🔒 UAE nears exit from FATF 'grey list' after illicit finance crackdown

The United Arab Emirates is on track to exit the Financial Action Task Force’s “gray list” this week, signalling a significant victory in its crackdown on illicit financial activities. Assessors noted substantial progress during an on-site visit, and insiders suggest a favourable decision by February 23. The UAE’s efforts involved diplomatic tours, heightened scrutiny on money transfers, and high-profile arrests. While some hail the nation’s progress, concerns linger, emphasising the delicate balance between compliance efforts and persistent challenges. Wall Street banks and global partners await the outcome of the FATF plenary in Paris.

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By Ben Bartenstein

The United Arab Emirates is poised to exit a global watchdog’s “gray list” as soon as this week, following a push to clamp down on illicit financial flows in and out of the oil-rich Gulf state. ___STEADY_PAYWALL___

Assessors from the Paris-based Financial Action Task Force conducted an on-site visit last month and subsequent feedback on the UAE’s action plan noted significant progress by the country, according to people familiar with the matter, who requested anonymity as the deliberations are private.

The UAE is expected to come off the list on Feb. 23, which is the final day of the FATF plenary in Paris, the people said. No final decisions have been made.

Bloomberg reported in October that delegates from at least three members of the FATF, who previously backed the UAE’s inclusion on a list of jurisdictions subject to more oversight, had supported the country’s delisting as early as February 2024.

“It would be unheard of to get to this final stage and not get removed from the list,” said David Lewis, the former FATF executive secretary who’s now a managing director at Kroll. “That said, FATF may still point to further work that needs to be done.”

Swift Turnaround

To get off the gray list, a significant majority of the FATF’s membership must vote that a country has made sufficient progress since the evaluation period began. Just a few votes to the contrary can result in a jurisdiction staying on the list, the people said. The group has just under 40 members, some of whom have greater sway.

Late last year, UAE officials went on a tour to key FATF states, including trips to the US, Switzerland and Singapore, to rally support. Russian sanctions evasion and crypto were central to the dialog with foreign partners, Bloomberg reported.

“The UAE is committed to combating illicit finance and continuing improving the effectiveness of our national system, in line with international best practice,” an official said.

A spokesperson for the FATF declined to comment.

An exit this month would mark a swift turnaround for the UAE, which was initially added to the list of jurisdictions under increased monitoring in March 2022. A Bloomberg investigation at the time chronicled Dubai’s status as a destination for some of the world’s wealthiest exiles.

Following the invasion of Ukraine, the UAE was among three Middle Eastern nations that emerged as magnets for Russia’s wealthy. That helped the Gulf country avoid a similar economic impact to some gray-listed nations.

“The UAE is a burgeoning financial center,” said Ibtissem Lassoued, the Dubai-based head of advisory in regional financial crime at law firm Al Tamimi & Co. “Its significance to the global financial market was part of the rationale underpinning FATF’s decision to include it on the gray list, but it also explains the UAE’s comparative resilience to the consequences of its listed status.”

Scrutiny

After the initial wave of inflows, UAE banks began tightening scrutiny on various nationalities, including Russians, as the government pushed to exit the list.

Money transfers — whether for companies repatriating funds to Russia or moving cash to a third country — became subject to greater oversight, Bloomberg reported in November. Some banks demanded more documentation, and at times blocked funds, while seeking justification for transfers or questioning the origin of the money.

The government said it imposed almost 250 million dirhams ($68 million) in AML/CFT fines from January to October 2023, representing a more than three-fold increase from the year prior.

The gray-list exit would be particularly welcomed by Wall Street banks, many of them with large operations in the UAE. They’ve grappled with increased compliance costs since the designation, forcing some to outsource more functions to India.

Ahead of the FATF plenary, Transparency International warned the organization that the country’s de-listing would be “premature,” according to a letter seen by Bloomberg. The Berlin-based corruption watchdog cited ongoing concerns related to money laundering, international cooperation and Dubai’s property market.

High-Profile Arrests

As part of their efforts to exit the gray list, UAE officials have made some high-profile arrests. Hedge fund trader Sanjay Shah, accused of defrauding the Danish state of $1.3 billion in the Cum-Ex trading scam, was handed over to Denmark late last year.

Officials also arrested Atul and Rajesh Gupta, who are wanted in South Africa on charges of money laundering and fraud, though a local court denied the African nation’s plea to extradite the brothers. Meanwhile, Angolan authorities have sought the extradition of Isabel dos Santos, another billionaire who’s found sanctuary in Dubai.

Shah, the Guptas and dos Santos have denied wrongdoing.

While some of the UAE’s allies have praised the country’s progress within the FATF, they’ve separately raised ongoing concerns with the Gulf state.

US authorities have sanctioned UAE-based shipping companies for violating the $60-per-barrel price cap on Russian oil. Western officials last year also asked the UAE to stop acting as a gateway for Russia to get around restrictions on sanctioned technology. The UAE continuously monitors the export of dual-use products, an official said at the time.

Despite recent reforms for the gold sector, vulnerabilities remain, according to Marcena Hunter, a director at The Global Initiative Against Transnational Organized Crime.

“It appears this isn’t simply a window-dressing exercise by the UAE,” she said. “However, the actions of some actors in the country can undermine real efforts by some Emirati officials to strengthen compliance and due diligence practices.”

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🔒 UAE nears exit from FATF ‘grey list’ following robust crackdown on illicit finance

Swift Turnaround

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