The Central Bank of the United Arab Emirates (CBUAE), in conjunction with other regulatory bodies in the nation, has recently unveiled fresh, collaborative guidelines for virtual asset service providers (VASPs) operating within the UAE.
These comprehensive guidelines are aimed at curtailing the activities of unlicensed VASPs and outline penalties for those found operating without the necessary licenses.
On November 6, the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) and the CBUAE jointly released a list of “Red Flags” for VASPs.
This list includes indicators such as the absence of a regulatory license, making unrealistic promises, poor communication, and a lack of regulatory disclosures, all of which can help identify suspicious entities.
Under the new guidance, supervisory authorities expect all licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licensed VASPs to promptly report transactions involving suspicious parties.
The guidance emphasizes the importance of reporting any information related to unlicensed virtual asset activities through whistleblowing mechanisms, aiding regulatory authorities in their efforts to enforce the law and safeguard the UAE’s financial system.
Furthermore, the central bank’s document highlights that VASPs operating in the UAE without a valid license will face severe consequences, including civil and criminal penalties, along with financial sanctions targeting the entity, its owners, and senior managers.
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Additionally, LFIs, DNFBPs, and licensed VASPs that engage with unlicensed VASPs will also face legal actions.
In a press release, His Excellency Khaled Mohamed Balama, the Governor of the CBUAE and Chairman of the NAMLCFTC, emphasized the timeliness of these guidelines, given the increasing accessibility of digital assets. He noted that as the digital economy evolves, their efforts to combat financial crimes intensify, ensuring the integrity of the UAE’s financial system.
Commenting on these developments, UAE lawyer Irina Heaver observed that these guidelines are part of a broader initiative by the UAE to remove itself from the Financial Action Task Force’s (FATF) “grey list.”
The grey list indicates that a country has deficiencies in its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) frameworks but is committed to addressing these issues within specified timeframes.
In March 2022, the UAE was placed on the FATF’s grey list, subjecting it to increased scrutiny due to AML and CTF deficiencies.
However, the UAE made a high-level commitment to collaborate with the FATF to bolster its AML and CTF regimes. Heaver noted that significant reforms have been implemented since the country’s inclusion on the grey list in 2022.
With ongoing updates to its regulatory frameworks, the UAE stands a chance to exit the grey list during the next FATF review, expected in April or May 2024, provided it continues to demonstrate consistent compliance with international standards.
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