The UAE is a complex jurisdiction, comprised as it is of several sub-jurisdictions. This presents challenges in terms of combating money laundering and financial crime. When in March 2022 the UAE was placed on the Financial Action Task Force's (FATF) "grey list" due to the body’s findings of weaknesses in the state’s AML and counter-terrorist financing systems, the UAE ramped up its AML and financial crime prevention and detection efforts.
For example, the UAE established a new Executive Office to enhance coordination of its AML and CTF initiatives, tasked with implementing the National CTF/AML Strategy and National Action Plan. Recent enforcement actions illustrate the UAE's commitment to these reforms.
In August 2022, the subsidiary of money transfer business, Wise, was fined USD 360,000 by the Abu Dhabi Global Market's financial services regulatory authority for failing to maintain adequate AML compliance systems. This sanction followed scrutiny of Wise's co-founder, who was listed as a "deliberate tax defaulter" and is under investigation by the UK's Financial Conduct Authority.
Additionally, in December 2022, the Dubai Financial Services Authority upheld a significant penalty against Arif Naqvi, the founder and former CEO of Abraaj Group. He was fined USD 135 million and banned from operating in the Dubai International Financial Centre after being found guilty of misleading investors regarding the misuse of funds. This fine is notable as the largest fine ever imposed on an individual by the DFSA.
In terms of virtual assets, the UAE's cryptocurrency market saw a dramatic 500% growth in transaction value, reaching around USD 25 billion between July 2020 and June 2021. In response, the Emirate of Dubai introduced Law No. 4 of 2022, establishing a regulatory framework for virtual assets to protect investors and align with international standards for regulating the emerging industry. The Virtual Assets Regulatory Authority (VARA) issued administrative orders governing the marketing of these assets and detailing penalties for non-compliance. This framework aims to facilitate blockchain adoption for economic growth while combatting potential financial crime risks.
Regarding international sanctions, the UAE generally maintains a neutral stance on sanctions. For example, in the sanctions against Russia due to the Ukraine conflict, the UAE has taken a more neutral position in contrast to stricter measures by other countries. The UAE has, however, mandated that organizations and banks implement due diligence and sanctions management to mitigate risks. A notable action includes the Central Bank's revocation of the Russian bank MTS Bank's license following its sanctions by the US. and UK.
And as for data protection, the UAE enacted the Federal Personal Data Protection Law (PDPL) in 2022, granting individuals rights over their personal data. While this law excludes public entities and free zones, it aligns closely with principles found in the GDPR. Executive Regulations for the PDPL are pending, giving organizations time to adapt.
Overall, the UAE is intensifying its efforts to tackle financial crime.