Hamid AlZaabi, the founding Director General of the Executive Office for Anti-Money Laundering and Counter Terrorism Financing, shares with Zawya the UAE’s progress in combatting and preventing money laundering and terrorism financing.
In 2022, the UAE was placed on the “Grey List” of countries under increased monitoring by FATF's International Co-operation Review Group (ICRG). What is the UAE's progress on adopting measures to combat money laundering and terrorism financing?
The UAE has made significant progress in combatting financial crime, and our investments have strengthened national AML/CFT systems in every way. This has, and continues to be, an ongoing effort and strategic priority for the UAE.
Effective systems are built on a risk-based approach. Simply put, this means having a detailed understanding of where the economy’s risks and vulnerabilities exist. Once a comprehensive understanding of this is developed, as we in the UAE have done, then steps can be taken to mitigate these risks accordingly. We are currently in the process of completing our second National Risk Assessment.
We are not building this clear picture in isolation. The UAE is working with its international partners, as well as entities such as the World Bank Group and Financial Action Task Force, alongside domestic actors, to achieve this.
We’ve improved the capacity, skills, and effectiveness of law enforcement authorities in the UAE to detect and investigate money laundering cases and make use of all information sources available. Accordingly, the number and quality of prosecutions and convictions for money laundering have increased.
We’ve also improved the effectiveness of regulatory and supervisory efforts for financial institutions (FIs) and Designated Non-Financial Business or Professions (DNFBPs), prioritizing higher risk sectors such as hawalas and gold. The response of the private sector to changes to supervisory regulations shows that an impact is being made, and the system is responding well to our efforts.
Companies that have not responded to our tighter regulations have been punished. Fines and confiscations have increased significantly in the UAE year-on-year. In Q1 2023, UAE supervisors issued fines totalling more than 115 million dirhams ($31.3 million), up from AED 76 million during the same period in 2022.
What are the new legislation and reporting requirements enacted by the UAE to ensure compliance?
The UAE has significantly improved the quantity and quality of suspicious transaction reports and suspicious activity reports sent to the FIU.
To achieve this, we set out by establishing a working group in 2022 to improve the quantity and quality of reports. The group has gone on to develop enhanced supervisory STR guidance for financial institutions, carry out sector outreach, and complete thematic reviews on identified issues.
The impact of this is clearly seen in the overall STR/SAR reporting numbers, which have improved with the number of reports rising from around 16,500 in 2020 to 39,000 in 2022. This was following a review of the infrastructure within regulated sectors to understand whether financial institutions and DNFBPs are adequately equipped to detect or report behavior that is reasonably suspected to be linked to financial crime.
The private sector has been an active partner in these efforts, and companies have responded accordingly to regulatory and supervisory changes. A telling role here is played by the UAE’s Public-Private Partnership Sub Committee (PPPSC), which is a bridge between corporate entities and government authorities.
What is the progress on the action plan to get off the FATF ‘grey list’?
As you know, the FATF assessment is on-going. At the past two plenaries in Paris, FATF said: ‘the UAE [has] demonstrated significant progress’. We continue to work to implement our FATF action plan and are working closely with the ICRG and will be meeting in September this year for the next review, ahead of the October FATF plenary.
What are the key areas of focus in the action plan?
I would prefer not to comment on an assessment that is on-going. I would however like to say that the UAE is working very closely with FATF on our action plan, and our cooperation is positive. We’re expending every effort to satisfy the remaining action plan requirements and will be providing further progress reporting after the summer at our next round of scheduled meetings.
Have investments in the UAE been affected due to it being on the "grey" list?
The UAE has remained a desirable destination for FDI, with real GDP growth of 3.6% forecast by the World Bank for 2023. Investors are attracted by the competitive tax environment, the security and lack of crime, developed infrastructure and capital markets, and favourable geographical location at the crossroads of Asia, Europe, and Africa.
This attractiveness to investors is evident in the latest data. The annual World Investment Report 2023 published by the United Nations Conference on Trade and Development (UNCTAD), FDI inflows to the UAE reached $22.7 billion (AED84 billion) last year, up 10% from $20.6 billion in 2021.
What initiatives has the UAE put forward to prevent illegal wildlife trade (IWT)?
IWT is a major threat to the environment and the planet’s biodiversity, which is why the UAE takes efforts to counter it very seriously. It’s a theme that you can expect to see tackled rigorously at COP28 in Dubai later this year.
To give you more context, according to Interpol, the overall annual value of transnational environmental crime is estimated to be worth $70 to $213 billion annually according to Europol.
The private sector is also very active and deserves mention. Emirates NBD and Mashreq are supporting efforts to combat global wildlife trafficking by joining the United for Wildlife (UfW) Financial Task Force, which is dedicated to stopping illicit financial flows associated with IWT. Their joining of the UfW Financial Task Force is part of their commitment to supporting global and local sustainability-focused initiatives such as the UN Sustainable Development Goals – specifically Goal 15, Life on Land – and UAE Vision 2021.
To help banks, last year the Executive Office of AML/CTF partnered with the UK Government to create an Arabic version of the ‘IWT Toolkit’, a resource produced by financial crime consultancy Themis that provides public and private sector partners with the knowledge to identify and investigate suspicious activities.
In the transport sector, major corporations such as Emirates and Etihad have signed up to the Buckingham Palace Declaration and maintain embargoes on the transport of CITES-listed products and parts of endangered animals and plants. DP World is founder of the United for Wildlife Transport Task Force and has implemented extensive measures to tackle trafficking.
Several of these companies are part of the UAE’s Public-Private Partnership Sub-Committee, which has established an IWT Working Group chaired by HSBC. By sharing information and exchanging best practices, advances made in this area can benefit everyone fighting this cruel and destructive crime.
UAE federal government legislation bans the illegal sale of wildlife and unregulated private zoos, and the country continues to increase oversight at its borders and prosecute those bringing wildlife into the region illegally.
The UAE has been invited as an official observer at the Asia / Pacific Group on Money Laundering taking place in Vancouver this month. How significant is this, particularly considering the UAE's presence on the "grey list"?
There’s no doubt that this is a significant development that underscores the UAE’s role in enhancing global security and protecting the integrity of financial systems. By way of context, it’s important to emphasise that the Asia/Pacific Group on Money Laundering is the UAE largest FSRB globally, which provides creates opportunities for cross border cooperation and information exchange that are unparalleled. Our delegation went to Vancouver to learn and bring back new insights that can ensure we are at the cutting edge of anti-financial crime strategies and tactics.
(Reporting by Brinda Darasha; editing by Seban Scaria)