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

World news1 March 2024

UAE Removed from 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 the country had implemented a number of important 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 owing to “strategic deficiencies” identified in its efforts to combat 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 its recent removal from the list is a significant and well-deserved achievement for the UAE.

The process of grey-listing and de-listing

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”, including understanding of risk (Immediate Outcome 1), international cooperation (Immediate Outcome 2), appropriate supervision (Immediate Outcome 3), the application 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 (Immediate Outcome 4), the availability to competent authorities of beneficial ownership information (Immediate Outcome 5), the use of financial intelligence by authorities to investigate financial crime (Immediate Outcome 6), the appropriate and dissuasive prosecution of money launderers and terrorist financiers (Immediate Outcomes 7 and 9), the confiscation of criminal proceeds (Immediate Outcome 8), and the prevention of the raising, moving or use of funds for terrorist activities or the proliferation of weapons of mass destruction (Immediate 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 will enter an observation period and will be placed under a “monitoring process” for one year in order to address its deficiencies effectively and in a timely manner and avoid being grey-listed. If a jurisdiction is grey-listed, it must meet the commitments in its action plan sufficiently for a majority of FATF members (currently 40 members)[2] to vote in favour of its de-listing.

Key reforms implemented 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 to enhance the effectiveness of the UAE’s legal and institutional framework for AML/CFT. Its scope is broad, as it extends to acts committed inside or outside the UAE, and it authorised the establishment of a Financial Intelligence Unit (FIU) to monitor suspicious activity and transaction reports (SARs/STRs) within the UAE and with counterpart units 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 for Anti-Money Laundering and Counter Terrorism Financing (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 Law No. 31 of 2021 promulgating the Crimes and Penalties Law (the Penal Code) came into force in January 2022 and consolidated the UAE’s existing laws on AML, breach of trust, bribery and fraud.
  5. Financial services regulators have also published extensive guidance for FIs, DNFBPs and VASPs on AML/CFT best practices, such as the Central Bank of the UAE’s Guidance for Licensed FIs on risks related to politically exposed persons (PEPs).[7]

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 in place, but the framework of requirements is relatively recent and therefore it is not yet possible to demonstrate the overall effectiveness of the system”.[8]

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

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

  1. Facilitating investigations through an increase in outgoing mutual legal assistance (MLA) requests.
  2. Developing an understanding of AML/CFT risks associated with DNFBPs, resulting in effective supervision, increased use of SARs/STRs and proportionate sanctions for non-compliance.
  3. Improving understanding of the risk of misuse of legal persons and implementing risk-based mitigating measures.
  4. Providing better resources to the FIU to enhance its ability to provide and use financial intelligence.
  5. Increasing AML enforcement.
  6. Refining the implementation of targeted financial sanctions by sanctioning reporting entities and developing private-sector understanding of the evasion of United Nations sanctions.

Expected positive impact of the UAE’s removal from the Grey List

An IMF Working Paper concluded that the average negative 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 has been able to exit the list in less than 24 months. De-listing 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 crucial for attracting foreign investment and stimulating economic activity.

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

Additional FATF developments

Barbados, Gibraltar and Uganda were also removed from the Grey List, having committed to implementing their action plans and addressed their strategic deficiencies within the agreed timeframes. Like the UAE, these countries will no longer be subject to increased monitoring by the FATF.

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 Embassy of Mexico in Washington, DC and Vice-President of the FATF.

Finally, the FATF expressed its concern about the growing financial connectivity between Russia and the countries subject to FATF countermeasures (Iran, Myanmar and the DPRK, all of which are on the FATF Black List) and warned all jurisdictions to remain vigilant to the related risks posed to the global financial system, including the risks of proliferation financing, 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] UAE Ministry of Economy,  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] UAE Ministry of Justice,  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] The Official Portal of the UAE Government,  Combatting money laundering , Combatting money laundering | The Official Portal of the UAE Government .

[6] UAE Ministry of Foreign Affairs,  UAE establishes Executive Office for Anti-Money Laundering and Counter Terrorism Financing  (24/02/2021),  UAE establishes Executive Office for Anti-Money Laundering and Counter Terrorism 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  (02/8/2022),  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  (27/4/2023),  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  (23/02/2023),  https://www.fatf-gafi.org/en/publications/Fatfgeneral/fatf-statement-russian-federation-feb-2024.html .

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

Source: The National Law Review

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