The Emirati flag in front of the Dubai skyline, June 3, 2022. (Credit: AFP)
This is a victory for the Emirates’ image, which is regularly criticized for its laxity and complacency in the face of international financial crime.
On Friday, the FATF removed the UAE from its "gray list,” on which it had been placed in June 2022. At the time, it had been accused of allowing money laundering and terrorist financing to proliferate, particularly in Dubai. This financial paradise has become a hub for circumventing sanctions in favor of Russia.
The Emirates' delisting was announced at the FATF's plenary meeting at its Paris headquarters on Friday, Feb. 23, along with the delisting of Barbados, Gibraltar and Uganda.
The removal from the list indicates that, for FATF, the Emirates complied with the group's 40 recommendations to strengthen controls on international banking exchanges and make them less porous to financial crime.
Among the most permeable sectors are banking, real estate and the trade in precious metals and stones, according to a presentation by the UAE Ministry of Foreign Affairs, as part of a campaign to demonstrate its efforts in this fight.
Alignment with international standards
In two years, the UAE has indeed adopted several measures — including financial prosecutions — and aligned its regulation of virtual assets (cryptocurrencies) with international standards.
The government said it imposed nearly 250 million dirhams ($68 million) in AML/CFT (money laundering and terrorist financing) fines between January and October 2023, a more than threefold increase on the previous year, Bloomberg reported.
It has also entered into more than 40 international cooperation agreements to combat money laundering and other crimes, claims the Dubai branch of international law firm DLA Piper, in an article published on its website in July 2023.
The UAE central bank has also made available an online form for whistleblowers concerning financial crime, with the option of remaining anonymous.
“The FATF's requirements are such that if you show certain signs and evidence that you are applying the standards, you can automatically be taken off the list," explained Managing Director of Iscid-CO International Business School Eric Vernier, who is also a specialist in money laundering.
“The question is whether the standards are sufficient and whether the measures taken by a country that has always acted opaquely are not the tree that hides the forest. The country in question could simply take fairly strong decisions, such as imprisoning the worst financial offenders, who are an embarrassment to the international community, but not necessarily to the state that harbors them, as it can profit from their funds," he added.
To remove a country from the list, a significant majority of the FATF's 40 members must judge that sufficient progress has been made since the beginning of the evaluation period.
Depending on their political and economic clout, certain FATF member states can also use their influence to decide whether or not to designate another state on one of the FATF lists, said the online newspaper Politico.
At the end of 2023, Emirati officials visited several member countries, including the United States, Switzerland and Singapore, to obtain their support, reported Bloomberg.
The geopolitical context
There are other signs that Abu Dhabi may have tried to steer the FATF decision to its advantage. Last year, members of the team responsible for assessing the country had complained that they were being asked to rely on data provided solely by the federation, without being able to verify it independently, Politico reported.
However, a FATF delegation visited the Emirates shortly before the withdrawal was announced to see what was happening. Wall Street banks, which regularly carry out a large number of transactions with their Emirati counterparts, are said to have particularly welcomed the news, added Bloomberg.
The geopolitical context also influences the FATF's decisions. A group of European countries, initially in favor of sanctions against the Emirates, urged the organization to remove the monarchy from its gray list last year, reported Politico.
This coincided with Europe's efforts to obtain help from Gulf countries to meet its energy needs, following Russia's invasion of Ukraine.
“Every time a country in this region has come off a FATF list [like Iraq in 2019 and Kuwait in 2015], there have always been suspicions of energy deals," added Vernier. “The stakes are such that we can't imagine a country like the United Arab Emirates remaining on such a list for too long."
This is stark in the context of the war in Gaza, given Abu Dhabi's diplomatic weight in the region, where it still appears as an important interlocutor vis-a-vis the West. However, this did not prevent the United States from sending a strong message to the Emirates about their cooperation with Russia.
On Feb. 23, on the eve of the second anniversary of the start of the war in Ukraine, ten new individuals and entities based in the UAE were added to the US Treasury's sanctions list. Several of them were accused of supporting Russia's military industry.
"The advantage the Emirates had in coming off the gray list will be limited by their extensive links with Russian and some Iranian entities," warned Rachel Ziemba, a researcher and consultant specializing in the Gulf economy and energy.
“Foreign banks and international companies may therefore fear that their transactions will violate sanctions and export controls if they have links with the Russian military and the sanctioned oil trade," continued the expert. "It is, therefore, a safe bet that these players will maintain heightened scrutiny over many of their links with the Emirati federation."
So far, these measures have not scared off investors. Jamie Ingram, an analyst at the Middle East Economic Survey, noted that "the United Arab Emirates has recently seen significant flows of foreign direct investment (FDI), especially as it has taken advantage of the global upheavals of recent years to become a safe place to do business.” Ingram added that "many oil and gas investments have still recently generated FDI.”
In the end, this removal from the FATF gray list "is above all a question of reputation" for the UAE, he concluded.
This article was originally published in L'Orient-Le Jour.