UAE Nears Removal from Global Watchdog’s ‘Gray List’ Following Successful Crackdown on Illicit Finances

The United Arab Emirates (UAE) is on the verge of being removed from the global Financial Action Task Force’s (FATF) “gray list” this week, signaling a successful crackdown on illicit financial activities in the country. Assessors from the FATF acknowledged significant progress in the UAE’s action plan during their recent on-site visit, and insiders suggest that the country may officially exit the list on February 23 during the FATF plenary in Paris.

Sources reveal that delegates from at least three FATF members, who previously supported placing the UAE under increased oversight, now back the country’s delisting as early as February 2024. David Lewis, a former FATF executive secretary, expressed confidence in the UAE’s removal from the list but noted that the FATF might highlight areas requiring further attention.

To secure removal from the gray list, a substantial majority of FATF members must vote in favor of the UAE’s progress since the evaluation period began. The UAE officials engaged in a diplomatic campaign, visiting key FATF states like the US, Switzerland, and Singapore, focusing on issues such as Russian sanctions evasion and cryptocurrency during discussions with foreign partners.

The UAE, initially added to the gray list in March 2022, has swiftly addressed concerns raised by the FATF. After attracting scrutiny as a destination for wealthy exiles, particularly in the aftermath of the Ukraine invasion, the UAE tightened scrutiny on financial transactions involving various nationalities, including Russians.

The government’s commitment to combating illicit finance is emphasized, with over 250 million dirhams ($68 million) in Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) fines imposed from January to October 2023, marking a significant increase from the previous year.

The potential removal from the gray list is anticipated to be well-received by Wall Street banks with substantial operations in the UAE, as compliance costs had surged following the initial designation. UAE authorities have also made high-profile arrests, addressing concerns related to individuals accused of financial wrongdoing, including hedge fund trader Sanjay Shah and the Gupta brothers.

Despite the positive developments, the UAE continues to face scrutiny from some Western nations. US authorities have sanctioned UAE-based shipping companies for violating restrictions on Russian oil prices, and concerns persist about the country acting as a gateway for Russia to evade sanctioned technology restrictions.

While acknowledging the UAE’s efforts, some experts caution that vulnerabilities persist, emphasizing the need for sustained compliance and due diligence practices. The UAE’s proactive steps to exit the gray list demonstrate a commitment to reform, but ongoing vigilance remains crucial in maintaining international financial integrity.