Fast money transfers within the UAE are essential for both individuals and businesses. Whether you’re sending money to family or handling business transactions, the UAE Funds Transfer System (UAEFTS), a centralised payment solution, facilitates transfers across the country.
However, for new immigrants, understanding the UAEFTS working process can be challenging. To simplify it, Remitly has created this guide covering how UAEFTS works, its benefits for finance professionals and businesses, and the latest purpose code changes for AED payments. Whether you’ve recently moved to Dubai, Abu Dhabi, or another part of the country, this guide will help you learn the basics of this essential tool.
How does the UAE funds transfer system (UAEFTS) work?
UAEFTS is a money transfer system used by UAE banks. It is managed by the Central Bank of UAE (CBUAE) and operates on an RTGS (Real-Time Gross Settlement) model. This means that each transaction is processed immediately and individually, without being grouped with others. To maintain consistency and standardisation, the CBUAE requires all transfers to use IBAN (International Bank Account Number) as the designated format for transactions.
Process of automating financial transactions
By eliminating manual intervention, UAEFTS accelerates the movement of funds within the banking sector. The system verifies fund availability, automates the execution of transfers, and supports seamless movement of funds. This guarantees fast and precise transactions across banks.
Key security features and protocols of UAEFTS
To maintain the security and integrity of automated transactions, UAEFTS employs a range of robust security protocols:
- Multi-factor authentication (MFA): This adds an extra layer of security by requiring users to authenticate their identity through multiple verification steps before accessing the system.
- Digital identity verification: The UAE Pass app serves as the country’s national digital identity solution, allowing secure authentication when accessing financial and government services.
- Secure file transfer protocol (SFTP): UAEFTS utilises SFTP to ensure secure and confidential transmission of payment instructions between financial institutions.
- End-to-end encryption: All transmitted user credentials and financial data are encrypted, maintaining confidentiality from the origin to the destination of the transaction.
- Session management controls: Strict session management protocols, including automatic timeouts and limited login attempts, prevent unauthorised access to the system.
These security measures work together to ensure the safe, efficient, and reliable execution of transactions on the UAEFTS platform.
Benefits to finance professionals and businesses
UAEFTS plays a vital role in supporting businesses and finance professionals across the country. Let’s look at some of its benefits.
Efficient payment and settlement system
With real-time processing capabilities, UAEFTS allows businesses to manage cash flow more effectively and settle transactions without unnecessary delays. By eliminating bottlenecks, finance professionals and businesses can ensure that payments are made swiftly, supporting timely payroll, supplier payments, and high-value transactions.
Enhanced regulatory compliance and transparency
UAEFTS ensures that all financial transactions comply with the UAE’s strict regulatory framework, helping businesses and finance professionals adhere to anti-money laundering (AML) and counter-terrorism financing (CTF) laws. The system also maintains detailed transaction records, promoting transparency and accountability in financial operations.
Seamless cross-border payment facilitation
While UAEFTS primarily operates within the UAE, its structured framework improves cross-border payment processes by integrating with international banking systems. Businesses engaged in global trade benefit from standardised transaction protocols and enhanced interoperability with foreign financial institutions.
By leveraging UAEFTS, finance professionals and businesses can take advantage of a modern financial ecosystem that aligns with the UAE’s vision for a digital-first economy.
UAEFTS enhances business transactions and plays a crucial role in salary disbursement. By integrating with the Wage Protection System (WPS), it ensures that employers can meet salary payment obligations in a timely and compliant manner.
Salary transfer system in UAE
Through the WPS system, employers, financial institutions, and government authorities work together to disburse salaries efficiently and in line with UAE regulatory standards.
Integration with UAEFTS
The WPS, established by the UAE Ministry of Human Resources and Emiratisation (MOHRE), ensures that employees receive their salaries on time, in accordance with their employment contracts. UAEFTS ensures that salary payments are routed through authorised financial institutions and channels to prevent wage disputes.
