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Opinion: The impact of UAE’s strengthened financial crime enforcement

Opinion: The impact of UAE’s strengthened financial crime enforcement

The UAE has been investing and setting up regulatory bodies specialising in financial crime, particularly, the Executive Office of Anti-Money Laundering and Counter Terrorism Finance

Gulf Business
Dr. Ryan Lemand on benefits of financial crime enforcement in the UAE

Foreign companies are setting up in the Gulf, wanting to benefit from the considerable reforms, and economic and financial initiatives, emerging in the region.

The UAE is the stand-out country in the region; the one that started the foreign investment drive by reforming and being at the forefront with visionary government policies and projects, and efforts to transform its society. With these reforms, the country has made itself especially attractive to foreigners wishing to invest here.

However, here are some examples of the headlines in the media about the UAE in 2022:

  • UAE seized $1.29bn worth of assets in 2022 related to financial crimes in the UAE
  • Abu Dhabi court seized $10.6m from two companies charged with evasion, forgery, and money laundering
  • Suspicious transactions reporting increased by more than 50% in 2022 versus 2021

The impression gained from this is that the UAE must be suffering under the weight of financial crime. In reality, this couldn’t be further from the truth.

It’s vital that the international community pay attention to the underlying numbers rather than the sensationalist coverage.

The above graph shows foreign direct investments (FDI) in net inflows (capital inflows minus capital outflows) into the Middle East and North Africa (MENA) since 1970. In the early 2000s, the MENA region started to attract foreigners wanting to invest large amounts in this new, emerging market. Unsurprisingly, the UAE has received the lion’s share of these inflows, particularly over the past couple of years, as shown in the graph below that highlights the same data, but only for the UAE.

In 2021 alone, the UAE attracted net FDI crossing $20bn, and though the World Bank has not yet published the total numbers for 2022, it’s expected to be at least as high as 2021.

Focused on tackling financial crime

In many countries, such a leap in foreign investment would catch them off-guard. Thankfully, the UAE has been investing and setting up regulatory bodies specialising in financial crime, particularly, the Executive Office of Anti-Money Laundering and Counter-Terrorism Finance (AML & CTF).

The Executive Office is part of a wider federal consortium, the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC), which many people do not know about.

The NAMLCFTC covers all financial and banking regulators in the UAE, as well as several ministries. Being part of the NAMLCFTC, the Executive Office has a federal and an international role, to:

  • improve national and international coordination and cooperation on AML/CFT issues at the policy and operational level
  • tackle money laundering and terrorist financing threats by working with regional and international groups, such as the Gulf Cooperation Council (GCC) Working Group on AML-CFT, G20, and the Financial Action Task Force. This will be done in conjunction with the National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organizations and the Ministry of Foreign Affairs and International Cooperation (MOFAIC)
  • actively increase information sharing between law enforcement agencies, supervisors, and the private sector
  • explore and enhancing legislation, in coordination with MOFAIC and relevant UAE entities, to further strengthen the UAE’s current AML/CFT framework
  • coordinate with MOFAIC to ensure that progress is accurately articulated and reflected by the Higher Committee on AML/CFT under the mandate of Sheikh Abdullah Bin Zayed Al Nahyan, Minister of Foreign Affairs and International Cooperation

Two factors contributed to the increase in financial crime-related announcements: the creation and collaboration of supervisory and law enforcement bodies in the UAE; as well as the increase in FDIs. Had there been a boost in FDIs, but no commensurate rise in financial crime law enforcement, then this would have been worrying.

The Executive Office also created a public-private partnership committee that aims to create a communication channel with the major finance and banking industry players in the UAE.

This collaborative approach is constructive because it is proactive and helps prevent financial crime before it happens. Having worked in other parts of the world, I am used to regulatory and law enforcement bodies showing up when they perform routine inspections and, in most cases, when they suspect something is amiss, making them reactive, rather than proactive as in the UAE.

The financial services and banking industries are fast changing, and more and more reliant on technology. Likewise, criminals are also adapting and using technology to commit crime. That is precisely why the Executive Office has divided the counter strategy into two parts:

  1. National and international cooperation – the Executive Office has signed numerous MoUs with national and international regulatory and law enforcement bodies, which allow information to flow seamlessly between them, essential in fighting international financial crime
  2. Deployment of state-of-the-art technological platforms such as goAML, IEMS, Fawri Tech and others.

Forget the headlines: underpinning the boost in foreign investment coming into the UAE is a much stronger financial crime policing and enforcement structure. It’s created a safer environment for financial and banking institutions to operate in, making the UAE an attractive hub for international capital through FDIs, while hopefully, being much less attractive to financial criminals.

Dr Ryan Lemand, is the CEO and co-founder of Neovision Wealth Management, which is based in Abu Dhabi Global Market

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