Once off the grey list, UAE can really work on its image

The UAE financial authorities will have earned a pat on the back if, as looks almost certain, the country is removed from the “grey list” drawn up by the Financial Action Task Force.

The Paris-based watchdog said last week that the country looked to have done enough to get off the list, with a decision to be confirmed by an on-site inspection early next year.

These visits tend to be box-ticking exercises rather than in-depth interrogations. So all seems set for the UAE to come off the category of “jurisdictions under increased monitoring” for shortcomings in complying with money laundering and terrorism financing regulations.

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Once the formalities are complete, the UAE will be given a clean bill of health at the next Financial Action Task Force plenary in February 2024.

When the FATF put the UAE on its grey list in March 2022, the country’s financial policymakers could have taken the view that it did not much matter.

The watchdog’s provisions are nowhere near as draconian as full-blown sanctions – maybe involving some increased paperwork and more lengthy and expensive processes. None of the ratings agency analysts thought the FATF action would damage the country’s credit worthiness.

Abu Dhabi could have ignored the ruling, deciding it was just another example of a worthy Western organisation imposing its standards around the world.

To its credit, the UAE took the categorisation very seriously indeed and swung into action to persuade the watchdog to reverse its decision.

Two men in particular were behind this decisive response: Ahmed Al Sayegh, UAE minister of state, an expert on the global financial industry, and Hamid Al Zaabi, who was appointed director general of the Executive Office of Anti-Money Laundering and Counter Terrorism Financing.

With the backing of the Central Bank, a rapid response strategy was put in place, resulting in a flurry of activity over the past 18 months.

John Lamparski/NurPhoto

WAM

To address the criticism that criminals could come to the UAE regardless of what they had done in their home countries, some 45 mutual legal assistance treaties have been signed with foreign governments to improve the flow of information and co-operation between judicial systems.

In the first half of 2023, the UAE sent 119 requests to more than 40 foreign jurisdictions and received 202 similar requests from abroad concerning suspects living in the UAE. By the end of June, it had handled 130 of the 202 requests.

In roughly the same period, fines totalling AED200 million ($54.5 million) were imposed and AED1.3 billion worth of suspect assets seized.

There has been a big increase in the number of suspicious transactions being reported to the authorities by financial institutions and the professional groups – lawyers, accountants, property agents – that support them.

Perhaps most impressive of all for the FATF assessors was the acceleration in the number of investigations and prosecutions for large-scale, complex money-laundering cases.

In the second and third quarters of this year, the public prosecutor investigated 164 cases, with 99 going to full court proceedings. The conviction rate was 92 percent.

Rather than the stereotype of “shady men in sunny places”, perpetrators have increasingly found themselves in the darker confines of the UAE prison system.

There are some high-profile international cases outstanding, such as the extradition requests for Sanjay Shah and for Atul and Rajesh Gupta. Talks are also continuing between the Irish and Emirati governments over the members of the Kinahan crime family reportedly living in the UAE.

But the word from Abu Dhabi sources is that the legal and diplomatic wheels are relentlessly in motion on all three.

There are also the Russians who have fled to the UAE since the invasion of Ukraine.

The authorities have imposed a strict regime on these exiles. Non-sanctioned individuals have to go through extensive checks before they can open a bank account or start a business.

Sanctioned Russians cannot operate at all, in theory. But western authorities have exposed several schemes to evade sanctions via UAE entities.

It should be remembered that getting off the grey list is not on its own a ringing endorsement of the UAE’s financial probity, but rather a recognition that the country adheres to the bare minimum global standards.

Panama, which was removed from the list again last week, has bounced between inclusion and removal for several years. The UAE wants to avoid that cycle.

The FATF decision will do little to change the minds of organisations such as the Carnegie Endowment for International Peace, the US think tank that labelled Dubai “a globally attractive destination for dirty money” in 2020.

Maybe the next task for the UAE’s money laundering troubleshooters is to engage the likes of Carnegie.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He also acts as a consultant to the Ministry of Energy of Saudi Arabia