Dirty money? UAE could be added to financial ‘grey list’ | Business and Economics News

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The UAE is set to be placed on a global watchdog’s ‘grey list’ after some of its members said the Gulf nation had not made enough progress in curbing illicit financial flows, according to people familiar with the matter.

At least three members of the Paris-based Financial Action Task Force have expressed the view that the UAE has not done enough to exit the review process and will therefore likely be placed on the list of the group of countries subject to more than surveillance, the people said. , who requested anonymity as the matter is private.

The organization is currently holding its plenary, where members are discussing the UAE government‘s efforts to tackle dirty money, and a decision is expected to be announced as early as Friday.

To avoid designation, a significant majority of the 39 FATF members must vote that a country has made sufficient progress since the start of the review period. A few votes against can result in a jurisdiction being added to the list of nations under heightened scrutiny, the people said.

A greylisted classification isn’t as punitive as the group’s high-risk “blacklist,” and it suggests UAE officials are taking steps to address the country’s current shortcomings, the people said.

Still, the decision is potentially the most significant step for the FATF to take in its three-decade history, given the UAE’s position as a regional financial hub. The FATF, set up by the Group of Seven major economies, has around two dozen countries – including Turkey, Zimbabwe and Albania – on its gray list, with Iran and North Korea on the blacklist .

The UAE government said it would issue an official response once the ruling is issued. A FATF spokesperson said its internal deliberations are confidential.

For the UAE, being on the gray list would be a setback at a time when it faces increased competition from neighboring Saudi Arabia, which is developing its financial markets and taking steps to attract more investment. .

Concretely, a gray list would force Wall Street banks, which use Dubai as their regional headquarters, to devote additional resources to compliance in order to avoid future sanctions from international regulators. The decision could also impact Abu Dhabi, the nation’s capital and home to sovereign wealth funds with more than $1 trillion in assets.

A report by the International Monetary Fund last year found that the gray list countries experienced “a large and statistically significant reduction in capital inflows”.

The potential fallout in the United Arab Emirates could be difficult to quantify, however, as financial firms may already consider the country a high-risk area, said Katherine Bauer, a former Treasury Department official who led the US delegation to the UAE. FATF regional partner in the Middle East. and North Africa, Bloomberg told January.

Milestones

Since the FATF warnings in 2020 as part of the group’s Mutual Evaluation Report, the UAE government has stepped up its efforts to better align with global anti-money laundering and anti-money laundering standards. financing of terrorism.

Emirati officials have set up an executive office headed by Hamid Al Zaabi to tackle illicit flows, working in partnership with other FATF members. Al Zaabi has previously said that the UAE is fully committed to maintaining the integrity of the international financial system.

The country has set up courts focused on financial crimes, established new beneficial ownership rules and even announced a 9% corporate tax from 2023. The central bank recently imposed sanctions on some lenders for breaching anti-money laundering regulations and regulated new rules on hawalas, charities often accused of facilitating terrorism-related money flows.

Last year, the United Arab Emirates collected more than $1 billion in sanctions against money laundering and terrorist financing, the official WAM news agency reported on Thursday. “Several major legal amendments have recently been passed, including the Anti-Money Laundering Act which includes broader powers related to confiscations, as well as control of virtual assets,” WAM reported, citing Al Zaabi.

The FATF Mutual Evaluation Report released in April 2020 also highlighted how the UAE has taken significant steps to combat terrorist financing, but requests for money laundering information have often been delayed. Since then, illicit flows into the country have come under greater scrutiny.

As the assessment period progressed, it became clear that the UAE faced a difficult hurdle to avoid a greylist, the people said. Still, ongoing progress in curbing illicit financial flows could allow the Gulf state to exit the list in a shorter time frame than other jurisdictions, they added.

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