Financial Crime World

UAE Struggles to Effectively Combat Terrorist Financing

The United Arab Emirates (UAE) has faced significant challenges in combating terrorist financing (TF), with a substantial amount of TF activity identified by authorities. Despite efforts to implement anti-money laundering (AML) and counter-terrorist financing measures, the country still faces technical deficiencies and limited understanding among financial institutions and non-profit organizations.

During the assessment period, there were no convictions of legal persons involved in TF activities. While sentences have been handed down for individuals accused of terrorist financing, the lack of convictions against legal entities has raised concerns about the effectiveness of the UAE’s anti-terrorist financing laws.

Key Findings:

  • No convictions of legal persons involved in TF activities
  • Concerns about the effectiveness of the UAE’s anti-terrorist financing laws

TFS Framework Still a Work in Progress

The UAE is implementing TF-related measures, including a new regulation and automatic transposition mechanism. However, these efforts have been delayed and technical deficiencies remain, particularly with respect to provisions related to Iran. The lack of understanding among private sector entities and the limited number of assets frozen under UN resolutions has also raised concerns.

Key Findings:

  • Delays in implementing TF-related measures
  • Technical deficiencies in provisions related to Iran
  • Limited understanding among private sector entities

NPO Sector Faces Challenges

The UAE has taken steps to address terrorist financing risks in non-profit organizations (NPOs), including completing a risk assessment and implementing licensing and financial controls. However, the Ruler’s Funds, which comprise 18% of high-risk NPOs, still require more attention.

Key Findings:

  • Steps taken to address TF risks in NPOs
  • Need for further attention on Ruler’s Funds

Supervision Efforts Lag Behind

Financial institutions in the UAE have shown good understanding of ML/TF risks and obligations. However, some sectors, such as DNFBPs, lag behind. Supervisors have made progress in developing a detailed understanding of ML/TF risk at the individual institution level, but more work is needed to ensure effective supervision.

Key Findings:

  • Good understanding of ML/TF risks among financial institutions
  • Lagging sectors include DNFBPs

Sanctions Still Lacking

The DFSA has demonstrated effective, proportionate, and dissuasive sanctions against firms and individuals accused of terrorist financing. However, the lack of sanctions against legal entities has raised concerns about the effectiveness of the UAE’s anti-terrorist financing laws.

Key Findings:

  • Effective sanctions against firms and individuals
  • Concerns about the lack of sanctions against legal entities

Conclusion

While the UAE has made progress in combating terrorist financing, it still faces significant challenges in implementing effective AML/CFT measures and addressing TF risks in key sectors. The country needs to address these challenges to effectively combat terrorist financing and prevent the misuse of its financial system.

Recommendations:

  • Implement delayed TF-related measures
  • Improve understanding among private sector entities
  • Increase attention on Ruler’s Funds
  • Enhance supervision efforts
  • Consider imposing sanctions against legal entities