The Financial Action Task Force (FATF), a Paris-based intergovernmental body that audits the ability of nations to detect and disrupt illicit finance, has censured the United Arab Emirates for not doing enough to combat money laundering and terrorism financing activities, reports the Wall Street Journal. The U.A.E joined 22 other countries, including Pakistan, Syria and Nicaragua, in a so-called gray list of jurisdictions that are deemed deficient but working with the FATF to improve.
The decision comes after years of pressure from Western governments and transparency advocates to limit the country’s heavy reliance on cash transactions and crack down on illicit finance flows, particularly through Dubai, which has become a hub for foreign investment into real estate and the trade of gold and precious metals. When a country is on the gray list, the cost of cross-border funding and transacting with banks there may be higher, due to additional checks and compliance requirements. Bankers in the U.A.E. said the designation would have little material impact in the short term on foreign investment or confidence in the country’s financial system and that most of their banks have already improved compliance and checks related to illicit finance in recent years.