The Financial Action Task Force (FATF) is set to increase its monitoring of money laundering in the UAE after it placed the country on its ‘grey list’.
The move will be a blow to businesses in the UAE who may face ratings downgrades as a result as well as potentially higher transaction costs.
It will also have ramifications for international fund asset managers that have UAE businesses in their portfolio and curbs the UAE’s ambitions to establish itself as an investment hub for the region.
The FATF, which serves as the global watchdog for financial crime and money laundering, had signalled that such a step could be taken when it released its assessment ratings late last year.
The UAE performed poorly and was warned by the FATF that it “must take urgent action to effectively stop the criminal financial flows it attracts” in order to avoid following the likes of Malta, Haiti, South Sudan and the Philippines onto a list of countries that would be subjected to increased monitoring.
The FATF did also acknowledge that the UAE had made a “strong commitment” to implement measures to improve its practices. It is also worth noting that the FATF’s increased monitoring is because “the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes”.
In 2021, the UAE set up an Executive Office for Anti-Money Laundering and Counter Terrorism Financing, three years after passing an anti-money laundering and terrorism financing law.
In response to the FATF’s announcement, the UAE authorities stated that “robust actions and ongoing measures taken by the UAE government and private sector are in place to secure the stability and integrity of the country’s financial system”.
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