The scope of Exchange Business is defined in the “Regulations regarding Licensing and Monitoring of Exchange Business issued in January 2014” (the Regulations) and all Licensed Persons are expected to operate within the scope of their license. Exceeding the scope of their license, by carrying out any activity other than those permitted by the Regulations, will be taken seriously by the Central Bank of the UAE (“the Central Bank”). This chapter provides the details of requirements related to the scope of Exchange Business and permitted activities that every Licensed Person must comply with at all times.

1. 1.1.1Exchange Business can be carried out by a person, whether natural or juridical, only if such person is licensed in writing by the Governor of the Central Bank or by a person authorized by the Governor to do so in accordance with the Regulations and its subsequent amendments;
2. 1.1.2The Licensed Person must carry out its activities in an utmost professional manner and in full compliance with all applicable Laws, Rules, Regulations, Notices and the Standards; and
3. 1.1.3The Central Bank shall treat instances of non-compliance seriously and reserves the right to impose appropriate non-compliance charges in accordance with Appendix 4 of the Standards.

The scope of Exchange Business is defined under Article 1.1(c) of the Regulations, which is explained in Paragraphs 1.2.1 to 1.2.4 of this Chapter.

1.2.1Foreign Currency Exchange (Article 1.1.(c).1 of the Regulations)

1. a)The Licensed Person is permitted to buy and sell foreign currencies and traveller’s cheques from/to customers, whether natural persons or juridical persons, who are physically present in the UAE;
2. b)The Licensed Person is not permitted to import or export foreign currencies from/to foreign entities without obtaining a Letter of No Objection from the Banking Supervision Department. Please refer to Paragraph 4.17 of Chapter 4 for further information; and
3. c)The Licensed Person may open Hedge accounts with a well regulated financial institution, whether inside or outside the UAE, for hedging its foreign exchange positions as part of mitigating the risk of exchange rate fluctuations subject to the following conditions:
   • •A Letter of No Objection from the Banking Supervision Department must be obtained prior to opening Hedge accounts;
   • •The Licensed Person must submit a duly completed “Foreign Account Application (FAA) Form” (Refer to Appendix 5 for FAA Form) along with the required supporting documents to the Banking Supervision Department in order to obtain a Letter of No Objection to open a Hedge account with a foreign financial institution. The Licensed Person must use the same FAA Form to apply for the Letter of No Objection to open a Hedge account with a financial institution located within the UAE;
   • •The Hedge account must be used strictly for mitigating the foreign exchange risk and not for any type of activities that may result in speculation; and
   • •The accounting for hedge transactions must be in accordance with the requirements of applicable International Financial Reporting Standards and must be fully automated.

1.2.2Remittance Operations (Article 1.1.(c).2 of the Regulations)

1. a)The Licensed Person is permitted to execute remittance transactions in local or foreign currencies on behalf of its customers, whether natural persons or juridical persons, who are physically present in the UAE provided that the Licensed Person is in possession of either a Category B or Category C license (Refer to Paragraph 2.2 of Chapter 2 for various license categories);
2. b)The Licensed Person may enter into necessary arrangements with banks, licensed/regulated financial institutions (local or foreign) or instant money transfer service providers to execute remittances subject to the conditions of Paragraphs 1.2.2 (c) to (f) below;
3. c)A Letter of No Objection from the Banking Supervision Department must be obtained to open accounts with foreign banks or foreign financial institutions (including establishing remittance relationships with exchange houses operating outside the UAE) for executing remittances. The Licensed Person must apply for the Letter of No Objection by submitting a duly completed FAA Form (Refer to Appendix 5 for this Form) along with the required supporting documents to the Banking Supervision Department;
4. d)A Letter of No Objection from the Banking Supervision Department must be obtained, by submitting a duly completed FAA Form (Refer to Appendix 5 for this Form), to open accounts with financial institutions operating in the Financial Free Zones of the UAE (e.g.: DIFC, ADGM);
5. e)A Letter of No Objection from the Banking Supervision Department must be obtained, by submitting a duly completed FAA Form (Refer to Appendix 5 for this Form), to enter into a remittance arrangement with any instant money transfer service provider;
6. f)The Licensed Person, who is a Master Agent (i.e. Main or Principle Agent) of an instant money transfer service provider, must obtain a Letter of No Objection from the Banking Supervision Department in order to appoint another Licensed Person to act as its Sub-Agent to offer the products or services of such instant money transfer service provider;
7. g)The remittance transactions executed by the Licensed Person on behalf of entities operating in the Financial Free Zones of the UAE must be in accordance with relevant laws related to such Free Zones;
8. h)A Licensed Person is not permitted to execute remittance instructions received from other Licensed Persons without obtaining a Letter of No Objection from the Banking Supervision Department when the remittance instructions are made on behalf of such other Licensed Persons’ customers; and
9. i)The Licensed Person is not permitted to act as a routing agent between its foreign correspondents without obtaining a Letter of No Objection from the Banking Supervision Department.

