The Financial Action Task Force (FATF) has included the United Arab Emirates in the ranks of “jurisdictions with strategic deficiencies” — informally known as the intergovernmental agency’s “grey list” — it announced late on Friday, March 4.
The UAE, which is the latest inclusion in the list, meanwhile, reaffirmed its commitment to the FATF to clamp down on money-laundering and terror funding.
According to a report in the official Emirates News Agency (WAM), the FATF has already recognized that the UAE has made positive progress in its anti-money-laundering (AML), countering the financing of terrorism (CFT), and counter proliferation financing (CPF) efforts.
When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring, the task force says on its official website.
The UAE side
The UAE is said to have indicated its strong commitment to working closely with the FATF to address remaining areas of improvement through the implementation of an action plan.
Noting that the country has “significantly strengthened” its anti-financial-crime framework, the action plan apparently builds on the foundations established and efforts already underway.
The Executive Office of Anti-Money Laundering and Countering the Financing of Terrorism was quoted by the WAM report as saying: “The UAE takes its role in protecting the integrity of the global financial system extremely seriously and will work closely with the FATF to quickly remedy the areas of improvement identified.”
It added: “On this basis, the UAE will continue its ongoing efforts to identify, disrupt and punish criminals and illicit financial networks in line with FATF’s findings and the UAE’s National Action Plan, as well as through close coordination with our international partners.”
What FATF said
The task force officially observed about the inclusion of the UAE in the grey list that the country, in February this year, “made a high-level political commitment to work with the FATF and MENAFATF to strengthen the effectiveness of its AML/CFT regime.”
It added: “Since the adoption of its MER [Mutual Evaluation Report] in February 2020, the UAE has made significant progress across its MER’s recommended actions to improve its system, including by finalizing a TF Risk Assessment, creating an AML/CFT coordination committee, establishing an effective system to implement targeted financial sanctions without delay, and significantly improving its ability to confiscate criminal proceeds and engage in international cooperation.”
The task force said the UAE has also since then “addressed or largely addressed” more than half of the key recommended actions from the MER.
The road ahead
The FATF said the UAE will now have to work to implement its action plan, and it can do so in several ways.
For starters, the UAE has to demonstrate — through case studies and statistics — a sustained increase in outbound MLA requests to help facilitate investigation of TF, ML, and high-risk predicates.
Second, it will have to identify and maintain a shared understanding of the ML/TF risks between the different Designated Non-Financial Business and Professions (DNFBP) sectors and institutions.
Thirdly, the country must show an increase in the number and quality of suspicious transactions reports (STRs) filed.
According to the FATF, the UAE will also have to achieve a more granular understanding of the risk of abuse of legal persons and, where applicable, legal arrangements, for ML/TF.
In addition, the country would also have to provide additional resources to the Financial Intelligence Unit to strengthen its analysis function and enhance the use of financial intelligence to pursue high-risk ML threats, such as proceeds of foreign predicate offenses, trade-based ML, and third-party laundering.
The UAE will also have to demonstrate a sustained increase in investigations and prosecutions of different types of ML cases consistent with the country’s risk profile.
And finally, it will have to proactively identify and combat sanctions evasion, including by using detailed relevant guidance in sustained awareness-raising with the private sector and demonstrating a better understanding of sanctions evasion among the private sector.