The United Arab Emirates (UAE) has been added to the Financial Action Task Force (FATF)’s «grey list» for increased monitoring for money laundering.
Countries on the grey list are working with the FATF to address deficiencies in countering money laundering, terrorist financing and proliferation financing. Being placed on the list means the jurisdiction is working actively to address the issues within agreed on time frames, according to the FATF website. The FATF is a global money-laundering and terrorist-financing watchdog, setting international standards.
The addition of the UAE, which is a regional wealth management center, to the grey list came at the FATF’s March plenary. Countries on the grey list might face consequences such as economic sanctions or difficulty getting loans from multi-lateral organisations such as the International Monetary Fund (IMF) or World Bank, as well as a potential reduction in international trade. In some jurisdictions, including Germany, grey list countries will require additional due diligence obligations.
Potential «Significant Negative Impact»
In a May 2021 report, the IMF said a machine-learning study found a «significant negative impact» on a country’s capital inflows after being added to the grey list, potentially via banks exiting relationships with customers in high-risk countries to reduce compliance costs.
The FATF said the UAE will work to show an increase in mutual legal assistance efforts for investigating terrorism financing, money laundering and other high-risk activities, and will work to increase effective investigations and prosecutions of money-laundering cases.
The UAE will also work to proactively identify and combat sanctions evasion, among other efforts, FATF said.
UAE to Work With FATF
In a statement, the UAE said it has a strong commitment to working closely with the FATF to implement an action plan.
UAE’s Executive Office of Anti-Money Laundering and Countering the Financing of Terrorism said in the statement: «The UAE takes its role in protecting the integrity of the global financial system extremely seriously and will work closely with the FATF to quickly remedy the areas of improvement identified. On this basis, the UAE will continue its ongoing efforts to identify, disrupt and punish criminals and illicit financial networks in line with FATF’s findings and the UAE’s National Action Plan, as well as through close coordination with our international partners.»
The FATF said the UAE has made significant progress since adopting a Mutual Evaluation Report (MER) in early 2020, which included recommendations such as establishing a system to implement sanctions without delay and improving the ability to confiscate criminal proceeds.
(This item has been updated to include a comment from the government of the UAE.)
