terrorist-finance 14 May 2020

Report: UAE must do more to fight money laundering and terrorist financing

Authorities in the United Arab Emirates do not fully exploit financial intelligence to go after money laundering or trace the proceeds of crime, a global watchdog has warned in a report.

While acknowledging that the UAE recently strengthened its legal framework to fight money laundering and terrorist financing, the Financial Action Task Force (‘FATF’) said the country must take ‘urgent action to effectively stop the criminal financial flows that it attracts.’

FATF added that the UAE’s strategic geographical location between continents, in proximity to conflict zones and its own jurisdictional complexity of seven emirates, two financial free zones and 29 commercial free zones ‘further increase the UAE’s risk of attracting funds with links to crime and terror.’

The Mutual Evaluation Report acknowledged that the elements of an effective framework to detect and prevent criminals and terrorists from misusing the financial system are mostly in place in the UAE. ‘However, this framework is relatively new and it has not yet been able to demonstrate the expected results.’

‘With 39 different company registries, which helped the UAE grow its various free zones, the misuse of legal persons is a real risk. The UAE also faces a significant risk of exposure to proceeds of crimes conducted abroad, but authorities do not make sufficient use of formal international legal assistance processes to pursue money laundering or the financing of terrorism and proliferation, although they demonstrated better capacity in using informal processes,’ the report said.

It added that authorities have access to a broad range of financial information in their investigation of terrorist financing, fraud and other offences, but that the ‘limited number of money laundering prosecutions and convictions, particularly in Dubai, are a concern given the country’s risk profile.’

According to the report, ‘[A]uthorities do not fully exploit financial intelligence to go after money laundering or trace the proceeds of crime. Improvements to the Financial Intelligence Unit’s role and capacity are positive but were too recent to demonstrate better operational outcomes.’

‘The country must urgently deepen its understanding of the risks it faces at national and individual Emirate-level and take action to strengthen the effectiveness of its measures to stop money laundering, terrorist financing and proliferation financing,’ the report said.