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UAE's money exchange industry faces shake out
[DUBAI] Some money exchange firms in the United Arab Emirates may have to merge and others could be forced to close as they struggle with rising capital and compliance costs and some banks refuse to do business with them, the head of an industry body said.
The UAE's majority expatriate population transferred a net US$18 billion abroad in 2013, according to central bank data, much of it through the estimated 120 exchange firms in the region's main financial hub.
But this year the industry has battled multiple headwinds. Money exchanges remitting money abroad were given two years from January to meet a new minimum capital requirement of 5 million dirhams (S$1.8 million) imposed by the central bank, posing a challenge for smaller players.
Exchange houses are also increasingly expected to exercise greater scrutiny on their customers and the money they handle in a region considered a high risk for terror financing and money laundering.
In May 2013, the US treasury department prohibited dealings with Al Hilal Exchange for aiding Iranian attempts to circumvent international sanctions against Iran.
Complying with capital and compliance regulations has added between 20 to 40 per cent to industry costs this year, said Osama al-Rahma, chairman of the Foreign Exchange & Remittance Group UAE. "This is why I'm expecting some won't be able to meet such huge operational costs, especially if you add this along with inflation and cost of doing business," he said. "You might see consolidation and you might see exits."