Impending FATF decision on dirty money list poses risks to UAE By Reuters

© . FILE PHOTO: General view of the Burj Khalifa and the downtown skyline in Dubai, United Arab Emirates, Sept. 30, 2021. REUTERS/Mohammed Salem By Lisa Barrington and Saeed Azhar DUBAI () – A global financial crime watchdog will rule this week or the United Arab Emirates have made enough progress to avoid being placed on a “grey” watch list, a designation that risks reputational damage for the Middle Eastern business center. The Financial Action Task Force (FATF) called in 2020 for “fundamental and significant improvements” by the UAE, the region’s financial capital and a gold trading center that has tightened regulations to overcome an image as a hotspot for illicit money. Countries on the ‘grey list’ face increasing FATF monitoring and are at risk of reputational damage, rating adjustments, difficulties in obtaining global funding and higher transaction costs, experts say. The UAE’s foreign minister, Ahmed al-Sayegh, told that the risk of a potential greylisting for sectors such as banking, real estate and credit was “generally low”. “The UAE’s economy is resilient and diverse,” he said. “We are actively engaged in dialogue with investors, financial institutions and companies doing business in the UAE to anticipate all relevant scenarios and mitigate any impact from increased monitoring.” The Paris-based FATF will update its list of high-risk jurisdictions and other controlled jurisdictions by March 4. Mazen Boustany, of Habib Al Mulla & Partners, a member of Baker & McKenzie International, said greylisting could affect the ratings of sovereign and local banks, and the UAE’s real estate sector. “I believe that the UAE will do everything it can to be removed very, very soon after if it is (on the list),” he said. Rating agencies S&P and Fitch did not immediately comment on whether a UAE graylist would lead to a rating change. Mohamed Damak of S&P Global (NYSE:) Ratings said the company looks at regulation and oversight when making country risk assessments for the banking sector. “If we see weaknesses, we take them into account,” he told . “The cost of transactions with banks in that country (on the gray list) could be higher due to additional controls and compliance requirements. It could also increase the cost of cross-border financing for banks in that country,” Damak added. PROPERTY TRANSPARENCY When the FATF graylisted Malta in 2021, Fitch did not change sovereign or bank ratings, saying authorities’ responses would be important in assessing any credit impact. The UAE, an oil and gas exporter that flaunts open-for-business credentials and facilitates glitzy expatriate lifestyles, has implemented reforms to increase technical compliance with FATF standards for money laundering and terrorist financing. improve. But it will also be evaluated for implementation in the federation of seven emirates. “I am confident that we will be able to address all possible aspects of FATF feedback quickly and effectively,” said Emira al-Sayegh’s minister. The UAE’s real estate sector, especially Dubai’s, is fueled by foreign money. The FATF’s 2020 report stated that the UAE had failed to effectively monitor real estate brokers, gemstones and metals traders. The UAE last year established an Executive Office for Combating Money Laundering and Terrorist Financing after it passed a law against money laundering and terrorist financing in 2018. The executive office has taken steps to raise bullion trading standards and improve ultimate ownership transparency. It highlighted progress ahead of the FATF assessment and said assets worth $625 million were seized in 2021, including for money laundering and the gold and precious metals sectors. The average time it takes to respond to international requests for money laundering and terrorist financing cooperation fell to 37 days in 2021, from 139 in 2019. “Illegal financing threatens the UAE’s international reputation and the integrity of our leading financial sector,” Emirates Foreign Minister Sheikh Abdullah bin Zayed wrote this month in Forbes Middle East magazine. “We are already making strong progress,” he wrote, adding that it is more effective to share information.

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