Middle East’s main financial hub, long seen as a magnet for illicit finance, is battling to keep itself off the FATF’s grey list
The United Arab Emirates has significantly increased its ability to clamp down on flows of dirty money, a senior official said, as the Middle East’s main financial hub battles to keep itself off a global money-laundering watchlist.
In April 2020, the Paris-based Financial Action Task Force warned the UAE, long seen as a global magnet for illicit funds, that it needed to work more closely with international counterparts and to tighten compliance in sectors vulnerable to abuse, especially gold trading and luxury real estate.
“We took on board the recommendations and started to change,” Ahmed Al Sayegh, a minister of state in the foreign ministry, told the Financial Times. “We think we have made significant progress — the bar has been set very high.”
Western officials say the UAE has made steps forward but is unlikely to avoid being placed on the FATF’s so-called “grey list”, which includes 23 countries such as Panama, Syria, Yemen and Zimbabwe. The multilateral body is due to make a final decision in February. Only Iran and North Korea are on the black list. “Regardless of the outcome, we now have an action plan,” Al Sayegh said.
Al Sayegh is part of an anti-money laundering task force, headed by foreign minister Sheikh Abdullah bin Zayed Al Nahyan, that is charged with improving co-ordination among the federation’s seven emirates. That includes Dubai, which has become the go-to location for international lenders and deal advisers seeking to service the Middle East.
The US has described the UAE’s fast-growing economy as a “transshipment point for illegal narcotics and a pass-through for drug proceeds”. The tax-free comfort of Dubai has proven an ideal location to park money, especially in the city’s booming luxury property sector and thriving gold and precious stones markets.
But the federation also needs to build a reputation for probity as its financial centres attract the cream of the global industry, from bulge-bracket banks to top law firms. Binance, the world’s largest cryptocurrency exchange, which faces a series of global regulatory probes, last month signed a deal with a Dubai trade zone to help the emirate build a “new international virtual asset ecosystem”.
Inclusion on the FATF’s watchlist would probably not deter financial institutions looking to set up in the UAE, bankers said. Yet the reputational damage could raise costs for local banks doing business with global counterparts and complicate compliance issues for international lenders. “It wouldn’t be a deal-breaker, but it is not something we would like to see,” said one official.
In 2020, the FATF said the UAE’s limited number of money laundering prosecutions, especially in Dubai, were a “concern” and urged the country to strengthen its anti-money laundering measures.
In an effort to avoid the grey list, the task force had since created a register of corporate beneficial ownership that can supply requested information to international counterparties in just three days, Al Sayegh said.
The UAE has also signed extradition treaty agreements with 33 countries including the UK, India and China. Sectors prone to financial abuse, such as real estate, have also been brought under the umbrella of the federally managed anti-money laundering reporting system.
Previously, only financial institutions had to report suspicious transactions — a requirement now expanded to accountants, auditors, precious stones and gold dealers, and property brokers. About 40,000 of them have now registered with the system, leading to a sharp rise in reports of suspicious transactions, such as large cash purchases of property.
“We have thousands of new suspicious transactions reports and are using them to target investigations,” Al Sayegh said. Staffing at the UAE financial intelligence unit, which leads investigations, has more than doubled.
Between 2019 and 2021, the UAE’s 243 money laundering cases secured an almost 94 per cent conviction rate and, last year, the country confiscated more than $625m as part of its anti-money laundering and terrorist combating procedures.
In one recent example of enhanced international co-operation, Hamid Al Zaabi, head of the UAE’s recently formed Executive Office to Combat Money Laundering and Terrorist Financing, pointed to the December arrest of an Emirati national in London.
The 46-year-old was detained in Belgravia on suspicion of organising a group of couriers who allegedly moved an estimated £100m of criminal cash from the UK to Dubai. All related assets have now been frozen.
“We will continue to stand shoulder-to-shoulder with the UK in the global fight against illicit finance,” Al Zaabi said.
David Lewis, who stepped down as executive secretary of FATF late last year, said: “The UAE is a big complex jurisdiction, it’s a nexus point for a lot of illicit funds, but they’ve got a high level of political commitment to deal with this and they’ve shown that to the FATF.” He added that even if the UAE avoided the grey list, “they [will still] have some challenges and more work to do I’m sure”.
by Simeon Kerr and Andrew England, January 16, 2022, published on Financial News