Analysis
United Arab Emirates: Integrity risks to persist despite new, stronger anti-money laundering measures
- Middle East
- United Arab Emirates
- Political and Country Risk
United Arab Emirates: Integrity risks to persist despite new, stronger anti-money laundering measures
By: Victor Tricaud
The government of Dubai (UAE) on 22 August announced that it will set up a specialised anti-money laundering court within the court of first instance and the court of appeal.
- Federal- and emirate-level authorities will continue to introduce anti-money laundering (AML) measures in the coming years, strengthening the federations’ overall AML framework.
- However, LOW integrity risks will persist, as the effective monitoring and investigation of money laundering will need to be progressively expanded in the coming years.
- UAE businesses operating in high-risk sectors should continue to closely monitor suspicious transactions and cooperate with relevant authorities.
Strengthening the AML framework
The move comes more than a year after the Financial Action Task Force (FATF – an international watchdog on anti-money laundering and combating the financing of terrorism and proliferation) in April 2020 put the UAE on a year-long observation course after publishing recommendations for the federation’s AML and combatting the financing of terrorism (CFT) framework. In its 2020 findings, the FATF found that the UAE continued to show insufficient effectiveness in tackling money laundering.
Since the publication of the FATF’s recommendation, the UAE, as well as individual emirates, have taken a number of measures aimed at strengthening their AML framework:
- September 2020: The central bank launched a new online tool named Fawri Tick to aggregate money laundering cases across emirates and courts to improve national coordination.
- September 2020: Federal authorities ordered the registration of informal cash transfer services (known as hawala) to improve control of international money flows.
- October 2020: Federal authorities introduced a law requiring companies to disclose ultimate beneficial ownership; thereby improving corporate transparency standards.
- November 2020: The Ministry of Economy set up a specialised AML department.
- November 2020: Specialised AML courts were set up in the Sharjah, Ajman, Umm al-Quwain and Fujairah emirates.
- February 2021: The UAE cabinet established an Executive Office for Anti-Money Laundering and Countering the Financing of Terrorism, responsible for implementing the federation’s National AML/CFT Strategy.
Federal and emirate-level authorities will continue to implement measures to curb money laundering over the coming years. Dubai will likely progressively increase oversight of sectors particularly affected by money laundering, including precious metal and gems trading, banking and real estate.
Lingering challenges
The recent measures will improve the UAE’s AML framework. However, integrity risks for businesses operating in high-risk sectors will persist over the coming year. Although underway, the strengthening of law enforcement’s investigative and monitoring capabilities will take several years to reach full effectiveness. In addition, the overlap of jurisdictions in the UAE due to parallel judicial systems across emirates and free zones will impede national coordination efforts.
Businesses operating in sectors such as commodity trading, international banking and real estate should continue to carefully monitor and identify transacting parties to mitigate integrity risks. They should also actively cooperate and liaise with federal- and emirate-level authorities on AML best practice and in case they detect suspicious activities.