The mechanisms available for an individual or entity to challenge its addition to a sanctions list are set out under the Sanctions Regulation:. If the grievance is rejected or not responded to within 60 days, the complainant may appeal before the court concerned with state security crimes.
Sanctions List: In accordance with Article 15 of the Sanctions Regulation, the Office shall post on its official website the procedures of submission of applications for removal from the Sanctions List. The procedure varies depending on the nature of the sanction. Changes to the Local Lists are published in the Official Gazette as well as in audio-visual and print media in both Arabic and English.
The Sanctions List is available on the UN's website. In addition to the sanctions referred to above, the UAE currently maintains comprehensive sanctions and embargoes against Qatar and Israel. In addition to including key Qatari individuals in its Local Lists, the UAE undertook the following measures, among others: UAE officials' announcement: The UAE authorities have announced that it imposed an embargo on Qatar and imposed sanctions on the Qatari government and certain Qatari companies and citizens.
The scope of the boycott imposed was initially wide and included secondary and tertiary sanctions. The process for lifting sanctions varies depending on the method of imposition as well as the nature of such sanction. With respect to the Local Lists, the Supreme Council for National Security periodically reviews the same in coordination with the Ministry of Justice and submits recommendations to the Ministry of Presidential Affairs. The latter then submits the application to the UAE Cabinet, including its opinion.
The removal of such sanctions is then implemented by the UAE through different means, which may vary depending on the method by which the relevant sanction was imposed. This is particularly illustrated by the significant role accorded to the Office with respect to implementing the Sanctions List, as well as the Commodities Law, which includes banning the import, export or re-export of goods deemed a threat to the UAE's foreign policy sanctions are often used as an instrument of foreign policy.
The UAE does not have blocking statutes or other restrictions prohibiting adherence to other jurisdictions' sanctions or embargoes. This Resolution was not publicised in the Gazette and to date, the Israel Boycott Law has not been amended. The parties and transactions subject to UAE's sanctions laws and regulations depend on the nature of and reasons for the sanctions.
Certain sanctions are more narrowly targeted than others. With respect to sanctions targeted at specific individuals and organisations e. With respect to more comprehensive sanctions targeted at governments, such sanctions often apply based on the nationality of persons involved, such as in the case of Qatar and Israel. Sanctions can also apply on the location where the transaction takes place; this is particularly relevant where sanctions are targeting trade with a certain country or the country imposing the sanction refuses to recognise or accept deals involving the currency of a certain country, as is the case with Iran and Qatar.
Financial institutions and customs departments in the UAE are, in certain circumstances, required to block or freeze funds or other property that violate sanctions. Pursuant to Article 12 of the Sanctions Regulation, "no physical or moral person shall be allowed to make the Funds in its possession or under its managements, or any financial services or other, available directly or indirectly to or in favour of any person or organisation listed on the Sanctions List There are no licences available that would authorise activities otherwise prohibited by sanctions per se.
However, special licences may be required to conduct activities more susceptible to the possible breach of sanctions; for example, pursuant to the Commodities Law, strategic goods and dual-use items, such as arms and military hardware, chemical and biological materials, cannot be exported or re-exported without a special licence. Multiple laws and regulations, including Article 15 of the AMLCFT Law, impose an obligation on financial institutions and DFNBPs to report to the relevant financial regulator any suspicion or any situation in which they have reasonable grounds to suspect a transaction or funds is related to a money-laundering crime, related predicate offences, financing of terrorism or illegal organisations.
Furthermore, Article 19 of the Sanctions Regulations imposes several reporting obligations on financial institutions and DFNBPs to the relevant financial regulator, including in the following cases: a. The government conveys its compliance expectations by circulating circulars and directives as well as issuing laws and regulations. In financial free zones, compliance expectations are comprehensive and included in "Rulebooks". Furthermore, Article 20 of the Sanctions Regulations imposes an obligation on financial regulators to take all measures to ensure financial institutions and DFNBPs comply with UN sanctions and apply administrative sanctions upon violation of such compliance.
A common compliance policy required is the implementation of client due diligence and onboarding clearances to ensure that customers of such institutions are not subject to any sanctions. The government authorities responsible for investigating criminal economic sanctions offences differ depending on the nature of the sanctions. As explained above, different government authorities are responsible for implementing different types of sanctions; these very same government authorities must investigate any potential breach by a person under its surveillance.
