The United Arab Emirates (UAE) has authorised MTS Bank of Russia, a move that could increase Western nations’ worries that the Gulf state could turn into a potential sanctuary for Moscow’s financial operations.

This transition would meet the increasing demand for financial services among Russian expatriates in the Gulf state.

According to records, MTS Bank is registered in Abu Dhabi and was granted a licence just last year.

Mobile Telesystems, Russia’s largest mobile operator, includes a fintech division. The Financial Times reported that the central bank had given its approval.

Massive Western sanctions against Russia have not yet particularly targeted telecom infrastructure, therefore MTS is not subject to the same constraints as some banks and energy companies.

According to executives and officials briefed on the situation, the central bank’s decision to grant the lender a banking licence exempt from Western sanctions would meet the growing demand for financial services among Russian expats. One source who is aware of the decision says that “it’s all about the business case [and] the number of Russians living here now”.

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By GlobalData

Since the invasion of Ukraine, a year ago, significant numbers of Russians have relocated to the UAE, primarily to Dubai, to evade financial hardship in Europe or military conflict at home.

Many people have expressed dissatisfaction with the difficulty in obtaining bank accounts, particularly corporate accounts, at the lenders now operating in the country.

MTS Bank of Russia is the first foreign bank to obtain a licence from the UAE in several years.

Amid Russia’s invasion of Ukraine, Goldman Sachs Group has restructured its holdings in Russia, the RBC newspaper said on Monday, citing two investment market sources, a move that might bring the US bank closer to a full exit from the nation.

US banks have reduced their exposure to Russia since it put tens of thousands of troops into Ukraine last year, but international lenders must obtain special approval from President Vladimir Putin to sell shares.