UAE lawyer Irina Heaver explained that the new guidance is part of the UAE’s efforts to be removed from the Financial Action Task Force’s (FATF) “grey list.”
The Central Bank of the United Arab Emirates (CBUAE), along with other regulators in the country, has recently published new joint guidance for virtual asset service providers (VASPs) operating within the country. The new guidelines include penalties for VASPs operating without proper licenses within the jurisdiction.
The National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC), in collaboration with UAE supervisors, has issued guidance on combating the use of unlicensed virtual asset service providers, which is prepared by…
— Central Bank of the UAE (@centralbankuae) November 6, 2023
On Nov. 6, the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC) and the CBUAE published a list that they described as “Red Flags” for VASPs. The list included the lack of regulatory license, unrealistic promises, poor communications, lack of regulatory disclosures and more indicators that could identify suspicious parties.
According to the new guidance, the supervisory authorities expect all licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs) and licensed VASPs to report transactions from suspicious parties. The guidance wrote:
“Any information related to unlicensed virtual asset activities can be reported through whistleblowing mechanisms, to help regulatory authorities in their efforts to uphold the law and protect the UAE financial system.”
Within the new document, the central bank also noted that VASPs operating in the UAE without a valid license will be subjected to “civil and criminal penalties including, but not limited to, financial sanctions against the entity, owners and senior managers.” In addition, the document also highlighted that LFIs, DNFBPs and licensed VASPs that demonstrate willingness to deal with unlicensed VASPs will also be subject to actions from law enforcement.
In a press release, His Excellency Khaled Mohamed Balama, governor of the CBUAE and chairman of the NAMLCFTC, said that the new guidance comes at a time when virtual assets have become more accessible. The CBUAE executive explained that as the digital economy matures, their work on “combating all kind of financial crimes intensifies.” This ensures the integrity of the financial system in the UAE, according to Balama.
Related: Lawyer explains new federal virtual asset law in the United Arab Emirates
Commenting on the update, UAE lawyer Irina Heaver told Cointelegraph that the new guidance is part of a broader effort from the UAE to be removed from the Financial Action Task Force’s (FATF) “grey list.” This list indicates that a country has deficiencies in its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regimes, but has committed to resolving these issues within agreed timeframes.
In March 2022, the UAE was placed into the FATF’s grey list and subjected to increased monitoring due to deficiencies in AML and CTF. However, the country made a high-level commitment to work with the global watchdog to strengthen its AML and CTF regimes.
According to Heaver, the UAE has enacted significant reforms since its placement on the grey list in 2022. With new updates to its AML and CTF regulatory frameworks, the country may exit the grey list soon. “The next FATF review, expected in April or May 2024, could lead to the UAE’s exit from the grey list if it continues to demonstrate consistent compliance,” she added.
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