These governmental authorities must then report to the executive board of the Supreme Council for National Security, which will further investigate the matter and may file a claim for prosecution of any person found to be in breach of sanctions through the judiciary system. There is both corporate and personal liability. With respect to natural persons, imprisonment may be imposed in addition to or instead of fines.
Pursuant to Article 42 of the Anti-Terrorism Law, a maximum of AED million shall be imposed upon a judicial person who violates criminal sanctions, unless a more severe penalty is imposed under the Penal Code. Under the Central Bank Law, a financial institution disregarding instructions of the Central Bank not to deal with specific persons will be fined a minimum of AED , and a maximum of AED 10 million.
Other potential consequences for breach of sanctions, where such breach constitutes crimes under the Anti-Terrorism Law or Penal Code, include imprisonment and capital punishment. The Commodities Law also provides for imprisonment for up to one year.
Public prosecution may be involved if the issue relates to a crime punishable by law, such as felonies. There are civil penalties for violating economics sanctions laws and regulations. These penalties depend on the nature of the violation in question. Persons effecting wire transfers in breach of sanctions may, in certain cases, find access to their bank accounts blocked until an investigation is conducted by the Central Bank or other competent financial regulator.
The government authority responsible for investigating and enforcing civil economic sanctions depends on the nature of the sanction that was breached. For instance, with respect to breach of custom laws, the relevant customs department is responsible, and with respect to breach of the Central Bank's rules, the Central Bank is responsible. There is both corporate and personal liability for civil economic sanctions violations. The laws and procedures applicable where civil economic sanctions are violated include the blocking of transactions and imposition of administrative fines by the competent authorities.
Administrative penalties may apply where persons are found to have violated economic sanctions; the penalty amount differs depending on the severity of the violation. With respect to customs offences, persons may be fined varying amounts depending on the offence and the value of the related goods. There is no limitation in principle to other potential consequences for a violation of civil economic sanctions.
Other potential consequences may vary depending on the nature of the violation and required measures to avoid a breach of sanctions, including the seizing and destruction of assets and freezing of bank accounts. Assessment of penalties depends on the breach itself. Where the latter includes a transaction, the penalty can be linked to the value of the transaction.
Should a matter be brought before the courts, the penalty assessment can also be left to the discretion of the judge. Not all resolutions by the competent authorities are public; certain penalties are imposed at their discretion and are based on the gravity of the violation. The appeal process for sanction penalties does not usually take place in judicial proceedings but rather consists of the submission of grievances and other administrative proceedings. Depending on such proceedings, it may be possible in certain cases to raise a claim and to appeal a decision before the courts.
The UAE does not have a binding precedent system, therefore information regarding cases in the UAE is not always publicly available. Criminal and civil enforcement are at both the national and Emirati level. While the Central Bank administers its applicable laws at a national level, customs laws are often administered at an Emirati level; for example, with respect to Dubai by the Dubai Customs and with respect to Abu Dhabi by the Abu Dhabi Customs.
Under Federal Law No. With respect to money laundering or financing terrorism or crimes by illegal organisations, Article 29 provides that criminal cases are not subject to the statute of limitations and the sanctions shall not lapse with time or with the lapse of any related civil legal cases due to the statute of limitations. Additional economic sanctions-related measures are regularly proposed and under consideration; however, such information is not usually shared with the public until officially issued or announced.
In other exceptional situations, the UAE may announce its intention to impose or comply with certain sanctions, such as its latest announcement to comply with existing and upcoming US sanctions on Iran. Many economic sanctions laws are available on the websites of the governmental entities issuing the same, sometimes both in English and Arabic. Published first by International Comparative Legal Guides. The content of this article is intended to provide a general guide to the subject matter.
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Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms. Fitch Ratings Inc. Economic headwinds are expected to continue through , but we are confident that we will keep meeting client demands and ensure the best possible revenues for our shareholders thanks to our clear strategy, our commitment to providing outstanding banking services, our implementation of the highest corporate governance standards across our operations, and our full compliance with transparency and disclosure principles.
