The Central Bank of the United Arab Emirates (CBUAE), in collaboration with other regulatory bodies in the country, has issued new joint guidance for virtual asset service providers (VASPs) operating within the UAE. These guidelines introduce penalties for VASPs that operate without the necessary licenses within the jurisdiction.
On November 6, the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) and the CBUAE published a list of “Red Flags” for VASPs. This list includes indicators such as the absence of regulatory licenses, unrealistic promises, poor communication, and a lack of regulatory disclosures, all of which can help identify suspicious parties.
According to the new guidance, supervisory authorities expect all licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licensed VASPs to report transactions involving suspicious parties. The guidance emphasizes that any information related to unlicensed virtual asset activities can be reported through whistleblowing mechanisms to assist regulatory authorities in upholding the law and safeguarding the UAE’s financial system.
The document also specifies that VASPs operating in the UAE without a valid license will face civil and criminal penalties, including financial sanctions against the entity, its owners, and senior managers. Furthermore, LFIs, DNFBPs, and licensed VASPs that demonstrate a willingness to engage with unlicensed VASPs will also be subject to actions by law enforcement.
The governor of the CBUAE and chairman of the NAMLCFTC, His Excellency Khaled Mohamed Balama, mentioned that this guidance is particularly important as digital assets become more accessible. He stated that as the digital economy evolves, their efforts to combat financial crimes intensify to ensure the integrity of the UAE’s financial system.
This initiative is part of the UAE’s broader efforts to be removed from the Financial Action Task Force’s (FATF) “grey list.” The grey list indicates that a country has deficiencies in its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regimes but is committed to addressing these issues within agreed timeframes. The UAE was placed on the FATF’s grey list in March 2022 but has since enacted significant reforms to strengthen its AML and CTF regulatory frameworks. The country’s exit from the grey list could be determined during the next FATF review, expected in April or May 2024, if it continues to demonstrate consistent compliance.