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on Countering the Proliferation of Weapons of Mass Destruction Standing Office 81
Notices

Targeted financial sanctions obligations and designated lists relating to the proliferation of weapons of mass destruction and proliferation financing

Notices

30 October 2026UN Security Council updates the sanctions list (30/10/2026)

Activities22 April 2024

The UAE exits the FATF grey list

Field: Proliferation financing Tiếng Việt

Unofficial translation from the Vietnamese original.

On 23 February 2024, the Financial Action Task Force (FATF) removed the United Arab Emirates (UAE) from its list of Jurisdictions under Increased Monitoring (the grey list). The FATF had announced at its October 2023 Plenary that the UAE could be removed from the grey list because it had undertaken a number of significant reforms to improve its overall anti-money laundering and countering the financing of terrorism (AML/CFT) regime.

The UAE had been on the FATF grey list since 4 March 2022 on account of the “strategic deficiencies” identified in its efforts to counter money laundering and terrorist financing. The FATF's conditions for removing the UAE from the grey list required the UAE to fully implement the recommendations set out in its action plan, and the recent delisting is a significant and well-deserved achievement for the UAE.

The process for grey list inclusion and removal

The FATF conducts Mutual Evaluations (MEs), which are peer reviews carried out on the basis of the FATF Methodology. An ME assesses the following:

  1. “Effectiveness”, by reference to 11 “Immediate Outcomes”, covering the understanding of risk (Outcome 1), international cooperation (Outcome 2), adequate supervision (Outcome 3), the implementation by financial institutions (FIs), designated non-financial businesses and professions (DNFBPs) and virtual asset service providers (VASPs) of preventive measures commensurate with the risks they may face (Outcome 4), the availability to competent authorities of beneficial ownership information (Outcome 5), the use of financial information by authorities to investigate financial crime (Outcome 6), the appropriate and dissuasive prosecution of money launderers and terrorist financiers (Outcomes 7 and 9), the confiscation of the proceeds of crime (Outcome 8), and the prevention of the raising, moving or using of funds for terrorism or the proliferation of weapons of mass destruction (Outcomes 10 and 11).
  2. “Technical compliance” with the Recommendations in members' relevant laws, regulations and other legal instruments.[1]

If a jurisdiction performs poorly in its ME, it enters an observation period and is placed in the “monitoring process” for one year in order to address its deficiencies effectively and in a timely manner and to avoid grey listing. If a jurisdiction is grey listed, it must meet the commitments in its action plan to a standard sufficient for a majority of FATF members (currently 40 members)[2] to vote in favour of delisting.

Key reforms undertaken by the UAE

At the regulatory level, the UAE has taken the following proactive initiatives to ensure the effectiveness of its AML/CFT legal framework:

  1. In 2018, the UAE issued Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations (the AML Law)[3]. The AML Law was introduced in order to enhance the effectiveness of the legal and institutional framework in the UAE for countering money laundering and terrorist financing. Its scope of application is broad, as it extends to acts committed inside or outside the UAE, and it sanctioned the establishment of a Financial Intelligence Unit (FIU) to control suspicious activity and transaction reports (SARs/STRs) within the UAE and with its counterparts in other countries. The AML Law was subsequently amended by Federal Decree-Law No. 26 of 2021.[4]
  2. In 2020, Sultan bin Saeed Al Badi Al Dhaheri, the UAE Minister of Justice, established specialised courts within the federal judiciary to hear money laundering and other financial crime cases in Ajman, Fujairah, Sharjah and Umm Al Quwain.[5]
  3. In 2021, the UAE Cabinet approved the establishment of the Executive Office of Anti-Money Laundering and Countering the Financing of Terrorism (the Executive Office), to “oversee the implementation of the UAE's national AML/CFT Strategy and National Action Plan”.[6] At the same time, Abu Dhabi and Dubai established their own specialised courts to hear money laundering cases.
  4. Federal Decree-Law No. 31 of 2021 promulgating the Law on Crimes and Penalties (the Penal Code) came into force in January 2022 and reinforced the UAE's existing laws on AML, breach of trust, bribery and fraud.
  5. The financial services regulators have also published extensive guidance for FIs, DNFBPs and VASPs on AML/CFT best practice, such as the Central Bank of the UAE's Guidance for Licensed Financial Institutions on Risks Related to Politically Exposed Persons (PEPs).[7]

The practical effectiveness of the UAE's AML/CFT initiatives

At the time of the UAE's ME in 2020, the Mutual Evaluation Report (MER) noted that “the elements of an effective AML/CFT system are present, but the framework requirements are relatively new and it has therefore not been possible to demonstrate the overall effectiveness of the system”.[8]

Since the MER, the above initiatives have translated into significant progress in enforcement and compliance. For example, in the first quarter of 2023 the UAE issued more than AED 115 million (~USD 31 million) in fines for AML/CFT breaches, an increase of AED 39 million (~USD 10.5 million) on the previous year.[9] At the October Plenary, the FATF recognised that “the UAE had substantially completed its action plan and warranted an on-site assessment to verify the implementation of its AML/CFT improvements”.