We will continue to consolidate and strengthen our budget by making further enhancements to capital and liquidity ratios and credit quality. Similarly, we will uphold our culture of high performance and deployment of modern technologies to provide an exceptional experience to our personal and corporate clients, whether they choose to interact with us in person or through our various digital channels.
On behalf of the Executive Management team, I express my deep gratitude to our shareholders, our board members, and our esteemed clients for their continued loyalty and trust in us. Faisal H. Galadari Chief Executive Officer We will remain committed to our conservative strategy for business growth and maintaining our asset value as we focus on diversifying sources of income and minimising risk.
In addition, we have pursued our Emiratisation efforts aimed at nationalising jobs and developing local talent. Al Masraf seeks to attract young nationals and graduates hoping to build a bright and successful career in the banking industry. Mohammad Ashour Head - Audit Mr. The Bank shall have a vision, mission and values of its own consistent with the principles and philosophy of governance. The Board of Directors shall adopt this and shall ensure that it is applied.
Ensuring that the Bank manages risk effectively by approving Risk Appetite Statement and risk framework and monitor aggregate risk exposures that occurs to the Bank in its generality. Ensuring implementation of disclosure policies and procedures that comply with regulatory requirements. Appointing Chief Executive Officer of the Bank and key members of Senior Management and Heads of control functions, which includes organizing their selection process and their compensation, monitoring and, when necessary, replacing them and overseeing succession planning.
Ensuring that the Bank has strong and well articulated cyber security systems in place. The Board must learn about any related breaches or losses. Establishing conflict of interest practices between the Board members and within Al Masraf in general. BODs primary responsibility is to provide effective governance over the Al Masraf affairs for the benefit of its shareholders, and to balance the interests of its diverse constituencies, such as its customers, employees, suppliers under the framework of the work environment of Al Masraf.
In all actions taken by the Board, the directors are expected to exercise their business judgment in what they reasonably believe to be in the best interests of and to comply with relevant laws, regulations, rules and best Al Masraf practices. The Board shall be responsible to ensure that the management balances the promotion of long term growth with the delivery of short term goals.
The Board is the main body for making decisions within Al Masraf. The Board defines appropriate governance structures and practices suitable for its own work, and puts in place the means and mechanism for such practices to be followed and periodically reviewed for its ongoing effectiveness. Determining strategic goals of the Bank and guiding the Executive Management. Supervising the Executive Management and follow up its performance and ensure of the safety of the financial position of Al Masraf by adopting policies and adequate procedures to supervise and oversee the performance of Al Masraf.
Committees make recommendations for action to the BODs, which retains collective responsibility for decision-making. The Committee plays a vital role in helping Al Masraf in achieving its objectives by enhancing the transparency in financial reporting process rather than providing reasonable assurance with regard to compliance with rules and regulations and adopting financial standards and forwarding it to the Board and recommending to appoint external auditors.
Remuneration and Nomination Committee RNC The committee considers matters relating to appointing the executive management and review their remunerations and motivations including policy for executive management remuneration and their annual individual remuneration awards. The committee also reviews succession plans for the Chief Executive Officer and other key Senior Management positions.
The Committee approves and review strategic HR issues including employee retention, motivation and commitment and succession planning for senior management positions. Risk arising from all businesses of Al Masraf and control processes related to it. Ensure comprehensive and well organization of Risk Management functions within the bank.
The objectives of the Committee are to: 1. Establish a Centralized Policy Credit and Investment decisions approval. Make speedy decisions and timely responses to the urgent Credit and Investment queries of the customers. Corporate Governance Committee CGC Corporate governance committee aims to apply a set of systems, principles and processes by which an organization is governed, directed and controlled.
It also create a long-term benefit on a sustainable basis for all its shareholders and all interested parties through the commitment to the principles contained in the Governance Code. The purpose of the committee is to ensure and monitor the implementation of Corporate Governance Code in real spirit in Al Masraf. Where it evaluate the performance of Board members and committees, ensuring the effectiveness of applying corporate governance within the bank, adopting, and reviewing the Annual Governance Report.
The committee gives its recommendations, for any strategic decisions raised by the bank to the BODs, which makes addressing such strategic decisions more efficient. The committee, which includes members and advisors with extensive experience in Technology, acts as a trigger for innovation in business and digital domains and facilitates the timely decisions on any strategic innovative ideas.
