In continuation of our article published earlier this month (AML Fines - A Summary of important penalties imposed on financial institutions in 2021) it seems that UAE will not be able to avoid joining FATF’s watchlist with an expected update of the list to be occurring early March 2022.
In 2020, the UAE Centennial Plan 2071 was unveiled by H. H. Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. It is a long-term, multi-decade strategy that will last for the next 5 decades after 2021. It lays forth a clear path for the government's long-term efforts to improve the country's reputation and economic status.
One of the four main pillars of the UAE Centennial Plan 2071 is:
“A diversified knowledge economy: The UAE’s economy is aimed to be competitive and one of the best economies worldwide. This can be achieved by increasing productivity of the national economy, support of national companies, investment in scientific research and promising sectors, focus on innovation, entrepreneurship, and advanced industries, development of a national strategy to shape the future of the UAE’s economy and industry, and place the UAE among international important economies. A knowledge economy can be achieved by a generation of UAE inventors and scientists and supporting them in technical sciences.”
It is evident that the UAE is keen to uphold its image as an international hub and has even shown interest in participating in the G20’s initiative of 15% tax on big companies. The UAE is seen the past years altering dramatically its capacity to crack down on illicit money flows. Prosecutors have been granted express power to engage with courts, police, the Central Bank, Customs, the Financial Information Unit, and the Executive Office to address money laundering and terrorism funding offenses.
Other law enforcement authorities have also been given permission to accept reports of suspected financial activities, make decisions, track and confiscate cash, and keep track of bank accounts.
Despite the fact that the Emirates have been ramping up efforts to align with the global strive against money laundering and terrorist financing it seems that it will not be able to avoid its “grey listing” by FATF. When the FATF sets a country under increased monitoring, it signifies that the jurisdiction has agreed to address recognized strategic shortcomings quickly and within agreed-upon timelines and that it will be monitored more closely. This list is commonly referred to as the "grey list".
In April 2020, the FATF issued a warning to the UAE authorities, advising them to engage more closely with foreign peers and enhance compliance in certain vulnerable sectors such as gold dealing and luxury real estate. Regardless of their steps to mitigate their vulnerabilities as jurisdiction nonetheless it seems that FATF members will proceed and list the Emirates in their increased monitoring list.
Ahmed Al Sayegh, a minister of state in the foreign ministry stated: “We took on board the recommendations and started to change,” and We think we have made significant progress — the bar has been set very high,”. Even though Western officials are agreeing that indeed the UAE made important steps towards compliance with recommendations and warnings, nonetheless these steps are not likely to halt the placement of the Emirates in the grey list.
Notwithstanding the probable listing, the country’s officials have specified that there is an action plan to remedy their shortcomings and become fully compliant with FATF recommendations and guidelines.
It can be argued that behind FATF’s grey listing election there are also political forces influencing the decision. David Lewis an ex-FATF executive secretary, praised the UAE authorities for their efforts to combat financial crime. However, he stated that the ultimate decision on the listing will be made by two to four nations. He argued that” Of the 39 members of FATF it typically takes 2 to 4 members to block consensus, and they are often the same members that block a decision not to list a country (of course, as Plenary discussions are confidential, I can’t reveal which members these are)”
Whilst it is evident that UAE has turned a page and is “a very different place to just a decade ago and much of this is down to the FATF and the recent action of the UAE leadership and national authorities” as David Lewis says, it seems that some FATF members argue that the jurisdiction needs to do more. It has been argued by many analysts that the United States is an important member of the two to four nations that make final decisions and that it had a role in Malta's 'grey listing' last year.
USA’s view of the UAE is unfavourable as it had previously branded the Emirates as a “transhipment point for illegal narcotics and a pass-through for drug proceeds”. Therefore, it is debatable that the USA will be an important factor in the final decision for grey listing the federation.
In an effort to avoid the placement in an enhanced monitoring list the UAE has, according to Lewis, “…doubled the number of staff in its Financial Intelligence Unit, signed extradition treaties with 33 countries, secured a 94% conviction rate from the 243 money laundering cases investigated between 2019 and 2021, created a register of beneficial ownership, introduced regulation of accountants and dealers in precious metals and stones,”. All the aforementioned steps are taken into consideration by FATF and are seen with a positive mindset, however, “The FATF sets the bar high, particularly for non-FATF members.” This “harsh” stance is important as it pushes countries to become compliant to some important recommendations that will have a national and international impact in battling money laundering and terrorist financing.
The inclusion of UAE as part of the enhanced monitoring list of jurisdictions (“grey list”) is expected to be announced on March 4th, 2022, at the end of the next FATF Plenary session.
By fLEXI tEAM