The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, confirmed on 27 October that the United Arab Emirates (UAE) had satisfied its action plan and was scheduled, subject to successful onsite inspection, to be removed from the 'grey list' of jurisdictions subject to increased monitoring at its next plenary meeting in February 2024.

The FATF formally identified the UAE as a jurisdiction subject to increased monitoring in June 2022 due to perceived deficiencies in the effectiveness of its anti-money laundering and countering the financing of terrorism (AML/CFT) regime.

When the FATF places a jurisdiction under increased monitoring, it means the country has made a high-level political commitment to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. This list is known as the 'grey list'.

"The UAE has initiated robust actions to address these weaknesses and committed to implementing FATF's recommendations by imposing fines, inspections, and asset seizures which has demonstrated a commitment to combatting money laundering" said Zana Jablan Musa, Director at Sovereign Corporate Services.

Musa commented, "FATF's report released in October commended the UAE's progress in aligning with Standards, highlighting substantial improvements in the anti-money laundering (AML) and counter-terrorist financing (CTF) regulatory framework."

At its October plenary meeting, the FATF determined that the UAE had substantially completed its action plan and warranted an on-site assessment to verify that the implementation of AML/CFT reforms had begun and was being sustained, and that the necessary political commitment remained in place to sustain implementation in the future.

It said the UAE has made the following key reforms:

  • Increasing outbound Mutual Legal Assistance (MLA) requests to facilitate ML/TF investigations.
  • Improving its understanding of ML/TF risks and implementation of risk-based Customer Due Diligence (CDD) for the Designated Non-Financial Businesses and Professions (DNFBP) sectors, applying effective and proportionate sanctions for AML/CFT non-compliance involving Financial Institutions (FIs) and DNFBPs, and increasing Suspicious Transaction Report (STR) filing for those sectors.
  • Developing a more granular understanding of risk of abuse of legal persons (companies) and implementing risk-based mitigating measures to prevent their abuse.
  • Providing additional resources to the Financial Intelligence Unit (FIU) to increase its capacity to provide financial intelligence to Law Enforcement Agencies (LEAs) and making greater use of financial intelligence, including from foreign counterparts, to pursue high-risk ML threats.
  • Increasing investigations and prosecution of ML in line with the country's risk profile.
  • Ensuring effective implementation of Targeted Financial Sanctions (TFS) by sanctioning non-compliance among reporting entities and demonstrating a better understanding of UN sanctions evasion among the private sector.

The onsite inspection is the final step in the process before a removal from the grey list and the scheduling is further evidence of the steps taken by the UAE authorities to meet the FATF's standards. A successful inspection would see the UAE being removed from the grey list at the FATF's next plenary meeting in February, along with Barbados, Gibraltar and Uganda.

At its October plenary meeting, the FATF announced that Albania, the Cayman Islands, Jordan and Panama had all been removed from its grey list following successful on-site visits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.