The agenda of the meeting with supporting documents shall be provided to the directors within sufficient time prior to the meeting date to provide ample time for review beforehand. And a director has the right to suggest items for inclusion on the agenda or to raise subjects that are not on the agenda for that meeting. Decision Making within the Board Decisions of the Board shall be taken by vote of the majority of Board i. If votes are equal the side which the Chairman supports shall prevail.
The Board may take some decisions passing resolutions if all BODs agree that the case necessitates that due its urgency and the proposed resolutions are delivered to BODs in writing and accompanied by all necessary supporting information.
If a Member has a reservation, the core reasons for such negative vote shall be minuted. Board members shall not use inside information to achieve personal gains for themselves or others. They shall also abstain from voting or even taking part in decision making process on any matter where they have an actual or potential conflict of interest.
At the end of the term of their mandate, they must return all confidential documents to Al Masraf and destroy all electronic copies if directed to do so by Al Masraf and they remain legally responsible if any information is made public through them. Corporate Governance Standards In discharging its responsibilities, the Board shall have regard to establish and evolving best practice Corporate Governance standards. Al Masraf Annual Report Difference between the positions of the Chairman of the Board of Directors and the Chief Executive Officer The Chairman of the BODs and the Chief Executive Officer has different kind of responsibilities, therefore to prevent any conflict of interest and to preserve an effective supervision over the management, the positions should be occupied by two different individuals in application to the valuable principles of the code.
Whistle Blowing Whistle blowing is a channel of communication that encourages employees to blow the whistle safely raise the alarm about such concerns as mentioned to protect the interest and image of Al Masraf without having the fear of being victimized. Al Masraf should have in place a comprehensive policy to lead and guide the assessment operation of the functions activities in a way whether those activities can be outsourced and the appropriate procedure to do so. Al Masraf Annual Report Outsourcing of various functions of the Bank Al Masraf should have a clear policy when assigning its functions to an outsourcer.
It has a well-defined process for performing ongoing and periodic due diligence on qualifying new and existing customers as per risk-based approach. In line with international standards, Compliance Dept. Audit Internal Audit charter which is approved by Audit Committee identifying internal audit responsibilities, authority and reporting line which are administratively with the CEO and functionally with the Board Audit Committee.
Independent, objective assurance and consulting functions evaluate the effectiveness of risk management, control and corporate governance process. Internal audit applied a comprehensive risk based audit of all operating units and departments in Al Masraf to ensure e. In addition, Business Units also use approved process notes, procedure documents etc. We have acquired a process flow application which provides the staff an online access to the Policies, Standard Operating Procedures SOPs and training.
It no longer limits to the financial side but has transcended the contribution of financial institutions in building society and achieving social solidarity. Al Masraf has, during the past years, achieved qualitative leaps and remarkable results, which were clearly demonstrated in the comprehensiveness of the social, voluntary and charitable services that the bank embraced in the year , whether through initiative, partnership or sponsorship.
The bank has adopted a policy and methodology to prove its worth in carrying out its role to support the society through its CSR initiatives, starting from the provisions of Federal Law No. The bank has contributed to various activities in the fields of health, education, charity, sports, Economy. In , the bank maintained its position as a responsible national banking institution seeking to contribute to supporting economic development in the country, improving the quality of life in our society, and creating job opportunities for citizens.
The bank organized an entertaining sporting day for employees and their families, on the sidelines of the Dubai Fitness Challenge. In the field of social welfare The bank participated in the initiative launched by the Fund to address bad debts, which aims to reduce the burdens of living and ensure decent living and family stability for citizens of the state with low incomes.
The bank participated in sponsoring the charitable events organized by the Rotary Club of Jumeirah Al Masraf Annual Report The bank participated in the "Bag of Tolerance" campaign organized by Dubai Customs, where staff volunteers distributed school bags to the students of the AlSaada School for Basic Education. During the holy month of Ramadan, bank employees participated in distributing 4, Iftar meals to fasting people.
In the health field The bank participated in "Dubai Fitness Challenge" activities to encourage employees and lead a healthy lifestyle. As part of its efforts to reduce the spread of breast cancer, the bank launched a campaign "Protect yourself" to raise awareness of breast cancer and how to prevent it. The bank organized a health awareness campaign for employees, during which free medical examinations and medical advice were provided.
