After FATF Grey Listing, UAE To Launch New Financial Crime Offices

August 2, 2023
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The United Arab Emirates (UAE) has committed to launching new “federal prosecution entities” that will specialise in bringing financial crimes and money laundering offences to justice.

The United Arab Emirates (UAE) has committed to launching new “federal prosecution entities” that will specialise in bringing financial crimes and money laundering offences to justice.

This week, the UAE’s Federal Judicial Council authorised the attorney general to establish new prosecution entities, which will seek to clean up the country’s image as a financial crime hotspot.

In an official statement, the UAE state news agency said the entities will also work towards modernising the country’s judicial system to keep pace with new global trends in financial crime.

“The creation of prosecution offices specialised in economic crimes and money laundering is a part of the transformative projects (government accelerators) on which the Ministry of Justice is currently working,” the statement said.

In addition to money laundering offences, the offices will focus on investigating corporate crimes such as bankruptcy, anti-competitive practices, financial market abuse, intellectual property theft and customs evasion.

By doing so, the government aims to attract investment, boost the competitiveness of the UAE economy and ensure that the Emirates continues to retain its status as a global financial and business hub.

The new offices will also complement the government’s "We the UAE 2031" vision, launched in 2021, under which the country has set itself ambitious targets over the next decade.

Under the programme, the UAE aims to double its GDP from AED1.49trn ($406bn) to AED3trn ($812bn), generate AED800bn ($22bn) in non-oil exports and raise the value of foreign trade to AED4trn ($1tn).

Additionally, the government said it wants to rank number one in the world at developing “proactive legislations” for new economic sectors, and wants to rank in the top three of the Global Cybersecurity Index.

FATF grey listing spurs action

In March 2022, the UAE was added to the “grey list” of the Financial Action Task Force (FATF) — a mark of the jurisdiction’s perceived weakness in anti-money laundering/counter-terrorism financing (AML/CTF) controls.

Since then, as covered by VIXIO, the UAE has taken numerous steps to address the “strategic deficiencies” of these controls, as is required to exit the grey list.

In August last year, the UAE imposed new rules on the use of cash and virtual assets in real-estate transactions.

Real-estate agents, brokers and law firms must now file reports to the Financial Intelligence Unit (FIU) when cash or virtual assets are used to purchase real estate, and additional reporting is required when cash or virtual assets worth more than AED55,000 ($15,000) are used.

In the same month, the country’s central bank imposed financial sanctions on six banks for failures to achieve appropriate levels of compliance on customer due diligence and reporting procedures and standards.

In the same week, it also fined an exchange house for failing to effectively monitor terrorist financing risks.

However, one setback came in the form of a warning from the US Treasury that the UAE risks becoming a hub for sanctions evasion due to the closeness of its banking and finance industries with Russian businesses.

“We know that Russian banks have employed deceptive payment practices and used shell companies and other means to hide the true nature of their transactions,” said Wally Adeyemo, deputy secretary of the Treasury.

He added that UAE banks “must be exceedingly cautious in handling any Russia-related businesses and in managing the risks associated with financial institutions that have exposure to the Russian financial system”.

UAE moving in the right direction

Nonetheless, in July, FATF’s Middle East branch, MENAFATF, published a positive update on the UAE’s progress towards FATF Recommendations.

On Recommendation 1 (assessing risk and applying a risk-based AML/CTF approach), the UAE was re-rated from “partially compliant” to “largely compliant”.

On Recommendation 19 (preventative AML/CTF measures applied to other high-risk countries), the UAE was re-rated from “partially compliant” to “compliant”.

On Recommendation 29 (operation of financial intelligence units), the UAE was re-rated from “partially compliant” to “compliant”.

In total, the UAE is now “compliant” with 15 out of 40 FATF Recommendations, “largely compliant” with 24 recommendations and “partially compliant” with one recommendation. Moreover, the country has no “non-compliant” ratings.

In June last year, Malta was removed from the grey list less than 12 months after being put on it.

The UAE has so far been unable to match the pace of Malta’s turnaround, but it appears to be moving in the right direction.

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