Compliance requirements for employers
To ensure compliance with the WPS, employers in the UAE should meet essential requirements:
- Registration: Employers might need to register with the MOHRE and work with a WPS-approved agent, such as a bank or exchange house, for salary processing.
- Salary Information File (SIF): Employers have to submit a detailed SIF containing employee and salary information to the WPS-approved agent, as specified by MOHRE.
- Timely payments: Salaries are paid on the agreed dates, as outlined in employment contracts, to avoid penalties or business suspensions.
- Adherence to labour laws: The WPS ensures that payments align with UAE labour laws, supporting fair treatment for employees.
By adhering to these requirements, employers can meet legal obligations and enhance transparency in wage payments. This offers several benefits for employees.
Advantages for employees
The implementation of the wage protection system provides multiple benefits to employees:
- Timely and full payment
Employees receive their wages on time and in full, allowing them to manage expenses, cover their costs of living, pay bills, and support their families without financial stress. This also fosters trust between workers and employers.
- Clear and transparent payment
Every salary payment is digitally recorded, giving employees a clear breakdown of their earnings and any deductions. This reduces misunderstandings and ensures fair, dispute-free payments.
- Easy access to banking services
By encouraging bank account payments instead of cash, WPS enhances financial security and provides employees with access to ATMs, debit cards, and potential banking benefits like loans.
WPS creates an open, secure, and predictable financial environment for employees, reducing stress and improving workplace stability.
- Greater financial inclusion
With their wages being deposited into bank accounts, immigrants can start building a financial history in the country. This improves their eligibility for credit cards, personal loans, and even mortgages, helping them plan for long-term financial goals.
- Protection against wage exploitation
WPS ensures that employees receive the agreed-upon salary without unauthorised deductions. This safeguards workers, especially in industries where wage exploitation has been a concern, promoting fair labour practices.
- Enhanced convenience and safety
Employees no longer need to carry large amounts of cash or worry about losing their wages to theft. Digital payments provide a secure and convenient way to access and manage funds, reducing risks associated with cash-based transactions.
Changes to purpose codes for AED payments
The Central Bank of the UAE (CBUAE) has introduced updates to the UAEFTS purpose codes for AED payments. These changes are aimed at enhancing transparency, regulatory compliance, and financial reporting for both local and international transactions.
Detailed list of transaction codes
Below is an overview of some key categories and their updated codes:
| Classification | Purpose Code | Brief description |
| Goods-services-income-transfers receipts and payments | ||
| Import-export | GDE
GDI |
Goods sold (Exports in FOB value)
Goods bought (Imports in CIF value) |
| Transport and travel | TPT
TRV |
Passenger, freight, and other transport services
Travel services, including business and personal travel |
| Insurance services | INS | Insurance and reinsurance services |
| Financial services | FIS | Financial intermediary and auxiliary services |
| Other Business Services | OBS | Business services not classified elsewhere |
| Government services | GOS | Government goods and services not included elsewhere |
| Income | INC | Investment income, compensation of employees, etc. |
| Current transfers | CTR | Current transfers between residents and non-residents |
| Capital account receipts and payments | ||
| Capital transfers | KTT | Capital transfers between residents and non-residents |
| Acquisition/disposal of non-produced, non-financial assets | NFA | Transactions involving non-produced, non-financial assets |
| Financial account receipts and payments | ||
| Direct investment | DIN | Direct investment transactions abroad and in the reporting economy |
| Portfolio investment | PIN | Portfolio investment transactions in equity and debt securities |
| Financial derivatives | FDS | Transactions in financial derivatives |
| Other investment | OIN | Other investment transactions, including loans, currency deposits, trade credits, etc. |
| Other receipts and payments | ||
| Personal transfers | PTF | Personal transfers between residents and non-residents |
| Compensation of employees | COE | Compensation of employees between residents and non-residents |
This table provides a concise overview of the purpose codes and their classifications. Refer to the Central Bank of the UAE’s official document for a comprehensive list, including all specific purpose codes under each classification.
