DUBAI (Transatlantic Today) – Early in 2020, the Financial Action Task Force — a Paris-based organization that observes and evaluates financial misdeeds by country — told the United Arab Emirates to strengthen compliance levels in certain financial sectors, especially those considered high-risk. The UAE has a storied history of financial abuse, especially in its gold trading and luxury real estate industries.
In a statement to Financial Times, a member of UAE’s foreign ministry, Ahmed Al Sayegh, said that the government “took on board the recommendations and started to change,” citing “significant progress” over the last year or so. Al Sayegh is a member of an anti-money laundering organization that encourages cooperation across the UAE’s seven emirates.
While international officials concede that the UAE has made steps in the right direction, it seems highly likely that the state will be placed on the FATF’s “gray list” — a moniker used by the organization to identify countries that have “strategic deficiencies.” Other countries on the gray list include Panama, Yemen, Zimbabwe, and Syria. There are only two countries on the black list — Iran and North Korea.
Of course, while the whole country could receive a gray list label, many officials see Dubai as the hub for these illicit financial activities. As a hub of international business, Dubai provides multitudinous opportunities for “dirty money” activities to occur.
When describing the UAE’s economy, the U.S. described it as a “transshipment point for illegal narcotics and a pass-through for drug proceeds.” Indeed, as a tax-free location, many people have used Dubai as a place to store money, especially when it comes to the city’s luxury real estate and precious stones markets.
But as Katherine Bauer, a former Treasury Department official with knowledge of the Middle East’s illicit financial activities, said, “There are undoubtedly costs associated with being gray-listed.” Indeed, being gray-listed could cause numerous repercussions for the UAE; however, the government seems to be working to find a solution. Al Sayegh said that “Regardless of the outcome, we now have an action plan.”
And that plan involves a lot of moving parts. First, the UAE financial task force put together a directory of corporate ownership that can deliver requested information to international inquirers in just three days. Secondly, the UAE signed extradition treaties with 33 other countries and even designed an anti-money laundering reporting system for vulnerable sectors.
Despite the UAE’s apparent efforts to stop “dirty money” and avoid being gray-listed, it’s still possible — and perhaps even probable — that they will receive an unfavorable classification from the FATF.