The
Central Bank of the United Arab Emirates (CBUAE) and other regulatory bodies in
the country have released new joint guidance for virtual asset service
providers (VASPs) operating within the UAE. These guidelines include penalties
for VASPs operating without proper licenses in the jurisdiction, reinforcing
the country’s commitment to combating financial crimes and ensuring the
integrity of its financial system.

On
November 6, the National Anti-Money Laundering and Combating Financing of
Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) and the
CBUAE jointly published a list of “Red Flags” for VASPs. These flags
are indicators that help identify suspicious parties and include a lack of regulatory
licenses, making unrealistic promises, poor communication, and a failure to
provide regulatory disclosure.

According
to the new guidance, supervisory authorities expect all licensed financial
institutions (LFIs), designated non-financial businesses and professions
(DNFBPs), and licensed VASPs to report transactions involving suspicious
parties. The guidance emphasizes that information related to unlicensed virtual
asset activities can be reported through whistleblowing mechanisms.

The
document also outlines the consequences for VASPs operating in the UAE
without a valid license. They will face civil and criminal penalties, including
financial sanctions against the entity, its owners, and senior managers.
Furthermore, the guidance warns that LFIs, DNFBPs, and licensed VASPs that
engage with unlicensed VASPs will be subject to law enforcement actions.

Back in August, a release of
the Finance Magnates
Intelligence’s Quarterly Industry Report provided an insight into how
industry leaders are navigating the challenging regulatory landscape. Against
this backdrop, the Middle East, notably Dubai,
is emerging as a potential hub for the cryptocurrency industry.

The
Digital Economy’s Impact on AML and CTF Measures

Khaled
Mohamed Balama, the Governor of the CBUAE and Chairman of the NAMLCFTC, stated that
this new guidance is timely as digital assets become more accessible. He
emphasized the importance of intensifying efforts to combat financial crimes as
the digital economy matures, ensuring the integrity of the financial system in
the UAE.

The
release of these guidelines is part of an effort by the UAE to be removed from
the Financial Action Task Force’s (FATF) “grey list.” The grey list
indicates deficiencies in a country’s Anti-Money Laundering (AML) and
Counter-Terrorist Financing (CTF) regimes.

The
UAE was placed on the
FATF’s grey list in March 2022 due to AML and CTF deficiencies. However, the
country made a commitment to work with the global watchdog to strengthen its
regulatory frameworks in these areas. Legal expert Irina Heaver noted that the
UAE has enacted reforms since its placement on the grey list. With updates to
its AML and CTF regulations, there is a possibility that the UAE may exit the
grey list following the next FATF review, expected in April or May 2024.

The
Central Bank of the United Arab Emirates (CBUAE) and other regulatory bodies in
the country have released new joint guidance for virtual asset service
providers (VASPs) operating within the UAE. These guidelines include penalties
for VASPs operating without proper licenses in the jurisdiction, reinforcing
the country’s commitment to combating financial crimes and ensuring the
integrity of its financial system.

On
November 6, the National Anti-Money Laundering and Combating Financing of
Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) and the
CBUAE jointly published a list of “Red Flags” for VASPs. These flags
are indicators that help identify suspicious parties and include a lack of regulatory
licenses, making unrealistic promises, poor communication, and a failure to
provide regulatory disclosure.

According
to the new guidance, supervisory authorities expect all licensed financial
institutions (LFIs), designated non-financial businesses and professions
(DNFBPs), and licensed VASPs to report transactions involving suspicious
parties. The guidance emphasizes that information related to unlicensed virtual
asset activities can be reported through whistleblowing mechanisms.

The
document also outlines the consequences for VASPs operating in the UAE
without a valid license. They will face civil and criminal penalties, including
financial sanctions against the entity, its owners, and senior managers.
Furthermore, the guidance warns that LFIs, DNFBPs, and licensed VASPs that
engage with unlicensed VASPs will be subject to law enforcement actions.

Back in August, a release of
the Finance Magnates
Intelligence’s Quarterly Industry Report provided an insight into how
industry leaders are navigating the challenging regulatory landscape. Against
this backdrop, the Middle East, notably Dubai,
is emerging as a potential hub for the cryptocurrency industry.

The
Digital Economy’s Impact on AML and CTF Measures

Khaled
Mohamed Balama, the Governor of the CBUAE and Chairman of the NAMLCFTC, stated that
this new guidance is timely as digital assets become more accessible. He
emphasized the importance of intensifying efforts to combat financial crimes as
the digital economy matures, ensuring the integrity of the financial system in
the UAE.

The
release of these guidelines is part of an effort by the UAE to be removed from
the Financial Action Task Force’s (FATF) “grey list.” The grey list
indicates deficiencies in a country’s Anti-Money Laundering (AML) and
Counter-Terrorist Financing (CTF) regimes.

The
UAE was placed on the
FATF’s grey list in March 2022 due to AML and CTF deficiencies. However, the
country made a commitment to work with the global watchdog to strengthen its
regulatory frameworks in these areas. Legal expert Irina Heaver noted that the
UAE has enacted reforms since its placement on the grey list. With updates to
its AML and CTF regulations, there is a possibility that the UAE may exit the
grey list following the next FATF review, expected in April or May 2024.

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