UAE Set to Be Removed from FATF Grey List in February 2024
Last Updated on 6 January 2025
The United Arab Emirates (UAE) is on track to be removed from the Financial Action Task Force’s (FATF) ‘grey list’ in February 2024.
The FATF, a global watchdog for money laundering and terrorist financing, confirmed on October 27th that the UAE has met its action plan requirements and is scheduled for removal pending a successful on-site inspection.
Why was the UAE on the Grey List?
In June 2022, the FATF identified the UAE as a jurisdiction that required increased monitoring due to perceived deficiencies in its anti-money laundering and countering the financing of terrorism (AML/CFT) regime.
Being placed on the grey list means that a country has made a political commitment to address these deficiencies within agreed timeframes and is subject to heightened scrutiny.
Positive Steps Taken by the UAE
The UAE has taken significant steps to address these weaknesses and demonstrate its commitment to combating money laundering. According to Zana Jablan Musa, Director at Sovereign Corporate Services, the UAE has implemented fines, inspections, and asset seizures as part of its efforts to align with the FATF’s recommendations.
In October, the FATF released a report commending the UAE’s progress in aligning with international standards for AML and counter-terrorist financing. The report highlighted substantial improvements in the UAE’s AML/CFT regulatory framework.
Key Reforms Made by the UAE
During its October plenary meeting, the FATF determined that the UAE had successfully completed its action plan and now requires an on-site assessment to verify the implementation of AML/CFT reforms. The UAE has implemented several key reforms, including:
1. Increasing Outbound Mutual Legal Assistance (MLA) Requests
The UAE has enhanced its cooperation with other jurisdictions by increasing outbound MLA requests. This facilitates money laundering and terrorist financing investigations.
2. Improving Understanding of ML/TF Risks and Implementing Risk-Based Customer Due Diligence (CDD)
The UAE has improved its understanding of money laundering and terrorist financing risks. It has also implemented risk-based CDD measures for the Designated Non-Financial Businesses and Professions (DNFBP) sectors. Additionally, the UAE has applied effective and proportionate sanctions for non-compliance involving financial institutions (FIs) and DNFBPs. The country has also increased the filing of Suspicious Transaction Reports (STR) for these sectors.
3. Preventing Abuse of Legal Persons (Companies)
The UAE has developed a more detailed understanding of the risk of abuse of legal persons, such as companies. It has implemented risk-based mitigating measures to prevent the abuse of legal entities for illicit activities.
4. Strengthening the Financial Intelligence Unit (FIU)
The UAE has allocated additional resources to its Financial Intelligence Unit (FIU) to enhance its capacity to provide financial intelligence to Law Enforcement Agencies (LEAs). The country is also making greater use of financial intelligence, including information from foreign counterparts, to combat high-risk money laundering threats.
5. Increasing Investigations and Prosecutions of Money Laundering
The UAE is actively increasing its efforts to investigate and prosecute cases of money laundering in line with its risk profile.
6. Ensuring Effective Implementation of Targeted Financial Sanctions (TFS)
The UAE is taking steps to ensure the effective implementation of Targeted Financial Sanctions (TFS). This includes sanctioning non-compliance among reporting entities and demonstrating a better understanding of UN sanctions evasion within the private sector.
Final Steps for Removal from the Grey List
The on-site inspection is the final step in the process before the UAE can be removed from the grey list. The scheduling of the inspection is a testament to the UAE’s commitment to meeting the FATF’s standards. If the inspection is successful, the UAE will be officially removed from the grey list at the FATF’s next plenary meeting in February 2024.
Other Countries Being Removed from the Grey List
In addition to the UAE, Barbados, Gibraltar, and Uganda are also scheduled for removal from the grey list in February 2024.
During the October plenary meeting, the FATF announced that Albania, the Cayman Islands, Jordan, and Panama had all been successfully removed from the grey list following on-site visits.
The UAE’s progress in addressing its AML/CFT deficiencies is a positive development for the country’s financial reputation and demonstrates its commitment to combating money laundering and terrorist financing.
