The Central Bank of the United Arab Emirates (CBUAE), in collaboration with other regulatory bodies, has introduced comprehensive guidelines for virtual asset service providers (VASPs) in the country. These guidelines include strict penalties for unlicensed VASPs, aligning with the UAE’s efforts to enhance its reputation with international financial regulatory bodies and be removed from the Financial Action Task Force’s (FATF) “grey list.”
The guidelines, released by the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC) and the CBUAE, feature a list of “Red Flags” for VASPs, aiding in identifying suspicious parties. Notable indicators include the absence of a regulatory license, unrealistic promises, poor communication practices, and a failure to provide regulatory disclosures.
A key aspect of the guidance is the expectation that licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licensed VASPs must report transactions involving suspicious parties. Reporting through whistleblowing mechanisms is stressed to assist regulatory authorities in enforcing the law and safeguarding the UAE’s financial system.
The guidelines also outline penalties for unlicensed VASPs, including civil and criminal sanctions, financial penalties on the entity, its owners, and senior managers. Additionally, LFIs, DNFBPs, and licensed VASPs engaging with unlicensed VASPs may face legal actions.
In a press release, His Excellency Khaled Mohamed Balama, the Governor of the CBUAE and Chairman of the NAMLCFTC, highlighted the necessity of combating financial crimes as digital assets become more accessible. The UAE, placed on the FATF’s grey list in March 2022, committed to strengthening its Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) frameworks.
Financial regulations specialist Irina Heaver notes significant reforms in the UAE since its grey list inclusion, including updates to AML and CFT frameworks. If the UAE consistently complies with international standards, there is potential for removal from the FATF’s grey list during the next review in April or May 2024, signaling a positive step in regaining global financial community standing.
By FCCT Editorial Team
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