Significance for local and international transactions
The updated purpose codes serve several key functions that impact both domestic and cross-border payments.
Improved transaction clarity
By categorising payments more accurately, the revised purpose codes help banks, regulators, and businesses track fund movements, reducing errors and ensuring money is allocated correctly. This also helps reduce fraud risks and enhances the efficiency of financial audits.
Facilitation of international transfers
With increasing cross-border transactions, the new purpose codes improve the interoperability of UAE’s banking system with international financial networks. This ensures that payments destined for overseas recipients or customers comply with global regulatory frameworks, avoiding delays or unnecessary compliance checks.
Future prospects and developments of UAEFTS
As digital transformation reshapes the UAE banking space, UAEFTS is expected to undergo significant advancements, offering tangible benefits to businesses and individuals. Let’s have a look at what the future holds.
New technology and innovations
- Blockchain for faster and safer transactions: The UAE is a global leader in using blockchain for financial services. Emerging technologies like blockchain and AI are set to enhance UAEFTS, reinforcing security measures and optimising transaction accuracy. This will enhance local and international transaction safety and increase business efficiency by streamlining payments and reducing fraud risks.
- AI to detect fraud and automate processes: Artificial intelligence (AI) and machine learning (ML) will help identify suspicious transactions in real-time. Automation will also make payments faster and reduce errors caused by manual work.
- 24/7 instant payments: The UAE is working on enhanced real-time payments. Future UAEFTS upgrades could allow instant money transfers anytime, making payments more convenient.
Improved user experience
- Easier digital banking: Banks and fintech platforms will have better API connections, improving mobile and online banking. This means instant transfers, better tracking, and real-time payment alerts for users.
- Multi-currency and international payments: Right now, UAEFTS mainly handles AED transactions. Future updates might allow integration with SWIFT for smoother multi-currency and cross-border payments, strengthening the UAE’s role as a global financial hub.
- Simplified compliance for businesses: Companies and financial institutions may get automated tools to handle regulator reporting, making compliance with the UAE central bank rules easier and more efficient.
Expected policy changes
- Stronger anti-money laundering (AML) rules: The UAE is tightening financial regulations. UAEFTS will likely introduce stricter AML and Counter-Terrorist Financing (CTF) measures, requiring banks to use advanced monitoring systems to detect risks.
- Global payment standards for easier trade: To boost international trade and investment, the UAE may align UAEFTS with ISO 20022, a global financial messaging standard that improves communication between banks worldwide.
- More government oversight on transactions: With a stronger focus on financial transparency, businesses and banks may need to provide more detailed transaction reports. This will help meet both UAE and international regulatory requirements.
By understanding and utilising the UAEFTS, individuals and businesses can ensure secure and efficient financial transactions across the UAE.
FAQs
How does UAEFTS work?
The UAE Funds Transfer System (UAEFTS) is a real-time gross settlement (RTGS) system managed by the Central Bank of the UAE. It allows banks and financial institutions to process and settle funds transfers securely and efficiently. Transactions are completed instantly, ensuring smooth and reliable movement of funds within the UAE banking network.
What is the salary transfer system in UAE?
The UAE’s Wage Protection System (WPS) is an electronic salary transfer system regulated by the government to ensure that employees receive their wages on time. Employers are required to process salaries through WPS using approved financial institutions, which then transfer payments directly to the employee’s bank account or prepaid payroll cards. This system enhances transparency and protects workers’ rights.
What is the meaning of FTS transfer or fund transfer system?
An FTS (Funds Transfer System) transfer refers to a financial transaction processed through the UAE Funds Transfer System (UAEFTS). This system enables individuals, businesses, and government entities to send and receive payments securely between banks across the UAE. It’s commonly used for salary transfers, business payments, and personal fund movements.