In the economic sphere The bank participated in the initiative launched by the Fund to address bad debts, which aims to reduce the burdens of living and ensure decent living and family stability for citizens of the state with low incomes. The bank participated in the credit guarantees program for financing small and medium companies launched by the "Emirates Development Bank", in our commitment to develop and provide innovative financing products and solutions to enable emerging national institutions and Emirati entrepreneurs to contribute effectively to economic development.
The bank participated in sponsoring a number of economic activities such as the International Internal Auditors Conference and the activities of the Federal Customs Authority. The bank also participated in sponsoring the compliance conference in a changing world. The audited financial statements have been prepared in accordance with International Financial Reporting Standards IFRS and an unqualified audit opinion has been issued by the independent auditors.
The cash and bank balances with the Central Bank, which also includes the statutory reserves and certificate of deposits was at AED 1, million as at 31st December against AED 1, million in the previous year. These portfolios are being marked to market on a regular basis. The total net market value of the investments of the Bank amounted to AED 1, million as at 31st December compared to AED 1, million as at 31st December The revaluation loss and the depreciation charge during the year has resulted into reduction of the net book value of Investment Properties to AED million compared to AED million in the previous year.
The earnings per share is AED 6. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as at 31st December , and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards IFRS. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information Management is responsible for the other information. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS and their preparation in compliance with the applicable provisions of the UAE Federal Law No.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
However, future events or conditions may cause the Bank to cease to continue as a going concern. We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Galadari Chief Executive Officer The notes on pages 44 to form an integral part of these financial statements. The Bank is engaged in commercial and retail banking activities and carries out its operations solely in the United Arab Emirates through its nine branches.
Decretal Federal Law No 14 of regarding the Central Bank and Organization of Financial Institutions and Activities was issued on 23 September and has come into force on that date, Banks were allowed three years to ensure compliance with the law No 14 of as per the transitional provision contained therein. Changes to significant accounting policies are described in notes 3 and 4 to the financial statements. Except as indicated, information presented in AED has been rounded to the nearest thousand.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in note 6 to the financial statements.
IFRS 16 - Leases The Bank applied IFRS 16 using the modified retrospective approach, under which the right of use assets is equal to lease liabilities, less prepaid lease rental, if any, as at 1 January Accordingly, the comparative information presented for is not restated — i.
The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in IFRS 16 have not generally been applied to comparative information. Definition of a lease Previously, the Bank determined at contract inception whether an arrangement is or contains a lease under IFRIC 4 Determining whether an Arrangement contains a Lease. The Bank now assesses whether a contract is or contains a lease based on the definition of a lease, as explained in note 3.
On transition to IFRS 16, the Bank elected to apply the practical expedient to grandfather the assessment of which transactions are leases. As a lessee As a lessee, the Bank leases some branches and equipment. The Bank previously classified these leases as operating leases under IAS 17 based on its assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset to the Bank. Under IFRS 16, the Bank recognises rightof-use assets and lease liabilities for leases of branch and office premises — i.
At commencement or on modification of a contract that contains a lease component, the Bank allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. Significant accounting policies continued a New and Amended standards and interpretations adopted continued As a lessee continued However, for leases of branches and office premises the Bank has elected not to separate non-lease components and account for the lease and associated non-lease components as a single lease component.
As a lessor When the Bank acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Bank makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.
As part of this assessment, the Bank considers certain indicators such as whether the lease is for the major part of the economic life of the asset. When the Bank is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
If a head lease is a short-term lease to which the Bank applies the exemption described above, then it classifies the sub-lease as an operating lease. If an arrangement contains lease and non-lease components, the Bank applies IFRS 15 to allocate the consideration in the contract. The accounting policies applicable to the Bank as a lessor in the comparative period were not different from IFRS When measuring lease liabilities, the Bank discounted lease payments using its incremental borrowing rate 2.
All other financial instruments including regular way purchases and sales of financial assets are recognised on the trade date, which is the date on which the Bank becomes a party to the contractual provisions of the instrument. All regular way purchases and sales of financial assets are recognised on the settlement date, i.
