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What does the UAE’s removal from the grey list mean for FIs?

The United Arab Emirates has recently been removed from the Financial Action Taskforce (FATF)’s grey list. what does this mean for financial institutions in and transacting with the UAE?

Daniel Fakhoury
June 20, 2024

The United Arab Emirates (UAE) has recently been removed from the Financial Action Taskforce (FATF)’s grey list. This signifies international recognition of its efforts to strengthen its anti-money laundering (AML) and combating the financing of terrorism (CFT) frameworks. With the rapid expansion of financial services in the Middle East, it is good news, but what does this mean for financial institutions in and transacting with the UAE?  

What is the FATF grey list?

The Financial Action Task Force (FATF) is a global intergovernmental anti-money laundering organisation which sets international standards for preventing financial crime.  The member states collaborate on an international level to ensure a high standard of anti-money laundering framework is in place.  

To aid these efforts, the FATF publishes black and grey lists to encourage reforms in weaknesses in AML/CFT processes for increased security in financial systems.

Jurisdictions on the grey list are subject to increased monitoring and must make reforms to its AML procedures. It lists countries that are actively collaborating with the FATF to rectify strategic weaknesses in their systems within agreed time frames for combating money laundering, terrorist financing, and proliferation financing.

What reforms has the UAE made?

The UAE was added to the grey list in March 2022 after having identified ‘strategic deficiencies’ in its money laundering controls. In recent years, its booming economy and increased tourism has made it an attractive market to trade and invest in, but as with any economic growth, this is an attractive prospect for criminals.  

To be removed from the grey list in February 2024, the UAE has implemented significant reforms in its financial and regulatory systems to address vulnerabilities in its AML/CFT measures. These reforms include:

  • enhancing transparency of risk-based mitigation measures,
  • improving regulatory oversight by increasing investigations and prosecutions,
  • applying effective and proportionate sanctions for AML/CFT noncompliance involving financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs),
  • strengthening cooperation with international authorities, making greater use of financial intelligence from foreign counterparts.

What impact will this have on the UAE?

  • The UAE’s removal from the grey list means it is no longer under increased monitoring from the FATF.
  • The UAE is more actively engaged with international bodies and jurisdictions to exchange information, collaborate on investigations and enhance cross-border cooperation in combatting money laundering and terrorist financing.  
  • The market should benefit from an improved reputation enhanced trust in its financial system, meaning cross-border transactions could become more affordable for consumers and businesses.  
  • Trade and investment in the market is becoming more attractive, as there is a reduced risk of sanctions or restrictions on transactions with the market.
Its removal means that it is an exciting time to do business and process transactions in the UAE. There will be increased collaboration and investment from abroad, and so it is important that firms do not just comply with regulations, but that technology is scalable and future-proof.  

Driving down the cost of compliance will become the focus for financial institutions in the UAE. This requires a highly configurable, and scalable for increased automation and operational efficiency, modern user-interfaces to easily report risky activity, a no-code sandbox environment for easy calibration, testing and implementation of new rules as money laundering typologies evolve on a regular basis.

While removal from the grey list is a significant achievement, the UAE must continue to maintain and strengthen its AML/CFT measures with NextGen financial crime compliance solutions to prevent the risk of being re-listed in the future. Learn more about the importance of sandboxes here.

Photo by Piotr Chrobot on Unsplash

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