Author(s):Several

UAE Law(s) Concerning Dormant Bank Accounts

Introduction

Bank accounts are among the most critical and valuable accounts that can belong to an individual. Long past is the time when people would stash their money in hidden safes and secret location, and the concept of stashing ones valuables in a mattress is now nothing more than a joke, usually ending with another party questioning why the money wasn’t merely stored in a bank account. In the developed world, the overwhelming majority of people have an account, and this also includes teenagers and kids.

In the UAE, things are slightly different. The population of around 9.5 million consists overwhelmingly of expatriates, with the figure laying at around the 85-90% range being expats. These individuals are also mostly in jobs since the country will only provide visas to those currently employed. Due to these combined factors, Bank accounts are almost universally present.

The UAE Central Bank governs banks and all activities performed by them. This entity is responsible for the financial sector of the country. It is to ensure the steady and healthy growth of the economy as well as managing the national currency. Most GCC countries have a Central Bank, which performs just this role, and the UAE is no different

More importantly to this article, they also manage all banks and bank-related activities such as the producing of laws and regulations to be followed by all, as well as providing regular circulars to spread the word on updates.

A recently produced circular concerned the matter of dormant bank accounts, and with so many expats in the country, people come and go all the time, and inactive bank accounts are an issue that would be more common than otherwise expected. It is imperative that there are tight regulations, and all are aware of them.

2018 UAE Dormant Account Regulation

The UAE Central Bank Circular Number 106/2018 was published earlier this year and covers the steps to be taken by banks for dormant accounts. It is essential to know just what will happen as the process in many countries is considerably different from those of the UAE. In the UAE, there are specific things to consider which aren't an issue elsewhere, and the question is one that many have, but not everyone has the answer.

The circular begins by stating in its scope, that the following regulation is to apply to all banks in the UAE at all times.

There are 10 Articles in total, and the objective of the law is to protect the balances of the bank's clients if a situation arises where a period of dormancy ensues.

Article 1 first provides the criteria under which an account shall be considered to be dormant. There are different three types of accounts which are accounted for by this law, and each has a slightly different set of criteria surrounding them:

Personal savings or current account: Where there have been no deposits or withdrawals for six years from the last transaction (not including the bank's activities with the account); Investment account: Where no communication with the customer can occur following twelve months from the date of final maturity; Short term deposit account: Where no automatic renewal clause is present, but no communication from the customer in five years, or where the deposit has matured, though there has been no renewal or claim in 12 months.

If these periods have elapsed, and the bank has attempted to contact the customer to no avail, after two months, the bank will be able to notify the Central Bank of the dormant account. However, there are some certain caveats to this. If the individual has other accounts with the same bank or has a known current address, the above will not be applicable.

Article 2 proceeds on the matter and informs banks of what is to happen with dormant accounts. Upon the confirmation of the position, the contents are transferred to a ledger, with a form to be filled in and a copy given to each department. Signature cards for the dormant accounts are produced and held separately from all other signature cards. The reason for this is to ensure no unauthorised persons can access the contents or perform any action. Further to this, all related documents for the account holder will require safeguarding.

Article 3 looks at what the process will be regarding the reactivation or accessing of the account following the activation of its dormant phase. Herein it is stated that to commence the retrieval process, the owner of the account should approach the bank with the relevant documents proving their identity and open a claim to reopen the account. Following this, the bank should transfer the total value of the ledger back into the original account.

Article 4 covers the responsibilities of the banks and specifies that there should be constant updates and check-ups with concerns to accounts to ensure up to date records. An important point to note is that banks cannot charge customers any fees to reactivate or close a dormant account; this is stated explicitly under Article 4.3.

Article 6 covers Consumer Protection. 6.1 specifies that no matter what occurs, the account and all its contents will continue to remain their property. Any interest that the account would ordinarily accrue would still do so. On top of this, any credit owed to the account may yet be added to it without changing its status as a dormant account.

Article 7 concerns accounts that remain dormant for extended periods of time. Should an account (so long as it has a value of over AED 3,000 and the individual who owns the account does not have a known address or different account with the same bank) be dormant for a period of seven years or more, its value should transfer to the UAE Central Bank under the ‘Unclaimed Balances Account – Dormant Accounts. Article 8 covers the retention of accounts following this stage, and herein it is stated that the Central Bank will then hold on to them until a beneficiary comes to claim them.

Finally, Article 10 specifies that this Circular will be published in the upcoming Official Gazette, and will become active one month following its publication.

Impacts of the Circular

Dormant bank accounts can be something of an issue for banks, as the primary methods through which the banks gain profit is from the interest earned on the loans they provide, and a vital source of the money these loans provide is the money that people save with the banks. However, in the UAE, since obtaining citizenship is not an option and instead, one must have a job and work in the UAE, there are many instances where people will leave their jobs and return to their home countries.

If one were to consider these previous facts alongside one another, then, it could be surmised that in small quantities, dormant accounts would be of no real worry to banks. Though in the UAE, with the likely amount of inactive accounts being significantly higher, there is undoubtedly a need for regulations setting out the necessary processes so that the banks are aware of their duties and responsibilities.

The circular itself is relatively simple, and from the bank client’s point of view, there is not much of note here. The value of the account and all its contents remain the property of the customer, and at no stage can it be taken from them. All generally continues as it would otherwise, which includes interest earnings, and there can be no fees levied upon the account holder if they wish to re-establish their accounts or close them down.

On the other hand, the banks must be aware of what they should do with accounts and at what point they are to act. Constant records are to be kept and updated, and there should be attempted communication between the parties to ensure that the account should remain under the dormant classification. The time before the designation of inactive arises may be relatively lengthy; thus, the importance of the records is highlighted by this.