In a decision announced on the 23rd February 2024, the United Arab Emirates was removed from the Financial Action Task Force's (FATF) 'grey list', a register of jurisdictions subject to increased monitoring in relation to money laundering and terrorist financing (AML/CFT) after its introduction on March 4 2022. 

In a statement released by the United Arab Emirates Executive Office of Anti-Money Laundering and Counter Terrorism Financing, His Highness Sheikh Abdullah bin Zayed AL Nahyan, Minister of Foreign Affairs welcomed the decision and plauded the success as a collaboration of efforts of the country's ministries, federal and local government agencies and the private sector to enhance its AML/CFT framework.

In this article, Brodies LLP partner, Paul Marshall, looks at the role of the FATF, why the U.A.E. was subjected to the increased scrutiny, certain of the key reforms undertaken and what the move means for one of the Arab World's largest economies.

What is the FATF?

According to its website, the FATF is "the global money laundering and terrorist financing watchdog." The Paris based FATF is an intergovernmental task force established in 1989 on the initiative of the G7 which establishes international standards concerning money laundering, terrorist financing and proliferation financing. 

First adopted in 2012 and most recently updated in November 2023, according to the FATF, the FATF Recommendations:

"set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction." 

The FATF monitors and assesses countries to ensure the standards are fully and effectively implemented. Countries which repeatedly fail to implement the standards of the FATF are named a "Jurisdiction under Increased Monitoring" or a "High Risk Jurisdiction". These are publicly known as the 'grey list' and the 'black list'. The grey listcovers jurisdictions identified by FATF as being subject to increased monitoring, while the black list of jurisdictions are as posing high risk. Iran, North Korea and Myanmar are currently listed on the latter.

Why was UAE on the grey list?

The UAE was added to the grey list in March 2022 because the FATF considered that there were strategic deficiencies in the UAE's systems to counter money laundering, terrorist financing and proliferation financing. 

The FATF identified the UAE as being subject to significant risk having regard to:

  1. its cash-intensive economy;
  2. the large size and openness of its financial sector;
  3. the highly active trade in gold and precious metals and stones in the UAE;
  4. the large proportion of foreign residents present in the UAE; and,
  5. its geographic proximity to countries de-stabilised by conflict or terrorism, as well as countries subject to UN sanctions.


Key reforms undertaken by the U.A.E.

In order to be removed from the grey list, the U.A.E. was required to fully implement the recommendations set out in the FATF's 2020 Mutual Evaluation action plan.

It has adopted a robust approach and implemented a series of regulatory reforms, including:

  1. introduction of Federal Decree Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations, later amended by Federal Decree Law No. 26 of 2021, with an objective of enhancing the efficiency of legal and institutional frameworks to combat AML/CFT and notably for acts committed inside and outside of the U.A.E.;
  2. establishment of the Executive Office to Combat Money Laundering and Terrorist Financing which oversees implementation of the country's national AML/CFT strategy;
  3. establishment of specialist courts within the framework of the federal judiciary to hear money laundering and other financial crime cases;
  4. publication by financial services regulators of new AML/CTF guidelines for financial institutions and designated non-financial businesses and professions on AML/CFT best practices; and
  5. adoption of a new Penal Code which bolstered the country’s existing laws on AML, breach of trust, bribery and fraud.


What does removal from the grey list mean?

The Middle East is one of the world’s most dynamic regions, with countries undertaking unparalleled levels of investment through significant national transformation programs. The United Arab Emirates is the Arab world's second largest economy and the capital, Abu Dhabi plays a fundamental part in this. The Emirate continues to welcome an unprecedented influx of foreign direct investment, global asset managers establishing operations, the list includes names including major global giants like Blackstone, Apollo and Fidera as well as investment banks JP Morgan and BNP Paribas. 

Brodies LLP regulatory, compliance and sanctions team have extensive experience in the United Arab Emirates advising some of the largest government entities in the GCC on regulatory and AML/CFT compliance.

Contributors

Paul Marshall

Brodies LLP, Partner

Tony Convery

Brodies LLP, Associate