The Central Bank of the UAE, in collaboration with regulatory bodies, issues new guidelines for Virtual Asset Service Providers (VASPs). The guidelines focus on identifying suspicious VASPs and the penalties for operating without a license, aiming to enhance the country’s AML and CTF efforts.
In a significant development, the Central Bank of the United Arab Emirates (CBUAE) and the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) have jointly released new guidance for Virtual Asset Service Providers (VASPs). This move reflects the growing importance of regulating digital assets within the UAE’s financial landscape.
Identifying “Red Flags”
The guidance includes a list of “Red Flags” that VASPs need to be aware of. These indicators encompass various aspects, such as the absence of a regulatory license, making unrealistic promises, poor communications, and a lack of regulatory disclosures. These red flags serve as markers to identify potentially suspicious parties operating in the virtual asset space.
Reporting Transactions Involving Suspicious Parties
The regulatory authorities expect licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licensed VASPs to report any transactions involving suspicious parties. This reporting mechanism is crucial in upholding the law and safeguarding the integrity of the UAE’s financial system.
Penalties for Unlicensed VASPs
The guidance emphasizes that VASPs operating in the UAE without a valid license will face significant consequences, including civil and criminal penalties. These penalties may extend to financial sanctions against the entity, its owners, and senior managers. Furthermore, LFIs, DNFBPs, and licensed VASPs that engage with unlicensed VASPs will also be subject to legal actions.
UAE’s Commitment to Combat Financial Crimes
In a press release, His Excellency Khaled Mohamed Balama, the governor of the CBUAE and chairman of the NAMLCFTC, highlighted the importance of these guidelines as digital assets become more accessible. He stressed that these efforts are vital to combat financial crimes and ensure the integrity of the UAE’s financial system.
Exiting the FATF’s “Grey List”
UAE lawyer Irina Heaver noted that these guidelines are part of the UAE’s broader efforts to exit the Financial Action Task Force’s (FATF) “grey list.” Being on this list signifies deficiencies in Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regimes. However, the UAE has made substantial reforms since its placement on the list in 2022. The upcoming FATF review in April or May 2024 could pave the way for the UAE to exit the “grey list” if it maintains consistent compliance.