On 21 December 2023, the United Arab Emirates’ Financial Services Regulatory Authority (UAE FSRA) published the revised Anti-Money Laundering and Sanctions Rules and Guidance. The revised Rules introduce new provisions relating to wire transfers to provide greater clarity that the Financial Action Task Force (FATF) "Travel Rule" applies to Virtual Assets.
The FATF is a Paris-based inter-governmental which consists of 36 member countries established to combat money laundering and terrorism financing. The "Travel Rule" (technically "FATF Recommendation 16") is a set of guidelines which applies to financial institutions engaged in virtual asset transfers (called "VASPS") and mandates a requirement for VASPs to obtain and disclose precise details pertaining to the sender and recipient of Virtual Asset transfers.
In a statement on 21 December 2023, the FSR have said:
The FSRA has made revisions that clarify the requirements that previously appeared in the AML Rulebook, reflecting the federal regulatory framework the UAE has put in place to combat money-laundering, the financing of terrorism and proliferation financing and ensure compliance with targeted financial sanctions
The updated rules provide that payments using virtual assets are covered within the scope of the regulation and reflect UAE’s progressive approach towards the evolving nature of financial transactions. The Rules seek to ensure virtual asset transactions in the UAE are aligned with the global standards set by FATF and mark a significant advancement in UAE’s cryptocurrency regulation.
In early 2022, the Financial Action Task Force (FATF) placed UAE on the ‘grey list’, placing them under heightened monitoring due to ‘strategic deficiencies’ in their AML/CTF regime. In recent months the UAE have taken significant steps toward being removed from the 'grey list', and last month the Financial Times reported the FATF said that the UAE had "substantially" introduced compliance measures needed for its removal from the list of countries under enhanced monitoring.
The recent revisions to the Rules reflect UAE’s ongoing commitment to combat money laundering and their progress in improving compliance with FATF standards were acknowledged by the global financial crime watchdog in a follow-up report published July 2023. As a next step, the FATF stated it would conduct on-site visits to verify the proposed changes would be sustained. The expectation seems to be that the UAE will follow in the steps of other jurisdictions including the Cayman Islands, Panama and Albania which were all removed from the list following successful on-site visits.
The new rules are effective immediately and will be relevant to:
all firms subject to the provisions in the AML Rulebook, including authorised firms in the financial services sector and Designated Non-Financial Businesses and Professions.
Separately, the UAE is also in their final stages of developing stablecoin laws. It is hopeful that their progressive approach will promote greater adoption of virtual assets while ensuring transparency and accountability.
By K Kim and T Masters