UAE at risk of joining financial watchdog's 'grey list'
The UAE could soon appear on an international watchdog's "grey list" which would see the country subjected to increased scrutiny to counter misconduct, including money laundering, according to reports.
The Financial Action Task Force (FATF) watchdog is considering the move in February 2022, people familiar with the matter were quoted as saying by Bloomberg on Tuesday.
The Paris-based organisation's list pinpoints nations where "strategic deficiencies in their regimes" result in high levels of financial misconduct. It currently includes 23 countries, among them Albania, Syria, and South Sudan.
"There are undoubtedly costs associated with being grey-listed," said Katherine Bauer, a former US Treasury Department official.
"Many global regulators require that banks and financial institutions review, if not revise, their risk ratings and associated due diligence measures for counterparties in countries on the FATF list."
The UAE is reportedly challenging the potential "grey list" status. It submitted a report to FATF last November and is expected to discuss the matter in an upcoming trip to Paris.
"We are taking this very seriously, having partnered with highly skilled and experienced specialists with a track record in meeting best international practices and standards," said Hamid Al Zaabi, director of the UAE Executive for Anti-Money Laundering and Counter-Terrorist Financing.
However, the country has not met many of the criteria required to stay off the list, according to inside sources quoted by Bloomberg.
The UAE claims it has attempted to crack down on financial misconduct in recent years, setting up courts focused on money laundering and requiring companies to disclose their owners to the government.
Yet the Gulf state, particularly its financial capital Dubai, is still dubbed a magnet for financial malpractice.
"With approximately thirty free trade zones, Dubai is a haven for trade-based money laundering," wrote the Carnegie Endowment for International Peace in 2020.
Illicit financial transactions are a "feature, not a bug, of Dubai's political economy", the US-based think tank said.
When the FATF places a country on the "grey list", the nation is then subjected to regular monitoring as they address their "strategic deficiencies" following an "action plan…within the agreed timeframes".
The UAE’s designation would be one of the watchdog's "most significant" steps in its three-decade history, Bloomberg said.