The UAE is committed to working with the international community and across sectors to tackle illicit finance and money laundering.
That is the overarching message from the UAE government in response to the work of the Financial Action Task Force (FATF), the global watchdog on financial crime, which has put the Emirates under increased monitoring.
Minister of State Ahmed Al Sayegh said: “We are a country that respects the law”, adding “we are a country that wants to progress also in accordance with what the international community believes is right now and we want to be put in place, the systems and procedures for this”.
He explained that, “what the FATF wants to see is having really made sure the laws, which is the technical part that we've passed, have even got better."
"They are happy with the technical part. I think what we're talking about here is effectiveness.
"And effectiveness, by definition, means evidence submitted over time”.
The UAE will now be working to address a number of outstanding issues that include more concerted co-operation with other countries when it comes to money flows.
Mr Al Sayegh added that “the recommendations that remain on the action plan now are focused on maintaining and sustaining the UAE’s progress so far. The FATF wants to see a sustained effort related to prosecutions, increased awareness and continued private sector engagement.”
The UAE government has been involved in a deep review of its procedures as part of working with the FATF for several years. In a joint interview with The National, three of the leading UAE ministers explained their efforts on tackling money laundering and illicit financing.
Mr Al Sayegh said: “The ministers of justice and economy are really cornerstones of this process”, explaining that a higher committee was appointed to ensure a whole-of-effort approach.
“The UAE government wanted to also show its commitment by creating at a political level, if you like, oversight, chaired by His Highness, Sheikh Abdullah bin Zayed, and in this entire committee, the strategy was reviewed every month. the milestones were checked, resources were made available … anything that was needed to make this successful, happened at this higher committee”.
In addition to Mr Al Sayegh, Minister of Economy Abdulla Bin Touq and Minister of Justice Abdullah Al Nuaimi spoke to The National about the breadth and depth of the work being undertaken.
Mr Bin Touq said, “The challenge with any growing economy is money-laundering operations. It is not just a UAE’s problem, it's a global problem”.
He added: “Fighting illicit finance is a moral act and an economic necessity, and legal requirement. It's not just an FATF requirement. This is bigger than just FATF, it is an interest that serves to protect businesses and investments and contribute to their growth and prosperity”.
Mr Al Nuaimi explained that the national strategy put in place meant that “the system is now better streamlined, than it used to be, and to be honest, more efficient, faster and digitised”.
Mr Bin Touq gave an example of the effectiveness of that system, saying that when a query is raised “we need to get back in hours. The point of getting back in days doesn't work. For basic information, we managed to handle about 22,072 requests since 2019. Basic information on nearly 100 per cent of UAE companies is fully available in the National Economic Registry, recently created in 2020”.
Throughout the public and private sector, policies and procedures to counter illicit finance have been set in place.
Mr Al Sayegh said: “We all felt this policy now needs to be crystal clear to everybody … Its outcome was to detect, deter and dissuade anyone from abusing our financial system. We want to make doing legitimate business easy, while deterring and combating bad actors.”
When the FATF committee originally presented its report on the UAE, it made 63 recommendations. Of these, four were immediately tackled, with 59 remaining.
“These 59 recommendations were enshrined as key elements of a national strategy”, said Mr Al Sayegh. Sub-committees were set up to ensure delivery, and “all of these sub-committees had to deliver in a very tight time frame during Covid-19”.
Mr Al Sayegh said the national expert group participated in more than 40 meetings with members and non-members of the FATF.
"Today we deliver the message about the significant progress we're making, in fighting illicit finance and I think, first of all, that meant they got to know us, the players globally," he said.
"Our experts came into the defence very prepared, very confident. None of us had actually had an experience like this. When we finished the defence, we were all looking at each other, feeling proud and thinking, you know, we did a good job”.
He added that: “Our confidence is growing and it can only be generated if you're doing work”.
Mr Al Sayegh explained that “countries are evaluated also based on the size of the economy and the risks they expose the global financial system to because of that”.
He added: “The National Risk Assessment Committee got full marks, because they did the national risk assessment as well as the sectorial risk assessment, and came up with a very good understanding of what we need to tackle”. He added that the FATF informed the UAE that its post-observation period report was “the most extensive paper ever received by FATF”. He went on to explain: “None of these 59 recommendations were not addressed … and this is unprecedented."
One of the key differentiators of the UAE, compared to other countries in the region, is its federal system, which allows local and federal entities to respond with agility to different needs but also means a much more stringent system is needed to ensure co-ordination between different parties.
Mr Al Nuaimi said “At the Ministry of Justice, we are the focal point for the international community for any international cooperation. So the way it works, we receive any request from outside and we basically work it out with the federal or the local governments”.
That process would previously take days and at times weeks. It now is a matter of hours. “Since the implementation of this exercise, we have immediate access to all the federal and the local agencies. We have developed the system between us, where we can just upload it into the system, and it will be there right away with the local entity”.
Mr Bin Touq added: “The most important part, we're bridging between federal and local governments, trying to make them as well understand and mature to anti-money laundering”.
Addressing possible concerns from the private sector on the ease of doing business due to the “grey-listing of the UAE”, the Minister of Economy was confident.
“Our overall economic objective is to ensure the UAE remains the premier location in the region and globally for trade, investment, economic opportunities, and innovation," he said.
"Having a stable framework of rules and regulations helps us to uphold the integrity of the economy and prevent businesses from being undercut by bad actors”.
