26 Mar 2024
23 February 2024 marked a noteworthy milestone for the UAE as it was taken off the FATF’s grey list and is no longer subject to increased monitoring. This came as one of the key outcomes of the fifth Plenary of the Financial Action Task Force (FATF), during which it updated its decision on high-risk jurisdictions and removed four countries, including UAE, Barbados, Gibraltar, and Uganda, from its increased monitoring or grey list.
The Financial Action Task Force (FATF) is an intergovernmental organization that sets international standards to combat money laundering and terrorism financing and evaluates the countries’ adherence to these regulations. The countries that are placed on the FATF grey list not only risk a negative reputation but also limited foreign investments and severe effects on their financial sector. UAE’s removal from the FATF’s grey list is a recognition and acknowledgment of the robust policies and regulations that it has employed to combat money laundering and terrorism financing.
What is the FATF “grey list”?
The FATF denotes grey-listing as the jurisdictions that are subjected to increased monitoring for anti-money laundering and the jurisdictions that have committed to addressing the deficiencies in their anti-money laundering and terrorism financing framework in an agreed period of time. In March 2022, the FATF added the UAE to the grey list due to recognizing some deficiencies and gaps in its money laundering system. Ever since, the UAE has undertaken robust procedures, progressive policies, and establishment of specialized offices to combat these deficiencies, which therefore led to its recent removal from the grey list.
UAE’s implemented actions that resulted in its withdrawal from the grey list
- The expansion of international cooperation and improvement of inter-agency coordination to prevent financial crimes.
- Establishment of Executive Offices designed to enhance the anti-money laundering framework and combat these financial crimes.
- Facilitation of the ML/TF investigations by increasing outbound Mutual Legal Assistance (MLA) requests
- Implementation of specialized guidelines for FI (Financial Institutions) and Designated Non-Financial Businesses and Professions (DNFBPs), involving increased understanding of the risks of anti-money laundering and Terrorism Financing in these institutions and risks and penalties associated with non-compliance to the anti-money laundering regulations. The UAE has also increased Suspicious Transaction Report (STR) filing for these institutions.
- Establishment of specialized courts to address cases of money laundering and other financial crimes.
- Increase in inspections, risk assessments, and implementation of penalties associated with the crimes of anti-money laundering.
- Assisting Financial Intelligent Units of the UAE with additional resources to further facilitate its provision of financial intelligence to LEA.
- Employing increased use of Financial Intelligence, including that from overseas counterparts, to target anti-money laundering threats
Recognition of the UAE’s measures against money laundering: The EFUR Report
Following the Mutual Evaluation of UAE conducted by the FATF in 2020, which called for strict measures to be employed to tackle deficiencies in its anti-money-laundering and terrorism financing governance, the country has excelled with flying colors by making significant advancements in several areas.
This advancement was also officially recognized by the FATF, as is evident in its Enhanced Follow-Up Report (EFUR) released in June 2023. This Report highlights UAE’s compliance with the FATF’s recommendations, including risk assessments (Recommendation 1), management of Higher Risk Jurisdictions (Recommendation 19), and Financial Intelligence Unit Reporting (Recommendation 29).
UAE has competently adopted these recommendations by bringing several reforms, including effective risk assessment to identify potential threats, improved due diligence, implementing measures to deal with high-risk countries, and rightfully taking the assistance of the Financial Intelligence Unit. The EFUR Report demonstrates the commitment and compliance of the UAE with the FATF’s recommendations.
Impact of UAE’s Removal from the Grey List
The addition of the UAE under FATF’s increased monitoring jurisdiction posed a threat to its credibility and transparency while also impacting foreign trade. The recent FATF’s decision to remove the UAE from this list stands as clear evidence of the country’s significant strengthening of its shield against money laundering and terrorist financing.
This official eradication from increased monitoring jurisdictions will play a significant role in uplifting the UAE’s image and give it global credibility. The major impact will be witnessed on economic growth and the facilitation of trade. An enhanced and FATF approved anti-money laundering system of the UAE also paves the way for increased trust of stakeholders and investors, providing it a competitive advantage. Additionally, it demonstrates the commitment of the UAE’s Financial Institutions in identifying and monitoring the Ultimate Beneficial Ownership (UBO).
The UAE’s congratulatory exit from the increased monitoring list of FATF is a reflection of the country’s stringent and improved framework of the country in combating money laundering and terrorism financing. It positions the country as a preferred destination for business opportunities and international investments and serves as a catalyst for continued progress. UAE registered businesses conducting the relevant financial activities must implement efficient regulations in accordance with the anti-money laundering and Counter Terrorism Law (The AML/CFT Law) to combat these financial crimes. To ensure effective compliance or to learn more about the UAE’s anti-money laundering and terrorism financing regulations, contact AMCA.
