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The United Arab Emirates (UAE) has been removed from the Financial Action Task Force’s (FATF) greylist after being added in 2022.
FATF removed the UAE from its list of countries subject to increased monitoring, saying that the Gulf state had made significant progress after a highly critical mutual evaluation report in 2020.
The UAE spent less than two years on FATF's so-called greylist, which is a short amount of time compared with other countries; for example, Pakistan remained on the greylist from 2018 to 2022.
“This success is the outcome of significant and distinguished efforts by relevant ministries, the federal government and local entities,” said Sheikh Abdullah bin Zayed Al Nahyan, the UAE’s foreign minister.
“These collective endeavours serve to expedite the national strategy and action plan, achieve the directives and aspirations of the UAE’s leadership, aiming to further strengthen the country’s leading status and competitiveness, and advance its position globally as an economic, trading and investment hub,” he said.
Uganda, Gibraltar and Barbados were also removed. Meanwhile, there are now 21 nations on the greylist, with Kenya and Namibia having been added.
Fabian Picardo, Chief Minister for Gibraltar, also greeted the news.
“I am grateful to all the agencies and authorities that have contributed to this work as well as the private sector that has wholeheartedly joined us in our fight against economic crime,” he said.
“Gibraltar's FATF whitelisting not only enhances our reputation but also strengthens our position as a trusted and compliant international financial centre.”
What changes?
“In response to the FATF changes, financial institutions should update their geographical risk scores and plug in the new scores into their customer risk model, transaction monitoring tool and enterprise-wide ML/TF risk assessment, or EWRA,” advised Povilas Randis, a partner at Adamano Consulting.
Randis added that firms should subsequently assess the impact to the customer risk scoring results and, in case of changes, recalculate the customer risk scores, followed by making changes to the applied anti-money laundering/counter-terrorism financing (AML/CTF) controls to affected customers.
The UAE has made tackling financial crime shortcomings a priority in recent years in light of its poor showing with FATF.
For example, the Gulf state has enhanced its AML/CTF regulatory regime and increased enforcement actions across its main jurisdictions, including the Dubai International Financial Centre and Abu Dhabi Global Market.
This has included the establishment of the Executive Office to Combat Money Laundering and Terrorist Financing, which is mandated to enhance the UAE’s AML/CTF legislation and regulatory framework, as well as new guidelines for financial and non-financial institutions and professionals.
Further, it has created a new anti-money laundering reporting platform under the name “goAML” where financial institutions must file suspicious activity reports when they have reasonable suspicion that funds may be related to crime.
The UAE Remains High Risk For Some
Despite progress, the UAE still comes up against concerns internationally. For example, it is defined by the EU as a high-risk country for AML/CTF.
Further, the European Securities and Markets Authority (ESMA) withdrew recognition of the Dubai Commodities Clearing Corporation last year.
“This remains a regulatory hurdle, but this could change soon,” said Randis.
The consultant pointed out that the list of EU high-risk third countries is interdependent with FATF evaluation.
Hence, the UAE could be soon removed from the list of EU high-risk third countries in the near future.
However, it could also not. For example, in October 2023, FATF removed the Cayman Islands, Jordan and Panama from the greylist in October 2023, while the European Commission removed only the Cayman Islands and Jordan from EU high-risk countries in December 2023.
“Financial institutions should think about the possible future business opportunities and have plans in place in case UAE is removed from the EU high-risk countries list, which would remove the regulatory barriers and open new business opportunities with UAE-based companies even wider,” said Randis.
What else happened?
FATF rounded off its Plenary Week in Paris by also appointing Elisa de Anda Madrazo of Mexico to serve as the group's next president for a fixed two-year term starting in July, taking over from Singapore’s T. Raja Kumar.
The Mexican official previously served as FATF vice president from July 2020 to June 2023.
During FATF’s plenary, members also worked on proposed amendments to the organisation’s Recommendation 16, otherwise known as the travel rule.
This is “to reflect the rapid development of cross-border payment systems, and changes to industry standards in particular ISO20022”, FATF has said.
These revisions aim to help make cross-border payments faster, cheaper, more transparent and more inclusive while ensuring AML/CTF compliance, and ensure that FATF Recommendation 16 remains technology-neutral.
The plenary members agreed to release the proposed revisions for public consultation.