Regular way purchases or sales of financial assets are those that require delivery of assets within the time frame generally established by regulation or convention in the market place. Significant accounting policies continued b Financial assets and liabilities continued ii Classification of financial assets and financial liabilities On initial recognition, a financial asset is classified as measured at: amortised cost, FVOCI or FVTPL.
A financial asset is measured at amortized cost if it meets both the following conditions and is not designated as at FVTPL: - - the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL: - - the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by investment basis. In addition, on initial recognition, the Bank may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Business model assessment The Bank performs an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: - - - - the stated policies and objectives for the portfolio and the operation of those policies in practice.
Significant accounting policies continued b Financial assets and liabilities continued ii Classification of financial assets and financial liabilities continued In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
The Bank classifies its financial liabilities, other than financial guarantees and loan commitments at amortized cost. On derecognition of a financial asset, the difference between the carrying amount of the asset or the carrying amount allocated to the portion of the asset derecognised and the sum of i the consideration received including any new asset obtained less any new liability assumed and ii any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.
Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Bank is recognised as a separate asset or liability. In transactions in which the Bank neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset and it retains control over the asset, the Bank continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.
Financial liability The Bank derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. Significant accounting policies continued b Financial assets and liabilities continued v Modifications of financial assets and financial liabilities Financial assets If the terms of a financial asset are modified, then the Bank evaluates whether the cash flows of the modified asset are substantially different.
If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value plus any eligible transaction costs.
If cash flows are modified when the borrower is in financial difficulties, then the objective of the modification is usually to maximise recovery of the original contractual terms rather than to originate a new asset with substantially different terms. If the Bank plans to modify a financial asset in a way that would result in forgiveness of cash flows, then it first considers whether a portion of the asset should be written off before the modification takes place. This approach impacts the result of the quantitative evaluation and means that the derecognition criteria are not usually met in such cases.
If the modification of a financial asset measured at amortised cost or FVOCI does not result in derecognition of the financial asset, then the Bank first recalculates the gross carrying amount of the financial asset using the original effective interest rate of the asset and recognises the resulting adjustment as a modification gain or loss in profit or loss.
For floating-rate financial assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs or fees incurred and fees receivable as part of the modification adjust the gross carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income calculated using the effective interest rate method.
Significant accounting policies continued b Financial assets and liabilities continued vi Subsequent measurement The following accounting policies apply to the subsequent measurement of financial assets Category Subsequent measurement Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. Financial assets at amortized cost These assets are subsequently measured at amortized cost using the effective interest method.
The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on de-recognition is recognized in profit or loss. Interest income calculated using the effective interest method, foreign exchange gains and losses are recognized in OCI.
On de-recognition, gains and losses accumulated in OCI are reclassified to profit or loss. The allowance for impairment on debt instruments designated at FVOCI is included in revaluation reserve and recognized in other comprehensive income Equity investments at FVOCI These assets are subsequently measured at fair value.
Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.
Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains and losses arising from a Bank of similar transactions. The fair value of a liability reflects its non-performance risk. When applicable, the Bank measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
Significant accounting policies continued b Financial assets and liabilities continued ix Fair value measurement continued When there is no quoted price in an active market, the Bank uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
The chosen valuation technique incorporates the factors that market participants would take into account in pricing a transaction. The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price — i.
If the Bank determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price.
Subsequently, that difference is recognized in the statement of profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is supported wholly by observable market data or the transaction is closed out. Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Bank on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position or paid to transfer a net short position for a particular risk exposure.
Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio. If an asset or a liability measured at fair value has a bid price and an ask price, the Bank measures assets and long positions at a bid price and liabilities and short positions at an ask price. The Bank recognizes transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.
The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI. The Bank recognizes loss allowances for expected credit losses ECL on the following financial instruments that are not measured at FVTPL: - Debts that are debt instruments; - Loan commitments issued; - Loan commitments instruments issued; and - Financial guarantee contracts issued. No impairment loss is recognised on equity investments. The Expected Credit Loss ECL model contains a three stage approach which is based on the change in credit quality of financial assets since initial recognition.
Expected credit losses reflect the present value of all cash shortfalls related to default events either i over the following twelve months or ii over the expected life of a financial instrument depending on credit deterioration from inception.
