Sat, Dec 21, 2024 | Jumada al-Aakhirah 20, 1446 | DXB 0°C

New AML strategy: Will financial institutions come under closer scrutiny?

Move will strengthen the UAE’s position as a leading international financial centre

Published: Thu 5 Sep 2024, 6:59 PM

By
Issac John

Image for illustrative purposes only

Financial institutions will come under closer scrutiny in the UAE under the new National Strategy for Anti-Money Laundering unveiled recently, according to analysts.

The strategy, formulated around 11 strategic goals, marks a significant enhancement of the UAE’s efforts to safeguard its financial system from illegal activities. It will enable the UAE uphold international standards in dealing with financial crime and combat money laundering and terrorism financing with a comprehensive framework of legislative and regulatory reforms.

According to experts, while the UAE was recently removed from the FATF Grey List, the objective of the new strategy is to demonstrate continued effectiveness across its AML framework. “This means enhanced supervision capacities, more advanced understanding of AML risks, decisive enforcement action and, ultimately, more efficacies in detecting and preventing illicit flows.

The move will strengthen the UAE’s position as a leading international financial centre and trade hub and will demonstrate its commitment to stay ahead of emerging threats by continuously enhancing its AML/CFT framework to ensure the financial system remains safe, resilient, and efficient, experts said.

AML experts said as the next Mutual Evaluation process with the FATF will take place during 2025-2027 the UAE must show sustained efforts over this period to achieve positive appraisals during future assessments. “Key issues for attention will likely include the treatment of virtual assets and asset recovery, information sharing between AML stakeholders, and the development of national databases to enhance the accuracy of the national risk assessment.”

The UAE Cabinet recently approved the new strategy for Anti-Money Laundering, Countering the Financing of Terrorism, and Proliferation Financing (AML, CFT and CPF) for 2024-27 to bolster the country’s financial system against illegal activities. The strategy, following ratification by the Higher Committee overseeing the national strategy, aligns with the latest National Risk Assessment, developed using the World Bank Group’s methodology, and incorporates feedback from private sector stakeholders during the final consultation stage.

According to Hamid Al Zaabi, secretary-general of the General Secretariat and vice-chair of the National Committee, the AML strategy is in alignment with global best practices and its comprehensive approach to addressing complex financial crimes. He highlighted the strategy’s focus on emerging risks, including trade-based money laundering and cybercrime.

“The strategy addresses complex crimes and emerging risks, including trade-based money laundering, third-party laundering, intricate legal structures, and modern technological threats. It also integrates findings and recommendations from the recently completed National Risk Assessment, which will be disclosed in the near future,” he said.

Centered on enhancing risk-based compliance, improving effectiveness and sustainability, and optimising national and international coordination, key components of the new strategy include enhancing coordination between national and international entities to better share information and strengthen partnerships while ensuring effective supervision of AML, CFT, and CFP obligations within the private sector.

The new procedures enable improved mechanisms for detecting, investigating, and disrupting illicit financial activities while seeking to invest in human and technical resources, enhance data collection and analysis, and update the legal and regulatory framework. The new AML strategy will focus on virtual assets, cybercrime, and other evolving threats.

Since international cooperation is a cornerstone of the new strategy the UAE plans to strengthen its partnerships with other countries and international organizations to facilitate the exchange of information and best practices. This collaborative approach is essential for addressing the transnational nature of financial crimes and ensuring that the UAE’s measures are effective in a global context, experts said.