After the UAE was taken off the FATF (Financial Action Task Force) grey list and even prior to that, the UAE continues to take action to ensure improved AML/CTF (Anti Money Laundering) and (Counter-Terrorist Financing) especially when it comes to virtual assets.
On July 10th, 2024, the Executive Office of Anti-Money Laundering and Counter Terrorism Financing (EO AML/CTF) started implementing over 100 recommendations from the UAE’s National Risk Assessment (NRA). This came after the twenty-first meeting of the Higher Committee Overseeing the National Strategy on AML/CFT, chaired by H.H. Sheikh Abdullah bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Foreign Affairs.
As per the announcement, efforts will focus on mitigating risks in high-risk sectors, enhancing transparency in legal entities, and supporting initiatives in the virtual assets sector.
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This initiative includes a comprehensive awareness program to address money laundering and terrorist financing risks. Between 2024 and 2026, more than 50 workshops are planned to educate stakeholders about these threats and enhance understanding and compliance across various sectors.
Hamid Al Zaabi, Director-General of the EO AML/CTF, stated, “We are pleased to have concluded the latest NRA employing the World Bank Group’s methodology (WBG), and begin a new phase of implementing the recommendations as part of the UAE’s efforts to build a long-term and sustainable AML/CFT system.”
He added, “The Executive Office will continue working with regulatory bodies to boost private sector awareness of money laundering risks. The impact of this awareness on authorities’ performance will be monitored through the National System for Money Laundering and Terrorism Financing Statistics in the UAE.”
Al Zaabi especially note that they are committed to supporting these initiatives in the virtual assets sector. He noted their commitment to mitigate risks in high-risk sectors, ensuring transparency in legal entities and arrangements.
The EO AML/CTF Executive Office initiates implementation of National Risk Assessment recommendations
— EO.AMLCTF (@EoAmlctf) July 16, 2024
Read more : https://t.co/fMw8R1ZxPX#amlcftUAE #UAE #crime #uaeamlctf #awareness #NationalRiskAssesment#compliance pic.twitter.com/S4ePOR6FQp
ADGM regulatory body updated its terrorist financing red flags
In January of 2024, the regulatory authority of Abu Dhabi Global Market, the FSRA (Financial Services Regulatory Authority), Financial Crime Unit, published an update on Terrorist and Proliferation Financing Red Flags guidance that included a new section for specific Red Flags applicable to virtual assets and Virtual Asset Service Providers (VASPs).
As per the FSRA, all Relevant Persons, Financial Institutions (FIs), VASPs, and Designated Non-Financial Businesses and Professions (DNFBPs) are required to refer to the updated Terrorist and Proliferation Financing Red Flags Guidance and incorporate the most up-to-date Red Flags indicators in their screening systems.
All these amendments and guidance by FSRA come after FinCEN (the U.S. Department of the Treasury’s Financial Crimes Enforcement Network) proposed new regulations to enhance transparency in convertible virtual currency (CVC) mixing and combat terrorist financing, mentioning Hamas and Palestinian Islamic Jihad.
UAE Central Bank issues AML/CFT guidance
But it hasn’t stopped there. Even the UAE Central Bank came out with its virtual assets and VASP framework guidance, including AML/CFT guidance within it. The guidance was targeted towards licensed financial institutions, with a focus on the risks of dealing with virtual assets.
The UAE Central Bank clarified what it considered virtual assets, who could offer services in this realm, and how banks and financial institutions would work with VASPs when opening accounts for them and meeting compliance requirements. It also made it clear that virtual assets are not considered legal tender in the UAE.
As per the guidance, “A virtual asset is a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes, excluding digital representations of fiat currencies, securities, and other funds (such as those separately regulated by the competent authorities of the UAE, including the CBUAE, SCA, VARA, FSRA, and the Dubai Financial Services Authority (“DFSA”).”
Also Read: UAE Central Bank Approves Issuance of Stablecoin Regulation
More importantly, as per the AML-CFT Decision, every natural or legal person who carries out any VASP activities provides VASP products or services or carries out VASP operations from the state must be licensed, enrolled, or registered by a competent supervisory authority in the UAE.
It has been made clear that licensed FIs are strictly prohibited from establishing relationships or processing transactions with individuals or entities that perform covered VASP activities and are not licensed by UAE authorities to do so.
The UAE Central Banks’s AML/CFT law brought virtual assets and VASPs within the scope of the UAE’s AML/CFT legal, regulatory, and supervisory framework. Under Articles 9 and 15 of the AML/CFT law, VASPs must report suspicious transactions and information relevant to such transactions to the UAE FIU, and under Articles 13 and 14, supervisory authorities are authorized to assess the risks of VASPs, conduct supervisory operations (including inspections) of VASPs, and impose administrative penalties on VASPs for violations of applicable laws and regulations.
Over the past two years, the UAE has continued to enhance the AML/CFT guidelines for virtual assets on all levels. With its recent stablecoin regulation, even more efforts are expected to be made on this front.
Cryptopolitan reporting by Lara Abdul Malak
