FATF concerns about UAE’s free trade zones and multiple company registries

The UAE must take urgent action to effectively stop the criminal financial flows that it attracts according to a new report from the Financial Action Task Force (FATF).

In its latest mutual evaluation report on the seven emirates the global money laundering and terrorist financing watchdog says it is most concerned about trade-based money laundering (TBML), the expansion of the UAE’s free trade zones (FTZs) and the country’s myriad of company registries.

TBML focus

The expansion of the FTZs in the UAE to position it as an international financial centre and major international and regional trading hub has exposed the country to inherent risks such as TBML and laundering of foreign proceeds of crime according to FATF.

It singles out TBML operations using fraudulent invoicing techniques as one of the “main risks” facing the UAE.

Commodities and free zones

The risks faced by the UAE are significant and result from the UAE’s extensive financial, economic, corporate and trade activities, including as a global leader in oil, diamond and gold exports according to FATF.

It says the UAE’s strategic geographical location between continents, in proximity to conflict zones and its own jurisdictional complexity of 7 Emirates, 2 financial free zones and 29 commercial free zones further increase the UAE’s risk of attracting funds with links to crime and terror

Company registries

With 39 different company registries, which helped the UAE grow its various free zones, the misuse of legal persons is a real risk according to the task force.

It says the country also faces a significant risk of exposure to proceeds of crimes conducted abroad, but authorities do not make sufficient use of formal international legal assistance processes to pursue money laundering or the financing of terrorism and proliferation, although they demonstrated better capacity in using informal processes.

As a major global financial centre and trading hub, the UAE must take urgent action to effectively stop the criminal financial flows that it attracts FATF concludes.

The FATF mutual evaluation report on the UAE can be found here.

Categories: Trade Based Financial crimes News

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