Dubai/Paris, Feb 23: The United Arab Emirates (UAE), home to the financial hub of Dubai, has successfully been removed from the global watchdog’s list of countries at risk of illicit money flows, signaling a significant victory that could enhance its international reputation.
The Financial Action Task Force (FATF), a multinational body focused on combating financial crime, announced on Friday the removal of the UAE from its ‘grey list,’ which includes around two-dozen nations deemed risky. In 2022, the Gulf country, known for attracting millionaires, bankers, and hedge funds, faced intensified scrutiny when the FATF highlighted concerns about money laundering and terrorist financing involving banks, precious metals, stones, and property.
The delisting marks a triumph for the UAE, once a regional trading hub for pearls and fish, now transformed into one of the world’s wealthiest nations following the discovery of oil in Abu Dhabi in the late 1950s. Efforts to improve anti-money-laundering measures were spearheaded by the Minister of Foreign Affairs, the brother of President Mohamed bin Zayed Al Nahyan.
John Kartonchik, a director at the UAE think tank Re/think, emphasized that this move could instill confidence in the country and attract additional overseas investments. The decision is expected to allow banks to reduce costs associated with serving wealthy clients in the country.
Despite being on the grey list, the UAE continued to attract global wealth, becoming an increasingly popular destination for cryptocurrency firms and Russians amid the conflict with Ukraine. In 2022, Dubai’s luxury property market ranked only behind New York, Los Angeles, and London, while the UAE surpassed Belgium as the world’s trading hub for rough diamonds.
However, the delisting contradicts the assessment of European officials, with the European Union categorizing the UAE as a high-risk country for money laundering and terrorist financing. The EU’s financial markets watchdog ESMA had previously barred European banks from clearing trades with the Dubai Commodities Clearing Corporation.
Critics, including Markus Meinzer of the Tax Justice Network, argue that the removal of the UAE from the FATF list highlights the ineffectiveness of the list and the need for greater transparency in decision-making. Jonny Bell of LexisNexis Risk Solutions anticipates that the UAE will continue strengthening its anti-money laundering and counter-terrorism financing measures.
The UAE’s ongoing efforts include increased financial investigations and prosecutions, enhanced international cooperation, and alignment of virtual asset regulation with international standards. This development comes amid growing competition among Gulf states to diversify their economies beyond oil, with a focus on sectors such as financial services, trade, logistics, and tourism.