1.2.3Payment of Wages using WPS (Article 1.1.(c).3 of the Regulations)

1. a)The Licensed Person is permitted to execute wage payments through the Wages Protection System (i.e. WPS) on behalf of legal entities operating in the UAE provided that the Licensed Person is in possession of a Category C license. Please refer to Paragraph 2.2 of Chapter 2 for various license categories;
2. b)The monthly turnover of wages paid using WPS by the Licensed Person shall be restricted against the value of its bank guarantee favouring the Central Bank and its risk grading awarded by the Central Bank. Please refer to Paragraph 2.4.5 of Chapter 2 for further information;
3. c)The monthly turnover of wages, in the context of Paragraph 1.2.3 (b) of this Chapter, means the total value of the Salary Information File (SIF) uploaded to and accepted by the System of Wages Protection during a month;
4. d)The Licensed Person must provide WPS services only to clients who are located within the same Emirate where the Licensed Person has branches. In this context, a client with multiple branches spread across different Emirates of the UAE may also utilise the WPS service offered by a Licensed Person who has branches in the same Emirate where the Main Office or Head office of such client is located;
5. e)The Licensed Person must cease the disbursement of wages in cash through WPS on or before 30^th September 2018. The disbursement of wages, thereafter (i.e., with effect from 1^st October 2018), must be executed only via payroll cards or through a bank account of the individual receiving the wages or salaries;
6. f)The Licensed Person may enter into arrangements with banks or other appropriate service providers in order to distribute payroll cards after obtaining a Letter of No Objection from the Banking Supervision Department;
7. g)The Licensed Person must arrange to deliver Payroll cards directly to each employee of its clients and obtain acknowledgements thereof at all times;
8. h)Payroll cards must not be reloaded with any value or money other than the salary/wages of the employee as per the Salary Information File (SIF) uploaded to and accepted by the System of Wages Protection;
9. i)The Licensed Person must comply with the Central Bank Rules in relation to the WPS (i.e. Rules of the UAE Wage Protection System issued by the Central Bank) at all times; and
10. j)The Licensed Person must carry out Enhanced Due Diligence, in accordance with Paragraph 16.11.2 of Chapter 16, for each legal entity before entering into any WPS arrangement.

1.2.4Special Products or Services (Article 1.1.(c).4 of the Regulations)

1. a)The Licensed Person must obtain a Letter of No Objection from the Banking Supervision Department if it intends to sell/offer any product or service which does not fall under various activities mentioned under Paragraphs 1.2.1 to 1.2.3 of this Chapter;
2. b)The Banking Supervision Department shall periodically issue the list of such products or services (called “the Special Product Matrix”) to all Licensed Persons;
3. c)The Licensed Person may choose any product or service from the Special Product Matrix and then request for the Letter of No Objection from the Banking Supervision Department prior to selling/offering such product or service;
4. d)The Licensed Person must seek the Letter of No Objection from the Banking Supervision Department for all its existing special products or services provided that they appear in the Special Product Matrix. The Licensed Person is not required to seek Letters of No Objection for those products or services in the Special Product Matrix on a condition that such products or services were approved by the Central Bank previously;
5. e)The Licensed Person must request a Letter of No Objection from the Central Bank in order to offer any new product or service that is not listed in the Special Product Matrix. The Licensed Person must submit below information/documents to the Central Bank in such cases:
   • •A request for the Letter of No Objection; and
   • •Description of the product or service, profile of the partner, a confirmation that the Enhanced Due Diligence has been carried out on the partner, detailed process flow, settlement process, targeted customers and a risk assessment report.
6. f)The Banking Supervision Department shall issue the Letter of No Objection for a special product or service, based on the merit of each application, subject to the following conditions:
   • •The Licensed Person must be in possession of either a Category B or Category C license. Please refer to Paragraph 2.2 of Chapter 2 for various license categories;
   • •The Licensed Person must fulfil the paid-up capital and bank guarantee requirements in accordance with the conditions contained in the Special Product Matrix; and
   • •The risk grading of the Licensed Person must be acceptable to the Central Bank. Please refer to Paragraph 5.3.5 of Chapter 5 for further details on risk grading.
7. g)The Licensed Person must not solicit its customers or any other party for selling loan products of local or foreign banks; and
8. h)The Licensed Person must not be involved in or assist its customers or any other party for opening bank accounts with local or foreign banks.