UAE Central Bank to fine unlicensed virtual asset service providers.

The Central Bank of the United Arab Emirates (CBAE) along with other regulators in the country recently published new joint guidelines for Virtual Asset Service Providers (VASPs) operating in the country. The new guidelines include penalties for VASPs operating without proper authorization in the jurisdiction.

The National Anti-Money Laundering and Countering the Financing of Terrorism and the Financing of Unlawful Organizations (NAMLCFTC) has issued directives to work with UAE regulators to combat unlicensed virtual asset service providers.

— UAE Central Bank (@centralbank) November 6;

In the year On November 6, the National Anti-Money Laundering and Countering the Financing of Terrorism and Unlawful Organizations Committee (NAMLCFTC) and the CBUAE published a list of what they described as “red flags” for VASPs. The list includes lack of regulatory approval, unrealistic expectations, poor communications, lack of regulatory disclosures and additional indicators that identify suspicious entities.

Under the new guidelines, regulatory authorities expect all licensed financial institutions (LFIs), non-financial businesses and professions (DNFBPs) and licensed VASPs to report transactions from suspicious entities. The manual reads:

“Any information related to unlicensed virtual asset activities may be reported by fraudulent means to assist regulatory authorities in their efforts to uphold the law and protect the UAE's financial system.”

In the new document, the central bank stated that VASPs operating in the UAE without a license “will be subject to civil and criminal penalties, including, but not limited to, financial penalties against the entity, owners and senior managers.” In addition, the document also includes LFIs, DNFBPs and licensed VASPs. He also indicated that action will be taken against law enforcement agencies that show interest in working with unlicensed VASPs.

In a press release, Honorable Khaled Mohamed Balama, Governor of CBUAE and Chairman of NAMLCFTC, said the new directive comes at a time when digital assets are becoming more accessible. The CEO of the CBUAE said that as the digital economy grows, their work “in fighting all kinds of financial crimes” has been strengthened. This ensures the integrity of the financial system in the UAE, said Balama.

Related: Lawyer explains new federal virtual property law in UAE

Commenting on the update, UAE lawyer Irina Hever told Cointelegraph that the new guidelines are part of a wider effort from the UAE to remove the “grey list” from the Financial Action Task Force (FATF). This 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.

In March 2022, the UAE was placed on the FATF gray list and was subject to additional monitoring due to deficiencies in the AML and CTF. However, the country had a high-level commitment to work with the International Security Organization to strengthen the AML and CTF regimes.

According to Hever, the UAE has made significant improvements since being placed on the gray list in 2022. With new reforms in AML and CTF regulatory frameworks, the country may soon come out of the gray list. “A FATF review, expected in April or May 2024, could result in the UAE's removal from the gray list if it continues to demonstrate continued compliance,” she added.

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