Significant accounting policies continued b Financial assets and liabilities continued x Impairment of financial assets continued - Under the Stage 3, where there is objective evidence of impairment at the reporting date these financial instruments will be classified as credit impaired and an amount equal to the lifetime ECL will be recorded for the financial assets. The Bank has developed methodologies and models taking into account the relative size, quality and complexity of the portfolios.
It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral. It is usually expressed as a percentage of the EAD. Macroeconomic factors, forward looking information and multiple scenarios IFRS 9 requires an unbiased and probability weighted estimate of credit losses by evaluating a range of possible outcomes that incorporates forecasts of future economic conditions. Macroeconomic factors and forward looking information are required to be incorporated into the measurement of ECL as well as the determination of whether there has been a significant increase in credit risk since origination.
Measurement of ECLs at each reporting period should reflect reasonable and supportable information at the reporting date about past events, current conditions and forecasts of future economic conditions. Credit-impaired financial assets At each reporting date, the Bank assesses whether financial assets carried at amortized cost and debt financial assets carried at FVOCI are credit-impaired.
Evidence that a financial asset is credit-impaired includes the following observable data: —significant financial difficulty of the borrower or issuer; —a breach of contract such as a default or past due event; —the restructuring of a loan or advance by the Bank on terms that the Bank would not consider otherwise; —it is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or —the disappearance of an active market for a security because of financial difficulties.
Significant accounting policies continued b Financial assets and liabilities continued x Impairment of financial assets continued Experienced credit judgment continued Default definition followed by the Bank for impairment assessment remains in line with the guidelines of IFRS 9, without any recourse to the assumptions, and consistent with regulatory requirements. The policy on the write-off of financing transactions remains unchanged. Write-off Loans and debt securities are written off either partially or in full when there is no realistic prospect of recovery.
This is generally the case when the Bank has exhausted all legal and remedial efforts to recover from the customers. Expected life When measuring expected credit loss, the Bank considers the maximum contractual period over which the Bank is exposed to credit risk. All contractual terms are considered when determining the expected life, including prepayment, and extension and rollover options. The Impairment reserve will not be available for payment of dividend. Definition of default The Bank considers a financial asset to be in default when: - It is established that due to financial or non-financial reasons the borrower is unlikely to pay its credit obligations to the Bank in full without recourse by the Bank to actions such as realizing security if any is held ; or - the borrower is past due 90 days or more on any material credit obligation to the Bank.
Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. Cash and cash equivalents are carried at amortised cost in the statement of financial position. When debt security measured at FVOCI is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss.
Gains and losses on equity instruments are never reclassified to profit or loss and no impairment is recognized in profit or loss. Dividends are recognized in profit or loss unless they clearly represent a recovery of part of the cost of the investment, in which case they are recognized in OCI.
Cumulative gains and losses recognized in OCI are transferred to retained earnings on disposal of an equity investment. These assets are initially recognised and subsequently measured at fair value in the statement of financial position.
All changes in fair values are recognised as part of profit or loss. The banking Murabahah involves deferred payment terms, but such deferred payment is not one of the essential conditions of such transaction, as there is also a Murabahah arranged with no deferral of payment.
In this case, the seller only receives a mark-up that only includes the profit for a spot sale and not the extra charge it would, otherwise, receive for deferral of payment. This leasing contract which includes a promise by the lessor to transfer the ownership in the leased property to the lessee, either at the end of the term of the Ijarah period or by stages during the term of the contract, upon fulfillment of all the obligations by the Lessee under the Ijarah agreement the Lessor will sell the leased asset to the Lessee at a nominal value based on a sale undertaking given by the Lessor.
An Ijarah contract may be executed for an asset undertaken by the lessor to be delivered to the lessee according to accurate specifications, even if the asset so described is not owned by the lessor. In this case, an agreement is reached to make the described asset available during the duration of the contract, giving the lessor the opportunity to acquire or to produce it. The Wakeel may be granted any excess over and above a certain pre-agreed rate of return as a performance incentive.
However, since the Wakala profit is always reliably estimated it is internally accounted for on a time-apportioned basis over the Wakala tenure based on the Wakala Capital outstanding. The agent acts in a fiduciary capacity in relation to the investment and therefore is not liable for any loss in cases other than willful misconduct, negligence, or breach of contract unless the breach happens to be advantageous to the principal. In situations where the agent is held liable for loss of capital, such liability is limited to the capital amount and the agent is not liable for loss of expected profit whether the capital was invested immediately or delayed or not invested at all.
