UAE in FATF Grey List

On 4th March 2022, Financial Action Task Force (FATF) has included United Arab Emirates (UAE) in its grey list.

About FATF

  • FATF is an inter-governmental body established by the G7 countries in 1989.
  • It is mainly a policy-making body and its mandate is to promote reforms in a country’s financial system to combat money-laundering and terror financing.

About FATF grey list

  • FATF grey list is officially known as the list of “Other monitored jurisdictions”.
  • If a country is placed in the FATF grey list, it will be closely monitored and scrutinized by FATF for any deficiencies or loopholes in combating “money laundering, terrorist financing, and proliferation financing”.
  • Such countries will also agree to cooperate with FATF to address financial irregularities within the stipulated time frame and maintain the integrity of the financial system.
  • FATF will also provide an action plan to the countries to improve and strengthen the financial system.
  • FATF will continuously monitor the progress of the commitments made by countries and update the list accordingly through its periodical reviews.
  • When a country is placed in the grey list, it faces the following issues:
    1. Rating agencies like Moody’s, Standard & Poor’s, and Fitch will give poor ratings.
    2. Its reputation will be damaged and thereby foreign investments will be reduced.
    3. The competitive advantage of the country will be lost.

Reasons for inclusion of UAE in the grey list

  • Lack of adequate financial intelligence capabilities to check illicit flows of money.
  • Inability to proactively identify and report suspicious financial transactions.
  • Inadequate investigation & prosecution of terror financing and money laundering cases.
  • Inability to manage risks and vulnerabilities in industries like jewelry, real estate, etc.

Previous initiatives of UAE

  • In 2018, UAE brought anti-money laundering and terrorism financing legislation.
  • In 2021, UAE constituted an executive office for anti-money laundering and counter-terrorism financing.

Pakistan on FATF grey list

Since 2018, Pakistan is placed on the FATF grey list, mainly due to the inability to adequately investigate and arrest commanders of terror groups designated by the United Nations (UN) such as Jaish-e-Mohammed (JeM). FATF has also asked Pakistan to confiscate the criminal proceeds of such terror group leaders and work with other nations to trace and freeze their assets.

FATF black list

FATF’s black list includes countries that do not cooperate with FATF in tackling issues of money laundering and terror financing.

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