At the heart of the issue is whether the jurisdiction has done enough to clamp down on money laundering and other illicit financial flows. The author of this article argues that so far, not nearly enough progress has been made to justify the FATF's action in February.

The following commentary comes from Ben Keith, who is a barrister at 5 St Andrew’s Hill and editor of Red Notice Monitor blog. He comments on recent developments affecting the United Arab Emirates. In February, the Financial Action Task Force, the inter-governmental body setting standards in the fight against money laundering and terrorism finance, removed the UAE from its “grey list” of jurisdictions subject to increased monitoring. 

At question is whether the UAE has done enough to clamp down on money laundering and all forms of illicit finance. After North America, Europe and select jurisdictions imposed sanctions on designated Russians after the Russian invasion of Ukraine in February 2022, a number of wealthy Russians moved their financial assets into the Gulf. (The FATF also removed Barbados, Gibraltar, and Uganda from the grey list in February.)

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Huge controversy accompanied the decision by intergovernmental agency FATF (Financial Action Task Force) to remove the UAE from its “grey list.” This conveyed to the world the erroneous impression that the country is a safe place to do business, one that upholds international laws pertaining to money laundering and sanctions treaties. 

Fortunately, members of the European Parliament (MEPs), having initially considered following suit and delisting the UAE from its list of high-risk for financial crime jurisdictions, decided against such action. They gave their reasons as that country’s major role in transnational money-laundering and sanctions-busting schemes.
 
Mixed messages are therefore being sent about the wisdom of doing business with the Emirates, with FAFT implying that it is a safe haven for transactions and the EU recognising the further work that must be done to rid the country of its reputation as a hub for international financial crime.
 
High net worth individuals and their advisors with existing or planned business dealings in the UAE should not be misled by FATF’s decision which effectively makes it an easier place to do business thanks to the removal of the strict monitoring and regulation that comes with grey-listing. It is astonishing that after only two years on the grey list, FAFT commended it for its “significant progress” in addressing money laundering crimes, when the UAE has long been a beacon for dirty money. Business dealings should be approached with caution and scepticism in a jurisdiction that continues to flout codes of transparency, accountability and the rule of law.
 
The UAE has vigorously attempted to portray itself as a place of growth and opportunity, a haven for trade and investment. As well as endorsing this false message, the FAFT’s ruling might also signal to the world that reforms have been implemented when this is far from the case. While some welcome steps have been taken – new legislation, increased crime fighting resources and cooperation agreements with foreign authorities – no data is yet available to prove legislative advances. This is why we can only go by the UAE’s track record which is abysmal. Here are some examples uncovered by Investigations:
 
Lack of action in money laundering
A wide range of UAE professionals have aided and abetted criminals to wash clean their money, offshore their wealth, invest their dubious funds worldwide, all with apparent impunity. The International Consortium of Investigative Journalists have recently, yet again, implicated Dubai as a prime destination for both illicit funds and smuggled gold from Africa.
 
No legal protection
With no independent judiciary, foreign investors can be exploited. A 2023 inquiry into how foreign business executives conducting business were treated when accused of breaking the law, discovered a severe lack of due process and fair treatment.

Sanctions busting and corruption
The UAE has greatly facilitated Russian sanctions busting, with Russian entities using UAE-based companies to evade sanctions. It has provided “enablers,” professionals in the non-financial sector who enable cross-border corruption.

A 2023 report by parliamentarians, the Real cost of doing Business in the UAE concluded that the risks of conducting high-value foreign business in the UAE cannot be overstated. From regulatory loopholes to rampant corruption, doing business in the UAE is akin to navigating a minefield – with potentially disastrous consequences for those not well-versed in its intricacies.

Emerging reports suggest that geopolitical considerations were at play when FAFT decided that the UAE merited removal from its grey list, with much lobbying of FAFT members by UAE representatives.

All these reasons make it imperative that investors should not be fooled by this apparent return to grace of the UAE. Its practices cannot be allowed to continue unabated. Given the difficulties for journalists of gaining and disseminating information, it is up to the international community to press for the UAE to tackle its role in money laundering and sanctions busting to protect the global financial system and halt cross-border corruption.