UAE Central Bank Updates Regulations for Virtual Asset Providers, Targets Removal from 'Grey List'
Summary:
The United Arab Emirates Central Bank, along with other regulators, has introduced new rules for virtual asset service providers (VASPs) operating in the country. The guidelines include penalties for non-compliant VASPs and aim to curb unauthorized activities. The nation's regulatory bodies expect all licensed entities to report suspicious transactions. These regulations come amid increased accessibility of virtual assets and effort to strengthen the country’s AML and CTF systems, in a bid to get removed from the FATF’s "grey list".
The United Arab Emirates' Central Bank (CBUAE), in conjunction with other regulatory bodies, has revealed new consolidated guidelines intended for providers of virtual asset services (VASPs) in the nation. If VASPs fail to carry out operations without licensing, they will face penalties as per the new mandates. The United Arab Emirates committee responsible for Anti-Money Laundering, Counter Financing of Terrorism and Counter Financing of Illicit Organisations (NAMLCFTC), along with UAE regulators, released advice aimed at curbing illicit VASP activity on November 6, 2023.
On the same day, both the NAMLCFTC and CBUAE released what they referred to as "Red Flags" for VASPs. The list pinpointed non-compliance with regulatory licences, unrealistic claims, poor communication, lack of regulatory disclosures, among other signs of potential suspicious activity. Following the issued advice, regulatory bodies anticipate all licenced financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licenced VASPs will report suspicious transactions. The advice given states: “Any unlicensed virtual asset activities can be referenced through whistleblowing mechanisms, assisting regulatory authorities' efforts to enforce the law and safeguard the financial system within UAE.”
In the updated mandate, the central bank also indicated that VASPs operating in the UAE without a valid licence would be vulnerable to "civil and criminal penalties including, but not limited to, financial sanctions against the entity, owners and executive management.” Furthermore, LFIs, DNFBPs and licenced VASPs that show intent to engage with unlicensed VASPs may also face legal action. The CBUAE governor and NAMLCFTC chairman, His Excellency Khaled Mohamed Balama, stated in a press release that the updated advice is timely given the increased accessibility of cryptocurrencies. He stated that as the digital economy develops, their work “targeting all kind of financial crimes is stepped up.” Balama credits this effort with maintaining the financial system's integrity in the UAE.
UAE lawyer Irina Heaver, when discussing the update, asserted that the recent guidance forms part of a wider strategy from UAE to be removed from the Financial Action Task Force’s (FATF) “grey list.” The grey list signifies nations that exhibit deficiencies in Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations, and commits to addressing these issues within a set timeline. The UAE was included in the FATF’s grey list in March 2022 due to flaws in their AML and CTF systems and were subjected to heightened scrutiny. Despite this, the UAE committed to collaborate with the international scrutiny body to fortify their AML and CTF systems.
Heaver states that since the UAE's inclusion on the grey list in 2022, the nation has undergone major reforms. Provided the UAE continues to exhibit consistent compliance, Heaver believes the nation may soon be removed from the grey list given its recent updates to AML and CTF frameworks. “The next FATF review, predicted to be in April or May 2024, may result in the UAE being removed from the grey list," she added.
Published At
11/8/2023 8:26:29 AM
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