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UAE cites ‘sanctions risks’ as it cancels licence for Russia’s MTS Bank

The United Arab Emirates has cancelled the licence of Russia’s MTS Bank and ordered it to wind down its operations in the Gulf state, citing the “sanctions risks” associated with the lender.

The decision comes as the region’s dominant trade and financial hub has been facing US pressure over western concerns that it is becoming a haven for Russian sanction busting.

The UAE’s central bank said in a statement on Friday that it “has been decided to cancel MTS Bank’s Abu Dhabi licence, wind down its operations within six months from the date of the decision . . . and close the branch”.

“This decision comes after considering the available options regarding the new status of the MTS Bank, and taking into account the sanctions risks associated with the bank after the designation,” the central bank said.

“During the winding down, the branch will be prohibited from opening new accounts and conducting transactions, except for clearing prior obligations and the bank’s use of central bank’s payment systems will be restricted to this purpose only.”

MTS Bank, which is a subsidiary of Russia’s largest mobile operator, Mobile TeleSystems, had sanctions imposed by the US and UK last month as part the waves of sanctions that the west has imposed on Russian individuals and entities since President Vladimir Putin launched his full invasion of Ukraine a year ago.

The Russian lender was the first foreign bank in several years to receive a licence in the Gulf state.

UAE officials have rejected western concerns about the country being used for sanctions evasion, saying the authorities had worked to halt financial flows from sanctioned Russian entities, while refusing to discriminate against non-sanctioned companies and individuals.

The UAE, which is an Opec member, has maintained cordial relations with Moscow since the Russian invasion. Tens of thousands of Russians have settled in the UAE, mainly in Dubai, over the past year in a bid to escape financial restrictions in Europe or to avoid the military draft back home. Many have complained of difficulty in opening bank accounts, especially corporate facilities, at banks already operating in the Gulf state.

US treasury officials had previously raised concerns about the granting of a banking licence to MTS.

US president Joe Biden’s administration is also worried that the UAE is becoming a hub for the shipment of items such as electronics that can be repurposed to help Russia’s war effort. US, UK and EU officials visited the Gulf nation last month to raise concerns with Emirati officials.

The pressure on the UAE over its links to Russians comes as the Gulf state seeks to demonstrate it has tightened financial compliance and boosted criminal enforcement following the global anti-money laundering watchdog’s decision a year ago to place it on its so-called “grey list”.

UAE officials have said they have taken many steps to address the Paris-based Financial Action Task Force’s concerns.

The Gulf state is a traditional western ally but in recent years it has sought to boost relations with other world powers, including Russia and China, as it has become frustrated with the US’s perceived disengagement from the Middle East.

Dubai is the region’s premier trade, finance and tourism hub and has long been the destination of choice for international banks and multinationals operating in the Middle East.

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