The UAE is in danger of being added to the Financial Action Task Force (FATF) grey list of jurisdictions with “strategic deficiencies” in their anti-money laundering and counter financing of terrorism (AML/CFT) regime according to a report by the Bloomberg news agency.
Inclusion on the grey could damage the UAE. Dubai has over the last twenty years established itself as a financial hub for the Middle East, Africa and South Asia markets while Abu Dhabi has played a prominent role in the development of the nation’s Islamic financial services sector.
Fundamental and major improvements
In 2020, the FATF warned the UAE that “fundamental and major improvements” to its AML/CFT and financing of proliferation of weapons of mass destruction systems were needed to avoid it placing the country on its list of countries under increased monitoring.
Last November the UAE submitted a report to the FATF but according to Bloomberg the report showed insufficient progress towards the standards required to avoid being placed on the grey list.
Decision due soon
The UAE has made improvements in its AML/CFT regime and is lobbying hard to avoid to avoid placement on the list ahead of the FATF plenary meetings that begin in late February, during which the global watchdog is expected to make a decision on the emirates’ status.
Whether the UAE has sufficiently addressed deficiencies identified in the mutual evaluation report published in April 2020 is expected to be critical in the FATF’s decision making process.
Free zone concerns
A key concern in that report is that the UAE has 39 different company registries, many of which exist to promote economic growth in various free zones.
The risk of criminals being able to misuse legal persons in the UAE for money laundering and terrorist financing thus remains high, particularly through concealment of beneficial ownership information via complex structures or the use of informal nominees the mutual evaluation report concluded.
A report published by the Carnegie Endowment last year described Dubai as a “haven for trade-based money laundering”, much of which is facilitated by the emirate’s free zones (Trade-based Financial Crime, 24 August 2020).
The report by Bloomberg News, UAE faces risk of inclusion on global watchlist over dirty money, can be found here.
The FATF’s United Arab Emirates Mutual Evaluation Report published in April 2020 can be found here.
Categories: Trade Based Financial crimes News
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