Mudarib would then invest the Mudaraba Capital in a specific enterprise or activity deploying its experience and expertise for a specific pre-agreed share in the resultant profit, if any. No profit can be recognised or claimed unless the capital of the Mudarabah is maintained intact.
Whenever a Mudarabah operation incurs losses, such losses stand to be compensated by the profits of future operations of the Mudarabah. The losses brought forward should be set against the future profits. All in all, the distribution of profit depends on the final result of the operations at the time of liquidation of the Mudarabah contract.
If losses are greater than profits at the time of liquidation, the balance net loss must be deducted from the capital. In this case, as he is a trustee the Mudarib is not liable for the amount of this loss, unless there is negligence or misconduct on his part. Subsequently, all items except for freehold land and buildings are measured at cost less accumulated depreciation and accumulated impairment losses, if any.
Freehold land and buildings, which are measured using the revaluation model, are carried at a revalued amount, being their fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent impairment losses, if any. Any deficit on revaluation is recognised in profit or loss except to the extent that it reverses a previous revaluation surplus on the same asset, in which case the debit to that extent is recognised in OCI.
Revaluation increases and decreases cannot be offset, even within a class of assets. Land and any asset situated on the land - e. Accordingly, increases and decreases in the fair value attributed to the land and to the building are recognised separately. Capital projects-in-progress are initially recorded at cost, and upon completion are transferred to the appropriate category of property and equipment and thereafter depreciated. Any revaluation gain or loss on these freehold land and buildings is recorded in the revaluation reserve through other comprehensive income.
Cost includes expenditure that is directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property or equipment have different useful lives, they are accounted for as separate items major components of property and equipment. Significant accounting policies continued i Property, plant and equipment continued ii Subsequent costs The cost of replacing a component of an item of property or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Bank and its cost can be measured reliably.
The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred. The estimated useful life of fixed assets for the bank is as follows: Category years Freehold premises 30 years Freehold improvements 10 years Leasehold improvements 7 years Furniture and equipment 4 years Computer hardware and software 4 years Core banking software Motor vehicles 10 years 4 years Depreciation is to be charged to income applying the straight-line method considering the estimated useful life of each part of an item of property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the assets.
The depreciation charge for the year is to be calculated after taking into account residual value, if any. The residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each balance sheet date. Depreciation on additions is to be charged from the date on which the assets are available for use and ceases on the date on which they are disposed-off. Investment properties are measured using the cost model which is cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of investment properties. The estimated useful lives of buildings classified as investment properties for the current and comparative years are 30 years. Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate. Significant accounting policies continued j Investment properties continued ii Investment properties under development Land and properties that are being developed for future use as investment properties are classified as investment properties under development and stated at cost incurred to date, less accumulated impairment losses, if any, until development is complete, at which time they are reclassified and accounted for as investment properties.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or cash generating units.
Goodwill arising from a business combination is allocated to cash generating units or groups of cash generating units that are expected to benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
Amortised cost is calculated by taking into account any discount or premium on settlement. Provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Contributions to that scheme are charged as an expense. Significant accounting policies continued o Employee benefits continued ii Short term employee benefits Short-term employee obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus if the Bank has a present legal or constructive obligation to pay this amount as a result of a past service provided by the employee and the obligation can be estimated reliably.
Loan commitments are firm commitments to provide credit under pre-specified terms and conditions.
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The Treasury said in the agreement that the bank operated U. British Arab allegedly set up a U. British Arab then used the account to facilitate payments for its Sudanese clients, the settlement said. The funding arrangement was set up in a way that British Arab believed that the U. However, the Sudan-related payments that British Arab processed outside of the U. OFAC said British Arab notified the agency in about an internal investigation into possible sanctions violations.
The company also hired new senior management, including a new chief executive, chief financial officer, chief compliance officer and general counsel, according to OFAC. Write to Mengqi Sun at mengqi. All Rights Reserved. How can organizations realize a positive ROI from their AI initiatives and help address potential financial risk?
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