Financial Crime World

UAE Takes Steps to Combat Money Laundering and Terrorist Financing, but Gaps Remain

The United Arab Emirates (UAE) has taken steps to strengthen its anti-money laundering (AML) and counter-terrorist financing (CFT) regime to curb money laundering and terrorist financing (ML/TF) risks in its financial system. However, a recent on-site visit by the Financial Action Task Force (FATF) revealed that while progress has been made, significant gaps remain.

Proliferation Financing Risks

The FATF report highlighted concerns over the UAE’s proliferation financing-related risks, particularly in relation to Iran. While the country is implementing measures to address these risks, technical deficiencies and lack of understanding among private sector entities pose a substantial vulnerability.

AML/CFT Measures

The UAE has implemented AML/CFT measures across various sectors, including:

  • Financial institutions (FIs)
  • Designated non-financial businesses and professions (DNFBPs)

However, the effectiveness of these measures varies depending on the sector. FIs, particularly banks, have a good understanding of ML/TF risks and obligations, while DNFBPs outside of Free Zones (FFZs) and some Commercial Free Zones (CFZs) lack comprehensive knowledge.

Supervision

The UAE’s supervisory bodies, including:

  • Dubai Financial Services Authority (DFSA)
  • Financial Services Regulatory Authority (FSRA)
  • Insurance Authority (IA)

have developed a detailed understanding of ML/TF risks. However, the effectiveness of their supervision is limited by the lack of comprehensive risk assessments and individual institution-level knowledge.

Gaps and Recommendations

The FATF report identified several gaps in the UAE’s AML/CFT regime, including:

  • Lack of understanding among DNFBPs outside of FFZs and some CFZs.
  • Limited implementation of AML/CFT measures across all sectors.
  • Technical deficiencies in proliferation financing-related risks.
  • Inadequate supervision and risk assessment among DNFBPs.

To address these gaps, the FATF has recommended that the UAE:

  • Enhance awareness and understanding among DNFBPs outside of FFZs and some CFZs.
  • Implement AML/CFT measures comprehensively across all sectors.
  • Address technical deficiencies in proliferation financing-related risks.
  • Strengthen supervision and risk assessment among DNFBPs.

By addressing these gaps, the UAE can further strengthen its AML/CFT regime and reduce the risk of money laundering and terrorist financing in its financial system.