UNITED ARAB EMIRATES
Summary
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Sanctions

None

FAFT AML Deficient

No

Higher Risk Areas

 

US Dept of State Money Laundering assessment

Not on EU White list equivalent jurisdictions

Compliance of OECD Global Forum’s information exchange standard

Offshore Finance Centre

Medium Risk Areas

 

Compliance with FATF 40 + 9 Recommendations

Weakness in Government Legislation to combat Money Laundering

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

The United Arab Emirates is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in The United Arab Emirates was undertaken by the Financial Action Task Force (FATF) in 2008. According to that Evaluation, The United Arab Emirates was deemed Compliant for 5 and Largely Compliant for 15 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 4 of the 6 Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

The United Arab Emirates was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Perceived Risks:

The United Arab Emirates (UAE) is a regional hub for transportation, trade, and financial activity. In recent years, its robust economic development, political stability, and liberal business environment have attracted an influx of people, goods, and capital, which may leave the country vulnerable to money laundering activity. Dubai, especially, is a major international banking and trading center that has aggressively sought to expand its financial services business.

Money laundering risks in recent years have increased commensurate with the growth of large numbers of exchange houses, hawaladars, and trading companies in the UAE. Furthermore, remittances are transferred through these establishments from non-nationals in the UAE, who comprise more than 80 percent of the population and often are unable to access the formal financial sector in their home countries. There are some indications trade-based money laundering occurs in the UAE, including through commodities used as counter-valuation in hawala transactions or through trading companies and that such activity might support sanctions-evasion networks and terrorist groups in Afghanistan, Pakistan, Iran, Iraq, Syria, Yemen, and Somalia. Activities associated with terrorist and extremist groups include both fundraising and transferring funds. Bulk cash smuggling is also a significant problem.

A portion of the money laundering/terrorist financing (ML/TF) activity in the UAE is likely related to proceeds from illegal narcotics produced in Southwest Asia. Narcotics traffickers from Afghanistan, where most of the world’s opium is produced, are reported to be attracted to the UAE’s financial and trade centers. Domestic public corruption contributes little to money laundering or terrorism financing.

Other money laundering vulnerabilities in the UAE include the real estate sector, the misuse of the international gold and diamond trade, and the use of cash couriers to transfer illicit funds. The country also has an extensive offshore financial center, with 37 free trade zones (FTZs) and two financial free zones. There are over 5,000 multinational companies located in the FTZs and thousands more individual trading companies. Companies located in the FTZs are considered offshore or foreign entities for legal purposes. UAE law prohibits the establishment of shell companies and trusts. Activity in the Dubai International Financial Center, supervised by the Dubai Financial Services Authority, is largely from major international banks/institutions.

 

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SANCTIONS

There are no international sanctions currently in force against this country.

 

The Arab League (comprising 22 Arab member states), of which this country is a member, has approved imposing sanctions on Syria. These include: -

-      Cutting off transactions with the Syrian central bank

-      Halting funding by Arab governments for projects in Syria

-      A ban on senior Syrian officials travelling to other Arab countries

-      A freeze on assets related to President Bashar al-Assad's government

The declaration also calls on Arab central banks to monitor transfers to Syria, with the exception of remittances from Syrians abroad.

 

The Arab League has also boycotted Israel in a systematic effort to isolate Israel economically in support of the Palestinians, however, the implementation of the boycott has varied over time among member states. There are three tiers to the boycott. The primary boycott prohibits the importation of Israeli-origin goods and services into boycotting countries. The secondary boycott prohibits individuals, as well as private and public sector firms and organizations, in member countries from engaging in business with any entity that does business in Israel. The Arab League maintains a blacklist of such firms. The tertiary boycott prohibits any entity in a member country from doing business with a company or individual that has business dealings with U.S. or other firms on the Arab League blacklist.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

66

World Governance Indicator – Control of Corruption

83

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

The UAE maintains a position as the major trade and investment hub for a large geographic region, which includes not only the Middle East and North Africa, but also South Asia, Central Asia, and Sub-Saharan Africa. The country ranked 19th in the World Economic Forum’s 2013-2014 Global Competitiveness Index, and 23rd on the World Bank’s 2013 Doing Business report, improvements of five and three places respectively from the previous year. Multinational companies cite the UAE’s political and economic stability, rapid population and GDP growth, efficient and fast growing capital markets, an absence of corporate and personal taxes, or any evidence of systematic corruption, as positive factors maintaining the UAE’s attractiveness to foreign investors, with inward FDI recording a 20% year-on-year increase to reach $12 billion, accounting for over 40% of the total inward FDI of the entire GCC.

