UAE set to be removed from money laundering ‘gray list’

BERLIN — The United Arab Emirates is set to receive a stamp of approval from a global money laundering watchdog, despite concerns of some countries who say the Gulf state has failed to do enough to tackle illicit activity.

A written evaluation by the Paris-based Financial Action Task Force (FATF), described to POLITICO, clears the way for the watchdog to remove the UAE from its “gray list” of wayward jurisdictions at a meeting of the group’s members in Paris on Friday.

“After lengthy discussions with all relevant authorities, the onsite team has confirmed that the measures taken by UAE to effectively investigate and prosecute high-risk money laundering cases are sustainable,” the report states in a summary of its conclusions, verified for POLITICO by three people who have read the report.

To critics, the decision shows how far longstanding advocates of tougher controls on money laundering are willing to compromise at a time of increased global instability, amid wars in Europe and the Middle East.

A spokesperson for FATF declined to comment. UAE says that it has complied with FATF’s demands and is committed to combatting money laundering.

As POLITICO first reported in June, some of FATF’s own reviewers believed the group’s push to remove UAE from the gray list was driven more by political considerations than any progress the country has made against money laundering.

A group of European countries that originally supported sanctioning UAE began urging the body to remove the country from the gray list last year. The shift coincided with Europe’s efforts to win help from the Gulf in addressing its energy needs in the wake of the Vladimir Putin's all-out of invasion of Ukraine, which all but halted the supply of Russian natural gas to the EU.

Critics of the soft-shoe approach included members of a FATF task force charged with evaluating the country and led to a heated debate within the group at a meeting in Mauritius in May. Among other things, they complained that FATF was being asked to rely on data provided by UAE itself that they had no way of independently verifying.

Despite those objections, which people close to FATF say were never fully resolved, the effort to clear UAE appears to have succeeded.

FATF placed UAE on the gray list in March 2022, citing serious deficiencies in the Gulf state's measures against sanctions evasion, terror financing and other crimes. The county has been a key conduit for Iran to undertake trade and circumvent sanctions, according to officials in both the U.S. and Europe.

The designation, which put the country just one step away from FATF’s dreaded “blacklist,” was a significant reputational blow to the Middle East’s largest financial center and also threatened to impair the country’s long-term credit ratings. Officials from UAE lobbied hard to get off the list.

Transparency International, the corruption watchdog, wrote to FATF President Raja Kumar last week urging the agency not to remove UAE from the gray list, arguing that there is little sign the reforms the country has announced to combat money laundering and other financial crimes have been implemented. The group said it has evidence that UAE has not taken action on a number of known cases involving individuals facing sanctions in other jurisdictions.  

“Transparency International was able to determine that at least three individuals who have been collectively designated by Australia, France, Switzerland and New Zealand in connection to Russia’s invasion in Ukraine still own properties in Dubai,” the group wrote. “There are likely many more.”

Maíra Martini, the head of policy and advocacy at Transparency International, said FATF’s decision sends a clear message to other jurisdictions with lax money laundering controls that, with the right allies, it’s possible to manipulate the system. Europe and the U.S., which counts UAE as key partner in the Middle East, have “a clear interest in having them as an ally,” she said.

For UAE, the long-term benefits of using its influence are clear.

“Historically they’ve made a good profit off of these activities,” she said.