounts for Russians and create a new channel for the flow of money into the UAE. The bank is set to roll out its services in the coming months. The news of the bank’s arrival has spread rapidly in the UAE’s Russian community, with many bankers calling it a “game-changer.”