Despite the rapid growth and high levels of foreign investment, the regulatory and legal framework in the UAE favors local over foreign investors. There is no national treatment for investors in the UAE and foreign ownership of land and stocks is restricted. The UAE maintains non-tariff barriers to investment in the form of restrictive agency, sponsorship, and distributorship requirements. In order to do business in the UAE outside one of the free zones, a foreign business in most cases must have a UAE national sponsor, agent or distributor, with at least 51% of the business. Foreign investors also express concern over weak dispute resolution mechanisms and insolvency laws, spotty intellectual property rights protections, and a lack of regulatory transparency. Labor rights and conditions, although improving and an area of focus for the UAE Government (UAEG), require continued attention as the UAE does not provide workers with the right to organize or collective bargaining rights.

The UAEG is however, opening up its trade sectors in line with its WTO obligations. Investment laws and regulations are evolving and are expected to become more conducive to foreign investment. There are currently several major federal laws in draft status meant to address a number of the concerns that have discouraged foreign investment in the UAE. These laws include updates to the existing Companies Law, Insolvency Law, and Arbitration Law, in addition to a proposed Foreign Investment Law. The UAEG has publicly declared its commitment to cut red tape for foreign investors with the intent of not only becoming the most competitive economy in the Gulf but one of the top economies globally.

Overall, despite its challenges, foreign companies and investors continue to find the UAE a profitable and attractive destination for operations and investment.

 

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FURTHER REPORTS

5 August 2016 - IMF Report: United Arab Emirates : 2016 Article IV Consultation (extract)

The UAE authorities have continued to strengthen the AML/CFT framework and address de-risking issues. In addition to adopting the by-law, they have upgraded the regulatory requirements for banks and exchange houses, and improved the availability and use of beneficial ownership information of legal persons established in the UAE and enhanced the monitoring of cross-border financial flows. The Anti- Money Laundering and Suspicious Cases Unit at the central bank will continue to strengthen the effectiveness of the AML/CFT framework through capacity building and bolstering regional and international cooperation. These efforts will help maintain financial integrity and prepare for the next round of mutual evaluation of UAE’s AML/CFT framework scheduled for 2022. The authorities have also taken concrete steps to conduct the AML/CFT national risk assessment and have asked for the Fund’s technical assistance in this regard. On de-risking issues, the authorities are looking forward to the Fund’s involvement to increase the awareness of concerned regulators and ease capacity constraints, especially given its relevance to the region.

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15 August 2013  -  Extracted from IMF Report:  United Arab Emirates: 2013 Article IV Consultation

"Gross foreign inflows to the banking sector remain steady and would deserve closer monitoring. Non-resident deposits have increased by more than 15 percent in 2012 and account for 12 percent of total deposits. In the context of mounting international efforts against money laundering and tax crimes, the authorities are encouraged to continue improving their understanding of the origin of financial inflows and of the beneficial owners of deposits and loans in the UAE. This would assist in effectively mitigating potential financial sector risks. In light of the 2008 anti-money laundering and combating the financing of terrorism (AML/CFT) mutual evaluation report and follow-up reports, as well as of the revised Financial Action Task Force (FATF) standard, the authorities are encouraged to continue their efforts in bolstering the soundness of the financial sector which could benefit from measures designed to improve compliance with the standard, including those related to customer due diligence, cross-border cash couriers, and hawaladars. In addition, staff invites the authorities to undergo an AML/CFT assessment in the context of the planned FSAP."

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