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29 June 2021, 12:26
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08.08.2022
UAE Recent AML Developments
An overview of recent AML developments in the UAE.
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29 June 2021, 12:26
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The Financial Action Task Force or the FATF is an inter-governmental decision making body. It was created in 1989 during the G7 Summit in Paris in response to the global concern over money laundering. Its current president is Marcus Pleyer as of the 1st of July 2020.
The policy body works towards bringing about a global legislative and regulatory revolution to money laundering. Additionally, since the occurrence of rising international terrorism such as 9/11 terror attacks in USA, the FATF has expanded to include such actions of terror finance under its governance.
The FATF currently comprises of 39 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe.
FATF scope primarily covers:
The FATF have created internationally endorsed global standards for implementing effective AML/CFT measures. The aim of these recommendations were to increase the transparency of the financial system aka making it easier to detect criminal activity while giving countries the capacity to successfully take action against money launderers and terrorist financiers.
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The Financial Action Task Force list also referred as the OECD (Organisation for Economic Co-operation and Development) list is a list of countries that the intergovernmental organisation considers non- cooperative in the global effort to combat money laundering and the financing of terrorism.
By issuing these lists, the FATF hopes to encourage countries to improve their regulatory regimes and establish a global set of AML/CFT standards and norms.
Even though the “grey” and “black” list does not exist in the parlance of the FATF these are the two categories associated with the status of a country under investigation.
These countries have been deemed as a safe haven for supporting terror funding and money laundering and in consequence are put on to the FATF “Grey- list”. This inclusion serves as a warning to the country that it may enter the blacklist.
Such countries are knowns as “High-Risk Jurisdictions subject to a Call for Action” or Non-Cooperative Countries or Territories (NCCTs). In theory, these countries are supporting terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
Significant strategic deficiencies in their regimes to counter money laundering and terror financing. There are two countries on the “Black List” as of 2020. They are North Korea and Iran.
Urges members to undergo enhanced due diligence, and in the most serious cases, countries are called upon to apply counter- measures to protect the international financial system against these ML/FT emanating from the country.
To see a full detailed list of the FATF countries and their status please visit: FATF Find a Country.
FATF has done so due to the inadequate controls over terrorism financing in 2018, which made foreign firms more cautious about investing in Pakistan.
Previously, the FATF had given Pakistan till the end of 2019 to implement a plan of action to curb its ML and FT problem. However, due to Covid-19 it was extended with a final warning until June 2021.
The FATF, has said in order to address its issues it should work on implementing these three recommendations:
Demonstrating effective implementation of targeted financial sanctions against all 1267 and 1373 designated terrorists, specifically those acting for or on their behalf.
Additionally, noted by the FATF was that Pakistan has made progress across all action plan items and has now largely addressed 24 of the 27 action items.
Due to the continued ‘grey list’ status has resulted in extremely high- cost debts for Pakistan, which has incurred a $38 billion economic losses due to the FATF decision.
Pakistan will also not be receiving any respite in trying to access finances in the form of investments and aid from various international bodies including International Monetary Fund (IMF). This latest decision will add to its problems given its perilous financial situation.
If Pakistan is to prevent future economic impacts and Black-listing it must complete the final 3 steps our of the FATF’s 27 action plan by June 21-25.
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As of last week, Pakistan has been retained on the FATF’s ‘grey list’ due to failing to effectively implement the global FATF standards and over its lack of progress on investigation and prosecution of senior leaders and commanders of UN-designated terror groups.
The FATF president, Dr. Marcus Pleyer, said that for Pakistan to be delisted, it will have to largely address all items on the new action plan in addition to the only remaining item on the original plan.
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