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The United Arab Emirates (UAE) is reinforcing its growing reputation for fighting money laundering by creating two high-powered committees to steer policy and enforcement while cracking down on illicit trade.
The UAE government on Sunday (August 11) issued a federal decree amending a 2018 anti-money laundering and counter-terrorism financing (AML/CTF) law that promises enhanced compliance, greater institutional coordination and follow-up on illegal activity.
The changes suggest the government wants to reinforce its good standing with the Financial Action Task Force (FATF), which removed the UAE from its greylist in February after two years.
The UAE is also looking to recover its compliance status with the European Commission, which red-flagged the federation in December 2022 by entering it on its financial warning list.
The amendments include the creation of the National Committee for Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations, as well as its overseer, the Supreme Committee for the Oversight of the National Strategy for Anti-Money Laundering and Combating the Financing of Terrorism.
The national committee will be backed by a new general secretariat, with the bureaucracy’s secretary-general to serve on both committees, according to a government press release.
The supreme committee will “study, monitor and evaluate the effectiveness of strategies and measures implemented by the National Committee and the relevant entities”, it said.
It will set the national committee’s goals and standards and “follow up on their implementation”, it said.
The supreme committee will also “oversee the development of a [FATF] Mutual Evaluation Report assessing the country's compliance” with international AML/CTF standards, and “will follow up on their implementation”.
It was not immediately clear how the new committees and their administrators will affect the UAE’s nascent gambling regulatory framework, which was launched last month.
Legislative and regulatory preparations for gambling segments such as land-based casinos, lotteries and a floated online gaming segment are likely to fall under the two committees’ purview.
The federation’s gambling regulator, the General Commercial Gaming Regulatory Authority (GCGRA), did not respond to Vixio GamblingCompliance questions on the impact of the AML reforms at publication time.
Still, the creation of two committees with significant resources and recent intervention in the processing of allegedly illegal gold shipments signal the UAE’s intent to protect and expand its reputation as a global financial hub.
Earlier this month, the government suspended operations at 32 gold refineries for two months in response to breaches of AML/CTF law, Bloomberg reported, amounting to a freeze on about 5 percent of the federation’s gold segment.
The suspensions followed reports in May that the UAE is laundering billions of dollars annually in smuggled and stolen gold, particularly from Africa.
In addition, fuelled by an influx of Chinese nationals, a less brutal version of Southeast Asian cyber-scamming and online gambling operations has taken root in the UAE over the years, although the government has yet to announce its strategy in this regard.
The UAE’s financial compliance environment had deteriorated so much that, in March 2022, the FATF placed it on its list of jurisdictions under increased monitoring due to “strategic deficiencies” in its AML regime (the greylist).
To resolve these deficiencies, the UAE government agreed to implement a FATF action plan based on seven key targets.
The UAE was required to demonstrate a “sustained increase” in the number of outbound mutual legal assistance (MLA) requests to other jurisdictions, facilitating the investigation of money laundering, terrorist financing and other high-risk predicate crimes.
It also had to show an increase in the number and quality of suspicious transaction reports filed by financial institutions and designated non-financial businesses and professions (DNFBPs).
Last February, FATF announced that the UAE had made “significant progress” in improving its AML/CTF regime and was no longer under increased monitoring.
UAE agencies had built up a track record of “effective and proportionate” sanctions for non-compliance with AML/CTF laws by financial institutions and DNFBPs, it said.
They also ensured the “effective implementation” of targeted financial solutions to monitor private-sector reporting entities and promote greater compliance with the UN sanctions programme.
According to a 2021 study by the International Monetary Fund (IMF), the capital inflows of a greylisted nation declined by an average 7.6 percent.
The study also found that foreign direct investment (FDI) inflows declined on average by 3 percent and portfolio inflows declined by 2.9 percent.
So far, however, the UAE appears to have escaped a similar downturn. In 2022, according to the Ministry of Economy, the UAE received $22.7bn in FDI inflows, or a 10 percent increase over 2021.
However, from 2022 to 2023, according to World Bank data, UAE’s GDP fell from $507bn to $504bn, or a decline of 0.6 percent.
Two years of greylisting appear to have done little to derail the country’s aspirations to be a global financial hub.
In 2020, the Central Bank of the UAE opened a FinTech Office, whose aim is to establish the nation as the foremost regional and global fintech hub.
In 2023, the bank followed up by launching the Financial Infrastructure Transformation (FIT) programme to accelerate digitalisation of the country’s financial services sector.
The first stage of the FIT programme included the launch of a domestic card scheme, an instant payments platform, and the forthcoming launch of a central bank digital currency for domestic and cross-border use.
Also in 2023, the Abu Dhabi Global Market (ADGM) announced that assets under management by funds operating in the emirate had grown by 35 percent.
“ADGM has declared 2023 as a year of success for the international financial center of the UAE’s capital,” the regulator said, “highlighting its performance as the fastest-growing financial center in the region for two consecutive years, as well as Abu Dhabi’s rise as a globally recognised financial hub.”
