New cooperative rules for virtual asset service providers (VASPs) operating in the UAE have been announced by the Central Bank of the United Arab Emirates (CBUAE) and other regulatory bodies in the country. As part of the UAE’s continuous efforts to be taken off the Financial Action Task Force’s (FATF) “grey list,” companies that do not hold the necessary licences will be penalised, according to UAE attorney Irina Heaver.
A list of “Red Flags” that apply to VASPs was released on November 6 by the CBUAE and the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC). The list contains a variety of red flags indicating questionable conduct, including a lack of a valid licence, exaggerated claims, and inadequate communication.
The new regulations mandate that all licensed financial institutions (LFIs), licenced VASPs, and designated non-financial companies and professions (DNFBPs) disclose any transactions involving questionable individuals. Additionally, the recommendations provide whistleblower procedures to support regulatory bodies in upholding the law and safeguarding the financial system in the United Arab Emirates.
In the UAE, those who operate VASPs without a current licence risk “civil and criminal penalties including, but not limited to, financial sanctions against the entity, owners, and senior managers.” Legal action will also be taken against LFIs, DNFBPs, and licenced VASPs who demonstrate that they are ready to deal with unlicensed VASPs.
The guidelines were introduced at a time when virtual assets are becoming more accessible, and as the digital economy matures, their fight against financial crime is becoming more intense, which helps protect the UAE’s financial system, according to His Excellency Khaled Mohamed Balama, the Chairman of the NAMLCFTC and Governor of the CBUAE.
The UAE is working to get off the FATF’s “grey list,” which identifies nations with weak counterterrorism financing (CTF) and anti-money laundering (AML) laws. The new regulation is a part of this larger effort. Despite being put on the grey list in March 2022, the UAE has pledged at a high level to collaborate with FATF to strengthen its CTF and AML frameworks.
Heaver listed important changes that have occurred since the UAE was added to the grey list in 2022. She believes the nation may be taken off the list in the upcoming FATF review, which is anticipated to take place in April or May of 2024, thanks to the improved AML and CTF regulations.