Introduction

The Central Bank of UAE along with UAE Banks Federation has been discussing the issue pertaining to the Dormant Accounts in UAE and in lieu of resolving such issue has laid down Circular Number 10 of 2018 pursuant to Dormant Accounts (the Circular or Regulation) on 24 April 2018. Prior to the enactment of the Regulations, banks were only obliged to provide the list of dormant accounts to the Central Bank. However, foregoing Regulation has expanded the bank’s duties in reference to actions needs to be undertaken for closing the dormant bank accounts.

The Regulation as explained by Lawyers in Dubai, address to several pertinent and unresolved questions regarding the dormant accounts including, but not limited to, administering the dormant account and their unclaimed dues; instituting a legal framework to safeguard the dormant accounts; establishing a process ensuring the unclaimed balance is received by the customers.

Identifying the Dormant Account

The Regulation reveals the copious categories of dormant accounts and accordingly outlines the procedure for managing such accounts. The classification of dormant accounts are as follows:-

1. Deposit Account

Following accounts will be considered as Dormant Deposit Accounts:

1. Personal Savings Account which has not been used by the customer from past six years;
2. Fixed/Shot term Deposit Account with or without the automatic renewable clause, wherein the former the claim request has not been submitted for a period of 12 months since maturity and 5 years in the latter;
3. An Investment Account where the customer has failed to communicate from past 12 months from the date of maturity.

In the foregoing cases, the bank must try to liaise with the customer informing them about the dormant account, however, failing to receive a response within 2 (two) months, the bank must indicate the Central Bank of UAE.

2. Unclaimed Bankers Cheques, Bank Drafts or Cashier Orders

The Bankers cheques, bank drafts of Cash Orders drafted on the request of the customer against the cash deposit or their account are remaining unclaimed for a period of 1 year. In such instances, the bank has an obligation to notify about such cheques in two local newspapers (Arabic and English), and if the response is pending until three (3) months, the balance must be transferred to the unclaimed bank account with the bank.

3. Unpaid Dividends to Bank’s Shareholders

The dividends paid to the shareholders are pending unclaimed with the bank for a period of minimum 1 year from the date of declaration of dividend. Similarly, in these circumstances, the bank must publish the dividend information in two local newspaper (Arabic and English), failing to receive a response in three (3) months, the amount must deposit in unclaimed bank account.

4. Unclaimed Content of Safe Deposit Boxes

The charges levied by the bank for safe deposit box are pending for a period of minimum two years, and the bank has not received any information pertaining to the secure deposit tenant. The bank must, in such cases, send a final notice to the customer last known address and subsequently should publish the information in two local newspaper and if the bank does not receive a response within three (3) months, bank shall file an application in the court for appointment of a supervisor of the safe deposit. The foregoing application must entail a detailed list of the contents of the box to be submitted to the Central Bank, and in any event, if the court proceeds to sale the contents of the box, the amount must be transferred to the unclaimed bank account post deducting the bank charges.

The Circular subsequently mentions once an account is deemed dormant and even post undertaking relevant actions to contact the customer as aforementioned, the bank must transfer the proceeds from dormant account to Dormant Account ledger along with a copy sent to the Banking Operations Department and the Banking Supervision Department of the Central Bank.

Customer’s Claims for Dormant Accounts

Pursuant to Article 3 of the Circular, the customer is authorized at any time to make a claim for the funds held in his dormant account either personally or through a legal representative. The bank post valid identification should settle the claim within 1 month unless there is a justifiable delay.

Bank’s Obligations

In consonance with Article 4 of the Circular, the bank must fulfil following obligations in relation to the dormant bank accounts:

1. Ensuring Customers profiles are updated timely considering the Central Banks regulations for Anti-Money Laundering;
2. Conduct periodical review of dormant accounts and must try to communicate with all means possible;
3. Ensure easy protocols to close dormant accounts and re-activate dormant accounts without levying any additional fees;
4. Monthly reconciliation of dormant accounts subject to the review of external auditor annually.

Protecting the Customers

The Regulation was laid down in the interest of the dormant account holders which is evident from the provisions of the said Regulation. The Circular specifically provide for clauses offering protection to the account holders as follows:

1. The funds in dormant accounts are the property of the holder, and in the event of his demise the legal heirs have the authority to hold the funds;
2. In the case of an interestm bearing account, the interest will accrue on the existing rate and no additional charges will be levied by the bank;
3. Even post declaring an account as a dormant account, the bank must generate account statement annually;
4. The bank must no levy debit or system based charges on dormant accounts;
5. The bank must ensure that the customer is aware of the terms and conditions in relation to dormant

Transfer of Funds to Central Bank

In reference to Article 7 of the Circular, if the account is dormant since seven (7) years from the date of last transaction and the funds exceeds AED 3,000 (UAE Dirhams three thousand), the bank must transfer the funds of unclaimed balances to Central Bank without any additional charges, subjected that the customer does not have any other bank account, and the Customer’s address is unknown. It is pertinent to note that the funds will be retained by the Central Bank, until unless claimed by the beneficiary.

Conclusion

The concerned Regulation has standardized the protocol for dealing with dormant accounts which have resulted in obliterating the uncertainty among banks to deal with dormant accounts. The regulation ensures the rights of the account holders and demolishes the possibility of banks retaining the funds from inactive accounts as income which strengthens UAE position internationally.

---

Copyright © of this article is retained by the author and/or other copyright owners. We explicitly grant you permission to download a copy, without any alteration, of this article for personal non-commercial research or study, without prior permission or any charge. This article can be utilized on your website or for marketing, however, we grant you permission to host this article on your website and no other rights. This content should not be altered in any way or sold commercially in any format without prior permission of the copyright holder. During reference of this article, full biographic details entailing the name of the author, his designation, the institute and the publishing date of the article shall be provided.