The UAE’S removal from FATF grey list: A Strategic Triumph

In a decision announced on 23rd February 2024, the Financial Action Task Force (“FATF”) has removed the United Arab Emirates (“UAE”) from its “grey” watchlist. As the intergovernmental organization and watchdog established to fight money laundering and the financing of terrorism, FATF’s grey-list pertains to countries that have deficiencies in anti-money laundering and counter-terrorism financing systems but are committed to actively addressing them. This major accomplishment represents a crucial step for the UAE, solidifying its status as a prominent financial hub protecting financial integrity and providing a safe and open place to do business.

The June 2023 Enhanced Follow Up Report

The commitment with which the UAE successfully tackled the issue in the past two years is reflected by the June 2023 Enhanced Follow Up Report (“EFUR”) released by FATF. The report was essentially a reassessment of the deficiencies identified during the FATF’s onsite assessments and recognized the significant progress the nation made, particularly in compliance levels for FATF Recommendations 1, 19 and 29. It highlights the UAE’s enhanced framework for combating money laundering and terrorist financing, achieving “largely compliant” or “compliant” status in nearly all of the 40 FATF Recommendations. The report also acknowledges additional legislative measures taken to safeguard businesses from illegitimate actors. Key aspects of the report encompass the UAE’s deployment of appropriate risk assessments, dealing with higher-risk countries, and the utilization of the Financial Intelligence Unit (FIU) to analyze sectors susceptible to money laundering and terrorist financing.

Crackdown: Authorities ramp up enforcement and intensify efforts

Since 2022, the UAE has shown its growing willingness to take enforcement action to combat financial crimes, including levying hefty fines, carrying out extensive inspections, and using its powers to seize assets. A raft of new legislation was also passed to increase oversight and effectiveness, including the establishment of new bodies to counter money laundering and terrorist financing. The creation of specialized Anti Money Laundering and Counter Terrorism Financing courts, the Executive Office to Combat Money Laundering and Terrorist Financing, along with new guidelines for financial institutions and Designated Non-Financial Business or Professions (“DNFBPs”) stand as clear indicators of the UAE’s dedication to enhancing its regulatory framework across key sectors of its economic system.

Figures released by Ministry of Economy for March 2023 revealed that the UAE imposed fines totaling AED 22.6 million on 29 DNFBP companies for non-compliance, highlighting the authorities’ strengthened enforcement efforts and demonstrating the effectiveness of its systems. Furthermore, revisions made to not only the Anti Money Laundering and Counter Terrorist Financing law (Federal Decree Law No. 26 of 2021) and associated statutes, but also the Penal Code and framework governing virtual assets (Law No. 4 of 2022 Regulating Virtual Assets) ensured the legislative framework is fully aligned with global standards. These measures have resulted in fines exceeding AED 115 million in Q1 2023 and the seizure of assets worth over AED 925 million between November 2022 and February 2023. Strengthened bilateral legal assistance treaties, coupled with a surge in suspicious transaction reports further played a pivotal role in an overall jump in the utility of the UAE’s defences.

Status reversed: A favorable landscape for businesses

The UAE’s efforts have yielded positive results that are visible to all. With the country’s ability to adapt swiftly and with collective effort, both public and private sectors will be compelled to meet higher standards of AML diligence and compliance.

This achievement is bigger than just regulatory adherence, as it also elevates the nation’s global financial reputation. The UAE is emerging as one of the most attractive commercial landscapes, globally. Its removal from the grey list signifies a significant triumph, paving the way for a more open and secure future. Delisting does not represent an opportunity to reduce controls, though. The authorities will be aware that it remains crucial for all stakeholders in the UAE to maintain robust defences and to continuously refine compliance practices if the country is to continue its growth trajectory without compromising the integrity of its system.