The Central Bank of the United Arab Emirates (CBUAE), in collaboration with other regulatory bodies in the nation, recently released comprehensive joint guidance tailored for virtual asset service providers (VASPs) operating within the country.
This updated regulatory framework introduces penalties for VASPs found operating without the necessary licenses within the jurisdiction.
On 6 November, the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) and the CBUAE jointly published a list termed “Red Flags” designed for VASPs.
The indicators include a lack of regulatory license, unrealistic promises, poor communications, and other markers aimed at identifying potentially suspicious entities.
According to the fresh guidance, supervisory authorities anticipate full compliance from licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licensed VASPs in reporting transactions involving suspicious entities.
The guidance stated that:
“Any information related to unlicensed virtual asset activities can be reported through whistleblowing mechanisms, to help regulatory authorities in their efforts to uphold the law and protect the UAE financial system.”
His Excellency Khaled Mohamed Balama, the Governor of the CBUAE and Chairman of the NAMLCFTC, emphasised in a press release that the new guidance aligns with the growing accessibility of digital assets.
He stated that as the digital economy matures, their commitment to combating financial crimes intensifies, ensuring the integrity of the UAE’s financial system.
Addressing the update, UAE lawyer Irina Heaver noted that these guidelines reflect a broader effort by the UAE to exit the Financial Action Task Force’s (FATF) “grey list.”
This designation signals deficiencies in a country’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regimes, with a commitment to addressing these issues within specified timeframes.
In March 2022, the UAE was placed on the FATF’s grey list, subjecting it to heightened monitoring due to AML and CTF shortcomings.
However, the country pledged to collaborate with the global watchdog to strengthen its regulatory frameworks.
Irina indicates that the UAE has undergone significant reforms since its grey list placement in 2022, with the latest updates to its AML and CTF regulatory frameworks positioning the country for potential removal from the grey list in the near future.
She added that:
“The next FATF review, expected in April or May 2024, could lead to the UAE’s exit from the grey list if it continues to demonstrate consistent compliance.”