By Elizabeth Hearst for AMLi
The Financial Action Task Force has published its updated consolidated table of assessment ratings for FATF members.
Through its nine FATF-Style Regional Bodies (FSRBs), FATF brings together 205 jurisdictions committed to implementing the body’s financial recommendations.
The consolidated assessment ratings highlight the current level of compliance in each Member States, published during the Mutual Evaluation Reports (MERs) and Follow-Up Reports (FURs).
The UAE hit the headlines in recent days, after sources revealed FATF were considering adding the Gulf’s booming financial hub to its ‘grey list’. Such a decision could have devastating effects on the UAE’s financial reputation, as well as economy.
During its 2020 Mutual Evaluation Report, the UAE was found to have a low level of effectiveness in four of FATF’s Immediate Outcomes. To achieve this, FATF Immediate Outcomes have not been achieved, or “achieved to a negligible extent”, with “fundamental improvements needed”.
The UAE was found to be below-par in ensuring “international co-operation delivers appropriate information, financial intelligence and evidence and facilitates action against criminals and their assets”.
Similarly, the UAE did not demonstrate that “legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information is available to competent authorities without impediments”.
The UAE also failed to show that money laundering offences “are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions”.
Most notably, the UAE was not effective in preventing “persons and entities involved in the proliferation of weapons of mass destruction from raising, moving and using funds, consistent with the relevant UN Security Council Resolutions”.
The UAE was also found to be partially compliant in six of FATF’s 40 Recommendations of technical requirements, including:
- Assessing Risks and Applying a Risk-Based Approach
- Targeted financial sanctions related to terrorism and terrorist financing
- Targeted financial sanctions related to proliferation
- Preventative measures against higher-risk countries
- Transparency and beneficial ownership of legal arrangements
- Financial Intelligence Units
Following its 2020 MER, FATF issued a statement in which it said the UAE had “recently strengthened its legal framework to fight money laundering and terrorist financing”, but warned that “as a major global financial centre and trading hub, it must take urgent action to effectively stop the criminal financial flows that it attracts”.
FATF states that despite the UAE’s understanding of the risks it faces, the risks are “significant” and result from the UAE’s “extensive financial, economic, corporate and trade activities, including as a global leader in oil, diamond and gold exports”.
The UAE has “significantly strengthened relevant laws and regulations” and has put in place a range of committees to improve its national co-ordination and co-operation. “While the country needs to swiftly address a number of remaining issues, the elements of an effective framework to detect and prevent criminals and terrorists from misusing the financial system are mostly in place”, according to FATF.
FATF added that the UAE must “urgently deepen its understanding of the risks it faces at national and individual Emirate-level and take action to strengthen the effectiveness of its measures to stop money laundering, terrorist financing and proliferation financing”.
Following these recommendations, the UAE has implemented a number of measures to bolster its anti-financial crime regime, including establishing its beneficial ownership database to serve as a “reference for stakeholders that include security agencies, police and other enforcement bodies as they investigate financial crime”.
The UAE has also set up special courts to specifically target money launderers, information exchanges with China and a collaboration programme with the UK.
Officials from the UAE are expected to travel to Paris next month for FATF’s 2022 February Plenary, perhaps in a last ditch effort to avoid grey listing. Director General of the UAE’s Executive Office AML/CFT Hamid Al Zaabi said the UAE takes its role in protecting the global financial system “extremely seriously”, and stressed that the country was “committed to taking action”.
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