In summary, the FATF commended the UAE for addressing its strategic deficiencies by:

  1. Facilitating investigations through increased outbound mutual legal assistance (MLA) requests.
  2. Developing an understanding of the AML/CFT risks associated with DNFBPs, leading to effective supervision, increased use of SARs/STRs and proportionate sanctions for non-compliance.
  3. Enhancing the understanding of the risk of misuse of legal persons and implementing risk-based mitigating measures.
  4. Better resourcing the FIU to enhance the availability and use of financial information.
  5. Strengthening AML enforcement.
  6. Refining the implementation of targeted financial sanctions by sanctioning reporting entities and developing the private sector's understanding of United Nations sanctions evasion.

The expected positive impact of the UAE's removal from the grey list

An IMF Working Paper concluded that the average adverse impact of grey listing on a country's capital inflows is 7.6% of Gross Domestic Product (GDP).[10]

It is therefore significant that the UAE was able to be delisted in less than 24 months. Delisting is expected to have a number of positive effects on investor confidence and on the UAE economy as a whole. It signals the UAE's commitment to a best-in-class AML/CFT framework, addresses any previous concerns about financial transparency and strengthens the country's reputation in international markets, which is vital for attracting foreign investment and boosting economic activity.

Other positives include the likelihood that international banks and financial institutions will be more willing than before to transact with UAE counterparties. This should reduce transaction delays, relieve some of the compliance costs borne by international actors in carrying out enhanced due diligence on UAE parties, and increase liquidity for UAE businesses by making borrowing more affordable.

Further developments at the FATF

Barbados, Gibraltar and Uganda were also removed from the grey list, having committed to implement their action plans and addressed their strategic deficiencies within the agreed timeframes. Like the UAE, these countries will no longer be subject to the FATF's increased monitoring.

The FATF also appointed Elisa de Anda Madrazo of Mexico as its next President. Her term is due to begin on 1 July 2024. She was previously an Attaché at the Mexican Embassy in Washington, DC and Vice-President of the FATF.

Finally, the FATF commented on its concern about the increasing financial connectivity between Russia and countries subject to FATF counter-measures (Iran, Myanmar and North Korea, all of which are on the FATF black list) and warned all jurisdictions to remain vigilant to the attendant risks to the global financial system, including proliferation financing risks, malicious cyber activities and ransomware attacks.[11]

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[1] FATF, Methodology for Assessing Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems (June 2023), FATF Methodology 22 Feb 2013.pdf.coredownload.pdf (fatf-gafi.org) .

[2] FATF, FATF Members , Who We Are (fatf-gafi.org) .

[3] Ministry of Economy of the United Arab Emirates, MoE Laws and Regulations , Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations | Ministry of Economy – UAE (moec.gov.ae) .

[4] Ministry of Justice of the United Arab Emirates, Anti-Money Laundering and Terrorist Financing (accessed 20 February 2024), Anti-Money Laundering and Terrorist Financing | Laws & Legislation | Ministry of Justice, UAE (moj.gov.ae) .

[5] Government of the United Arab Emirates Portal, Combatting Money Laundering , Combatting Money Laundering | The Official Portal of the UAE Government .

[6] Ministry of Foreign Affairs of the United Arab Emirates, UAE Establishes Executive Office to Counter Money Laundering and Terrorist Financing (24 February 2021), UAE Establishes Executive Office to Counter Money Laundering and Terrorist Financing (mofa.gov.ae) .

[7] Central Bank of the UAE, CBUAE issues new guidance for licensed financial institutions on risks related to politically exposed persons (2 August 2022), cbuae-issues-new-guidance-on-anti-money-laundering-and-combatting-the-financing-of-terrorism-for-licensed-financial-institutions-on-risks-related-to-politically-exposed-persons-en.pdf (centralbank.ae) .

[8] FATF, Mutual Evaluation Report Executive Summary (2020), MUTUAL EVALUATION REPORT OF THE UNITED ARAB EMIRATES (fatf-gafi.org) .

[9] The National, UAE issues more than Dh115 million in fines in Q1 of 2023 to combat money laundering (27 April 2023), UAE issues more than Dh115 million in fines in Q1 of 2023 to combat money laundering (thenationalnews.com) .

[10] The Impact of Grey Listing on Capital Flows: An Analysis Using Machine Learning, by Mizuho Kida and Simon Paetzold; WP/21/153 ( https://www.imf.org/-/media/Files/Publications/WP/2021/English/wpiea2021153-print-pdf.ashx )

[11] FATF, Statement on the Russian Federation (23 February 2024), https://www.fatf-gafi.org/en/publications/Fatfgeneral/fatf-statement-russian-federation-feb-2024.html .

The authors wish to thank Molly McKenna for her contributions to this article.

According to The National Law Review

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