Furthermore, Mr Al Nuaimi noted the importance of understanding what “grey-listing” meant.
“Just to clarify, the grey list is not the blacklist. So, we have to differentiate. The extensive measures usually happen to a region when it goes into a blacklist”.
So while there is increased monitoring, it does not hinder doing business in the UAE.
Mr Al Sayegh added: “Our economy is diverse, our economy's growing, our economy is robust. And increased monitoring, in this context, especially given how much we've invested in compliance, and how much awareness was created, is not expected to decrease the ease of doing business”.
In addition to gold and real-estate, crypto is one of the areas of concern globally when it comes to illicit finance. There is a designated regulatory authority in the country, working with the UAE central bank, to oversee crypto.
Mr Al Sayegh said: ”No cowboys are going to be able to set up shop in the UAE, only legitimate well-regulated entities will be able to set up shop”.
One of the significant markers for international co-operation is the placement of extradition treaties. The Minister of Justice said that “prior to this exercise, we had we had 34 international co-operation treaties. Today, we have added 11, five are already signed and the other six are to be signed. One of those recently signed was with the US last week and we're working on additional ones”
The UAE’s economy has been going through extensive changes, including the introduction of VAT in 2018, the expected introduction of corporate tax next year and the opening up of the economy to foreign ownership.
Mr Bin Touq addressed these changes, saying “When we go back to 2019, we will find that the UAE redesigned its economy by promoting even more openness and resilience policies ... Then Covid-19 hit not only the UAE but globally”.
And through Covid-19, measures were taken to sustain the economy and lay long-term plans, in addition to tackling vulnerabilities to illicit finance.
The minister of economy said: “We continue to enhance the country’s business environment and openness to the world by adopting a wide array of initiatives designed to accelerate and sustain future economic growth, most notably the latest legislative amendments to provide more freedom to business owners and foreign investors across sectors by granting of 100 per cent foreign ownership, also the amendments in commercial transactions law and the decriminalisation of cheques, which came into effect on the 2nd of January. Dramatic changes in economic laws and policies to guarantee a more attractive and profitable business environment in the UAE”.
He added: “We have achieved a substantial amount of progress over the past year, and this is very important to recognise. Our trajectory is a positive one.”
One point the minister was keen to address was economic growth not being affected by more stringent measures brought into place.
“With all the confiscation we have done, all the inspections we're doing, all the fines and penalties, doing KYC and everything else, we had growth in the economy. This really shows that combating illicit trade and anti-money laundering efforts helps growth for an economy, it is not the other way around. And this is the major bottom line”.
Among the measures the UAE is introducing is corporate tax. The Minister of Economy explained: “The corporate tax really will help with a lot of understanding in KYC [know your customer], who's a beneficial owner, and that aspect is very important”.
His ministry is currently working with the federal tax authority to link companies’ tax numbers with the national economic registrar.
The addition of the UAE on the FATF’s ‘grey list’ ultimately means more scrutiny within the UAE’s financial system.
However the ministers sounded upbeat.
Mr Al Nuaimi said: When we first started this journey, we were regretting the process itself. But to be honest, today, I think what was done is extremely important. We managed to streamline the workflow among all agencies, and that is a good exercise”.
Mr Bin Touq agreed, adding: “I [have] learnt that each time, we had a vision and an ambition we turned them into a reality — because here in the United Arab Emirates, we push boundaries.
“We are a very young country, 50 years old. We're young, we're fit, and Covid-19 showed that fitness, and we are ready to fight — to fight illicit trade”.
Minister Al Sayegh: “The most important lesson, for me, has been about the real importance of understanding risk and how this is a journey that never stops. Defining risk and then thinking that is it, is a big mistake.
"By defining risk and continuing to use that as the base for how you move forward, I have seen it in a different light. Every week, these criminal elements come up with a new scheme, I hadn’t been so aware of how dangerous it is to stop at a certain baseline”.
In its announcement, the FATF said the UAE had made “a high-level commitment” to tackle illicit finance and concurred that the country had made “significant improvements”.
The Paris-based group now wants to see a sustained effort and further measures to address pending recommendations. The UAE has addressed 60 per cent of the recommendations from the FATF’s 2020 report.
Mr Al Sayegh said: “They want to see a granular understanding of risk that keeps building on the knowledge that we've attained, they want to see this just continuing. And our response to this is: this is a political commitment at the highest level. It is one thing that we've been benefiting from, we're doing this, not because of the report or process, we are now doing this. And we are continuing to do this because we want to and we need to”.
One clear message from the ministers was that the effort put on anti-money laundering and combating the financing of terrorism (AML/CFT) has led to a cultural change in the country.
Minister Al Nuaimi said that “the journey to better develop our system for AML/CTF has been there for quite a number of years. The national team that is led by the [Central Bank] governor, was established 35 or 40 years ago, and they've been continuously developing the co-ordination among the local and the federal entities to better combat any illicit operation. But when we look at the UAE and the amount of investment business, being a financial hub, a faster or a fast-track of development should have happened”.
Digitising records, appointment of compliance officers and ensuring stringent requirements on money flows are here to stay.
“The procedures for knowing your customer, the procedures for understanding who's the ultimate beneficial owner, it's all now part of our culture. The UAE has made a big cultural change, and in endorsing not just politically, but in fact, in the field”, according to Mr Al Sayegh.
As for next steps when it comes to the FATF, which will continue to review the work of the UAE, Mr Bin Touq said a sign of progress is that the number of recommendations has gone down significantly.
