The Central Bank of the United Arab Emirates (CBUAE), in collaboration with other regulators in the country, recently released new joint guidance for virtual asset service providers (VASPs) operating within the UAE. This move comes at a time when virtual assets have become more accessible in the region, and authorities are intensifying their efforts to combat financial crimes and protect the UAE’s financial system.
The new guidelines include penalties for VASPs operating without proper licenses within the UAE. The National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC) and the CBUAE published a list of “Red Flags” for VASPs, highlighting indicators that could identify suspicious parties. These indicators include the lack of regulatory license, unrealistic promises, poor communications, and lack of regulatory disclosures, among others.
The supervisory authorities expect all licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licensed VASPs to report transactions from suspicious parties. The guidance also encourages the reporting of any information related to unlicensed virtual asset activities through whistleblowing mechanisms to help regulatory authorities uphold the law and protect the UAE financial system.
In an effort to enforce compliance, the guidance notes that VASPs operating in the UAE without a valid license will be subjected to civil and criminal penalties, including financial sanctions against the entity, owners, and senior managers. Additionally, the document highlights that LFIs, DNFBPs, and licensed VASPs that demonstrate a willingness to deal with unlicensed VASPs will also face actions from law enforcement.
Related Post
His Excellency Khaled Mohamed Balama, governor of the CBUAE and chairman of the NAMLCFTC, emphasized the importance of the new guidance in ensuring the integrity of the financial system in the UAE. He highlighted that as the digital economy matures, their work on “combating all kind of financial crimes intensifies.”
The release of the new joint guidance aligns with the UAE’s broader efforts to be removed from the Financial Action Task Force’s (FATF) “grey list.” The list indicates that a country has deficiencies in its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regimes but has committed to resolving these issues within agreed timeframes.
In March 2022, the UAE was placed into the FATF’s grey list and subjected to increased monitoring due to deficiencies in AML and CTF. However, the country made a high-level commitment to work with the global watchdog to strengthen its AML and CTF regimes.
According to UAE lawyer Irina Heaver, the UAE has enacted significant reforms since its placement on the grey list in 2022. With the new updates to its AML and CTF regulatory frameworks, the country may exit the grey list soon. She emphasized 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.
In conclusion, the release of the new joint guidance for VASPs operating in the UAE reflects the country’s commitment to combat financial crimes and strengthen its regulatory frameworks. As the digital economy continues to evolve, regulatory authorities in the UAE are taking proactive measures to ensure the integrity of the financial system and secure the country’s position in the global financial landscape.
