The UAE welcomes its removal from the FATF grey list

The move comes as the country clamps down further on money laundering and terrorist financing

On 23 February 2024, the United Arab Emirates (the UAE) was removed from the Financial Action Task Force (FATF) "grey list" after its introduction in 2022.

In March 2022, FATF, a global action task force aimed at tackling money laundering, terrorist financing and proliferation financing, placed the UAE on its "grey list" having identified what it deemed to be strategic deficiencies in its systems to counter such criminal conduct. As a result, the UAE was subject to increased monitoring and scrutiny by FATF.

While the UAE has established itself as a highly attractive jurisdiction for trade and investment over the last few decades, it had also become attractive to those seeking to invest the proceeds of crime due to perceived weaknesses in financial regulation and the ease of investment in high risk sectors such as high value real estate. These perceived weaknesses, combined with limited transparency of business ownership have been high on the agenda as the UAE continues to combat financial crime and strengthen its economy.

In order to be removed from the "grey list", countries must address the shortfalls identified in FATF's recommendations. Over the last two years, the UAE has prioritised overhauling its compliance framework and taken a number of steps to ensure a more robust regulatory environment including:

1. Establishing an Executive Office to counter money laundering and terrorist financing.
2. Establishing a special court to prosecute financial crimes.
3. Adopting new guidelines for financial institutions and designated non-financial businesses and professions aimed at anti-money laundering and combating the financing of terrorism.
4. Implementing a new penal code strengthening its anti-money laundering, terrorist financing, anti-bribery and corruption regulations.

The UAE's removal from the grey list signifies its commitment to combatting money laundering and terrorist financing. This development is likely to increase investor confidence in the UAE's regulatory framework. With this, it is anticipated that there will be greater foreign capital inflows and reduced compliance costs and costs of borrowing.

The UAE has positioned itself as a leader in technology in the region and economic growth is expected to be driven by embracing and leading in the development of new technologies. However, this comes with additional challenges, as technology can provide novel methods for perpetrating and disguising financial and other crime. In an article published recently in The National, the UAE's leading English language daily newspaper, H.E. Ahmed Ali Al Sayegh, UAE Minister of State, recognised that it is "imperative to forge an equitable balance between fostering innovation and establishing a transparent and predictable regulatory framework". The UAE's recognition of the importance of striking this balance indicates that it is well-placed to enhance its economic standing and regulatory regime over the years to come.

For more information, please contact Stuart Paterson and Janine Mallis.