UNITED ARAB EMIRATES
Summary
This is my page

 

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 Forumís 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)

United Arab Emirates is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes

OVERVIEW

 

The United Arab Emirates (UAE) is a stable regional hub for transportation, trade, and financial activity that has aggressively expanded its financial services business and FTZs, which now number 37. Despite increased efforts to address money laundering threats, illicit actors continue to take advantage of the relatively open business environment, multitude of global banks, exchange houses, and global transportation links to engage in illicit financial activity.

 

The UAE government has enhanced its AML program and demonstrated its willingness and capability to take action against illicit financial actors, even beyond immediate national security threats. However, the UAE needs to continue to increase the capacity and resources it devotes to investigating money laundering in order to comprehensively address persistent money laundering threats.

 

VULNERABILITIES AND EXPECTED TYPOLOGIES

 

The presence of large numbers of exchange houses, hawalas, and general trading companies in the UAE creates an environment susceptible to bulk cash smuggling, TBML, and the raising and transferring of funds for illicit activity. There are occurrences of TBML, including through commodities used as counter-valuation in hawala transactions or through trading companies illegally operating as exchange houses. Such activity might support sanctions-evasion networks and foreign terrorist groups.

 

A portion of the money laundering activity in the UAE is likely related to proceeds from illegal narcotics produced in Southwest Asia. 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. Domestic public corruption contributes little, if anything, to money laundering.

 

The UAE has an extensive offshore financial center, with 37 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, however, the operation of financial entities in FTZs not identified, regulated, or supervised for financial activity presents a gap in regulatory oversight. Therefore, there is significant opportunity for illicit actors to engage in regulatory arbitrage and avoid the controls and supervision put in place by the Central Bank of the UAE (CBUAE) and FTZ regulators of the two financial free zones.

 

The UAE is progressing in its ability to investigate suspected money laundering activity and should further increase its capacity and resources devoted to investigating money laundering activities both federally by the Anti-Money Laundering and Suspicious Cases Unit (AMLSCU), the FIU, and by law enforcement at the federal level in each emirate. The UAE also worked on enhancing the independence of the AMLSCU, publishing annual reports, and providing comprehensive statistics on the activities carried out by the unit. Over 98 percent of STRs are now received online.

 

KEY AML LAWS AND REGULATIONS

 

The AML law permits the CBUAE to freeze the assets of any suspicious institution or individual, and has comprehensive KYC and STR regulations. The UAE has a records exchange mechanism in place with other governments, but does not have a MLAT with the United States. A lack of information sharing among respective UAE entities engaged in AML prevents optimum implementation of AML laws and regulations.

 

The UAE is a member of the MENAFATF, a FATF-style regional body.

 

AML DEFICIENCES

There are no sanctions or penalties against the UAE for major AML deficiencies. Additionally, the UAE has enhanced due diligence procedures for both foreign and domestic PEPs. The UAE continues to pursue additional measures to regulate its exchange houses, but still faces challenges given the size and diversity of the sector. The UAE should release annual numbers of AML prosecutions and convictions to better gauge the effectiveness of its regime.

 

ENFORCEMENT/IMPLEMENTATION AND COMMENTS

 

The government continues to enhance its regulatory measures. The UAE cooperated with the U.S. government in support of the October 2016 designations of individuals and entities associated with previously-U.S.-designated UAE-based Al Zarooni Money Exchange. The UAE has expanded the scope of money laundering predicate offenses, verified client identities, designated the FIU as the sole national center for STRs, and enhanced the level of cooperation with equivalent regulatory authorities.

 

Several areas of AML implementation and enforcement require ongoing action by the UAE. The government should proactively develop money laundering cases and establish appropriate policies and procedures regarding all aspects of asset forfeiture. Additionally, the UAE should strengthen enforcement mechanisms for cash declaration regulations. It should conduct more thorough inquiries into large amounts of declared and undeclared cash being imported into the country as well as enforce outbound declarations of cash and gold utilizing existing smuggling and AML laws. TBML facilitated by exchange houses or general trading companies should be given greater scrutiny, including customs fraud, the trade in gold and precious gems, commodities used as counter-valuation in hawala transactions, and the abuse of trade to launder narcotics proceeds.

 

____________________________________________________________________________________

 

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.

 

____________________________________________________________________________________

 

BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

66

World Governance Indicator Ė Control of Corruption

83

 

____________________________________________________________________________________

 

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 Forumís 2013-2014 Global Competitiveness Index, and 23rd on the World Bankís 2013 Doing Business report, improvements of five and three places respectively from the previous year. Multinational companies cite the UAEís 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 UAEís 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.

 

____________________________________________________________________________________

 

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 UAEís 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 Fundís technical assistance in this regard. On de-risking issues, the authorities are looking forward to the Fundís involvement to increase the awareness of concerned regulators and ease capacity constraints, especially given its relevance to the region.

Read Full Report

 

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."

Read Full Report (pdf file)