The new guidelines are part of the United Arab Emirates’ (UAE) efforts to be removed from the Financial Action Task Force’s (FATF) “grey list,” according to UAE attorney Irina Heaver.
Recently, the Central Bank of the United Arab Emirates (CBUAE) and other regulatory bodies in the country have released updated cooperative guidelines for virtual asset service providers (VASPs) conducting business in the UAE. The new rules include penalties for VASPs operating in the jurisdiction without the required permits.
On November 6, the CBUAE and the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) released a list of “Red Flags” for VASPs. This list includes indicators that can help identify suspicious parties, such as a lack of regulatory licensing, unrealistic claims, poor communication, and a failure to make regulatory disclosures.
According to the updated guidelines, regulatory authorities expect all licensed financial institutions (LFIs), licensed VASPs, and designated non-financial companies and professions (DNFBPs) to report transactions involving questionable parties.
“To enhance the effectiveness of regulatory measures and safeguard the integrity of the UAE’s financial system, individuals can utilize whistleblower mechanisms to report any information related to unlicensed virtual asset activities. These reports play a crucial role in supporting regulatory authorities as they diligently enforce the law.”
The central bank has also emphasized in its updated statement that Virtual Asset Service Providers (VASPs) operating in the United Arab Emirates without a valid license may be subject to various penalties, both civil and criminal. These penalties include the possibility of financial sanctions being imposed on the entity, its owners, and senior managers. Additionally, the memo highlights that law enforcement authorities will take action not only against unlicensed VASPs but also against Licensed Financial Institutions (LFIs), Designated Non-Financial Businesses and Professions (DNFBPs), and licensed VASPs that express an intention to collaborate with unlicensed VASPs.
In a press release, His Excellency Khaled Mohamed Balama, the governor of the CBUAE and chairman of the National Anti-Money Laundering and Countering the Financing of Terrorism Committee (NAMLCFTC), emphasized that this new guidance is being issued at a time when digital assets have become more accessible. He further explained that as the digital economy continues to evolve, their efforts to combat various financial crimes are intensifying. This commitment is essential to maintaining the integrity of the financial system in the United Arab Emirates, as per Balama’s statement.
UAE attorney Irina Heaver has responded to the recent changes in the country’s regulatory guidelines by stating that these updates are part of a broader effort to have the United Arab Emirates removed from the Financial Action Task Force’s (FATF) “grey list.” This list is used to identify nations that have deficiencies in their counterterrorism financing (CTF) and anti-money laundering (AML) policies, but have also committed to addressing these issues within specified timeframes.
In March 2022, the UAE was placed on the FATF’s grey list and subjected to increased monitoring due to shortcomings in its AML and CTF practices. However, the country made a high-level commitment to collaborate with the global watchdog in order to enhance its AML and CTF frameworks.
According to Heaver, significant improvements have been made in the UAE’s AML and CTF measures since its inclusion on the grey list in 2022. With recent adjustments to its legal frameworks in these areas, the UAE is positioning itself for potential removal from the grey list. Heaver suggests that if the UAE consistently demonstrates compliance with FATF requirements, it could lead to the country’s removal from the grey list during the upcoming FATF review, expected to take place in April or May of 2024.