On 23 February 2024, the Financial Action Task Force (FATF), an intergovernmental body tasked with combating money laundering, the financing of terrorism, and the proliferation of weapons of mass destruction, removed the UAE and several other jurisdictions from its “grey” list. This article explores the implications of this development for businesses associated with the Emirates.
What is the FATF?
The FATF is a global intergovernmental organization with the primary objective of combating the laundering of criminal proceeds, countering the financing of terrorism, and preventing the proliferation of weapons of mass destruction. Currently, the FATF’s international network encompasses over 200 countries and territories.
To achieve its objectives, the FATF:
- Develops standards for combating money laundering and the financing of terrorism.
- Assesses the extent to which national systems for combating the legalization of criminal proceeds adhere to these standards.
Jurisdictions with significant deficiencies in their anti-money laundering systems, or those that take insufficient measures to address these issues, are included in the FATF’s “black” and “grey” lists, respectively.
The FATF’s “Black” List
Countries on the FATF’s “black” list are those that:
- Do not cooperate with the organization.
- Cooperate insufficiently with the FATF.
- Support international terrorism.
Being included in the “black” list indicates a high level of risk regarding the legalization of criminal proceeds and the financing of terrorism from these jurisdictions. This means that companies dealing with partners from these countries must apply enhanced due diligence measures to protect the international financial system from these risks.
In practice, many international institutions and companies avoid partnerships with entities from these countries, particularly in the financial sector. The “black” list currently includes only three countries:
- North Korea
- Iran
- Myanmar
The FATF’s “Grey” List
Jurisdictions on the “grey” list have significant gaps in their systems for combating the legalization of criminal proceeds, countering the financing of terrorism, and preventing the proliferation of weapons of mass destruction. However, unlike countries on the “black” list, these jurisdictions actively cooperate with the FATF to address these gaps and deficiencies. Partners are also required to conduct enhanced territorial due diligence when dealing with these jurisdictions, though business activities with organizations from these areas are not excluded.
The UAE was included in the “grey” list in 2022. However, over the past two years, the Emirates have made significant efforts to ensure their national anti-money laundering system meets international standards, leading to their removal from the “grey” list.
On 23 February 2024, in addition to the UAE, Uganda, Gibraltar, and Barbados were also removed from the “grey” list, while Kenya and Namibia were added.
Thus, the FATF currently includes the following jurisdictions in its “grey” list:
| Bulgaria Burkina Faso Cameroon Croatia Democratic Republic of the Congo Haiti Jamaica Kenya Mali Mozambique Namibia | Nigeria Philippines Senegal South Africa South Sudan Syria Tanzania Turkey Vietnam Yemen |
Implications of the UAE’s Removal from the FATF’s “Grey” List
The removal of the UAE from the FATF’s “grey” list signifies the elimination of obstacles and restrictions for conducting international business with entities associated with this jurisdiction.
Consequently, the implications of the UAE’s removal from the “grey” list include:
- No obligation for individuals and organizations to conduct additional territorial due diligence on counterparts associated with the Emirates.
- No increase in risk assessment factors when collaborating with entities from the UAE.
- Greater access for entities associated with the Emirates to financial institutions: no issues related to international payments and opening bank accounts.
Thus, the removal of the UAE from the FATF’s “grey” list has made the Emirates an even more attractive jurisdiction for starting international business. However, to conduct business in the Emirates, it is necessary to form a company in the UAE.
- Stable jurisdiction;
- Freezones available;
- 100% foreign ownership.
