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The United Arab Emirates and Saudi Arabia are moving forward with their plans to counter money laundering, especially as the rise of fintech raises risks of illicit financial transactions, a United Nations official said.
The UAE has just launched a new anti-money laundering system (goAML) which was developed by the United Nations Office on Drugs and Crime (UNODC) for use by the UAE Central Bank’s Financial Intelligence Unit (FIU).The platform facilitates the receipt, analysis, and dissemination of illicit transactions and activity to law enforcement authorities in the UAE.
“It will enhance the flow of money because it will increase the capacity of the FIU on the detection of illicit financial transactions,” Hatem Fouad Aly, United Nations Office on Drugs and Crime (UNODC) representative for the GCC region told Zawya at an event in Abu Dhabi.
He said that prior to the new platform, certain transactions needed to be stopped to be examined closely, to detect any potential risk and assess whether it is illicit or intended to be used for illicit purposes or not.
“Now with the new system in place with this platform, you do not need to stop any other financial flows except those illicit financial flows, because the analytical part is done while the financial system is running,” he added.
Reporting entities in the UAE including financial institutions such as banks, finance companies and exchange houses are required to be registered on the system. The platform will also be used by law enforcement agencies, and for Designated Non-Financial Businesses and Professions, such as accountants and lawyers. (Read more here).
He said that the UAE’s new goAML platform is a useful first step for the country in terms of tackling money-laundering risks.
“This new plaform is a very good example that indicates the level of commitment that UAE has to actually fight illicit financial flows, money laundering and financing terrorism, because it takes a platform that is going to double, if not triple, the detection and the analytical capacity of the financial intelligence agencies,” Ali said.
The second step, he added, is enhancing coordination among the law enforcement and security agencies that are participating in the fight against money laundering and financing terrorism.
“These would be the police, the financial intelligence, the criminal justice, the prosecution, the judges, this national mechanism that has come together in full coordination because detecting the risk and crime necessarily leads to a criminal justice process,” he said.
“The operations that would follow in the second and third steps are the investigation and prosecution of the cases and the freezing of this money. They need to be equally capacitated to be able to achieve an outcome,” he said.
“We are already working very closely through the financial intelligence unit with the coordination of the UAE central bank, with the other law enforcement and criminal justice agencies within (the) UAE to make sure that a broader action is being taken, at the national level first, and then looking at the transnational level,” he added.
In October last year, the UAE passed a law to combat terror financing and money laundering, in line with the requirements of the Financial Action Task Force (FATF). The law mandated setting up a committee to assess and identify risks and the effectiveness of measures to tackle money laundering and terror financing.
The UAE is the first country within the GCC to launch this platform, which was customised to the requirements of the country’s Anti-Money Laundering and Counter Terrorist Financing framework.
“This is the first launch in the GCC, but there is deployment in two other countries in the Gulf I cannot speak of now,” Aly told Zawya.
Saudi in 'leader seat'
In March this year, European Union states blocked a proposal to include Saudi Arabia on a money-laundering blacklist, which would have added regulatory obstacles for doing business in the kingdom. The blacklist includes countries suspected of being lax on money laundering and financing terrorism. (Read more here)
The global money-laundering watchdog, the Financial Action Task Force (FATF), is set to visit the UAE to begin its latest Mutual Evaluation of the country – its first since the 2008 financial crisis – this month.
Last month, Saudi Arabia was granted full membership at FATF, becoming the first Arab country to be a member of the Paris-based group.
“It is a very timely and needed step from Saudi Arabia. We are working very closely with the national committee in combating money laundering and financing terrorism in the kingdom,” Aly said.
“Saudi is a very large economy and the reform process led by the crown prince envisages alternative economies,” he continued, adding that this entails the kingdom becoming more careful in protecting its financial system from attacks, illicit financial flows, money laundering and the suspicious terrorism-financing activities that may come into its system - or transit through it.
“So I say that the political leadership and the actual technical agencies are currently aligned in taking the action which reflects their understanding to this type of challenges, and that they’re responding,” he said.
“It is positive that Saudi is coming closer to working with FATF and with the MENAFATF (Middle East and North Africa Financial Action Task Force on Combating Money Laundering and the Financing of Terrorism). The kingdom has always been there, but it now takes a new position and puts itself more in a leader seat,” he said.
Saudi Arabia obtained full FATF membership last month after around four years of being an observer, according to a statement by the Saudi central bank, and became the 39th member worldwide.
Fintech money-laundering risks
The increased use of blockchain-enabled technologies in the financial system also poses a threat of greater amounts of illicit financing, Aly said.
“If it is going to enhance the capacity of the financial system and enlarge it, then it will necessarily pose a greater risk.
“But the good thing is that countries are already taking precautionary measures because they are working on combating the risks of these technologies on the financial system, even before they go larger, so we find this as a very positive indicator for these countries,”Aly said.
Last month, FATF launched new rules to try to stop the use of digital currencies in money laundering amid growing concerns among global law enforcement agencies that cryptocurrencies are being used to launder cash. Under the new worldwide regulatory constraints on the fintech sector, countries will have to register and supervise cryptocurrency exchanges and custodians.
The head of financial intelligence at the European police agency told Reuters last month that he saw a rise in use of cryptocurrencies in laundering money used in crimes, adding that it is a growing worldwide risk. (Read more here).
In April this year, Abu Dhabi Global Market (ADGM), the international financial centre in the UAE’s capital, announced it was enacting revisions to its regulatory framework for combating money laundering, the financing of terrorism and proliferation, and the financing of unlawful organisations. The changes aim to align its rules more closely with global standards in the area of money laundering. (Read more here).
(Reporting by Nada Al Rifai; Editing by Michael Fahy)
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