BERLIN — Germany, the U.S. and several other Western countries are pushing a global money-laundering watchdog to give the financial system in the United Arab Emirates a clean bill of health despite persistent indications that the country remains a haven for illicit transactions, according to European oversight officials and others familiar with the matter.
The Paris-based Financial Action Task Force (FATF) placed UAE on its so-called gray list, effectively a shot over the bow of wayward financial jurisdictions, in March 2022, citing serious deficiencies in UAE’s measures against sanctions evasion, terror financing and other crimes.
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, though that has yet to happen.
The long-term risk to UAE’s status as a business center is one reason financial officials there resolved to get off it as soon as possible, promising “robust actions.”
Yet some members of FATF’s International Cooperation Review Group (ICRG), a committee of banking and financial crime experts tasked with monitoring UAE’s progress, recently complained that the country had overpromised and undelivered, expressing concerns in particular about the reliability of the information provided by UAE for their evaluations.
To the critics’ surprise, ICRG representatives from several European countries, including Germany, Italy and Greece, as well as the U.S., refused to address their concerns, according to the people familiar with the matter. (The ICRG’s evaluation is critical because it provides the basis for a final ruling by FATF’s plenary — a decision-making body comprised of member states that meets three times a year — on whether take a country off the gray list.)
The issue came to a head during an ICRG meeting in Mauritius in May, when a Belgian representative, Michiel Vervloet, objected to the push to accelerate UAE’s removal from the gray list despite its lack of tangible progress in rooting out money laundering. UAE recently overtook Belgium as the world’s largest trading hub for rough diamonds, and international oversight officials suspect much of that trade involves illicit funds.
A German delegate from his country’s finance ministry told the Mauritius meeting that the body had to make its determination on the basis of the information provided by UAE, even if they suspected the information was inaccurate.
UAE’s finance ministry did not respond to a POLITICO request for comment on whether it had manipulated the data provided to FATF for the evaluation. FATF, the German finance ministry and representatives from other governments concerned, including the U.S. Treasury and the Bank of Italy, declined to comment on the suggestion that they were pushing to remove UAE from the gray list despite the concerns of some committee officials that the country had yet to comply with FATF’s standards for combatting money laundering.
In the end, the objections expressed by Vervloet and other critics were ignored. Roberto Angeletti, a Bank of Italy official who serves as the ICRG’s co-chair, said he intended to recommend an onsite visit to UAE, a final step in the evaluation process that signals a country will be removed from the gray list. Vervloet and Angeletti declined to comment.
Why the watchdog’s overseers appear to have decided to go easy on UAE isn’t clear.
One explanation is that the geopolitical winds shifted in UAE’s favor after it was placed on the gray list last year.
In the wake of Russia’s all-out invasion of Ukraine, for example, Germany was forced to turn to the Gulf for an emergency injection of natural gas. In September, German Chancellor Olaf Scholz traveled to Abu Dhabi, where he signed a gas deal to get Germany through the winter. He also announced a broader “Energy Security and Industry Accelerator Agreement” between Germany and the UAE to “enable the swift implementation of strategic lighthouse projects on the focus areas of renewable energies, hydrogen, LNG and climate action.”
Washington, meanwhile, has been keen to show Saudi Arabia, which has proved to be a difficult partner of late in confronting Russia, China and Iran, that it has other powerful Arab friends in the region, chief among them UAE.
The FATF plenary is meeting in Paris this week and is expected to issue an update on UAE’s progress.
In the wake of the Mauritius meeting, optimism in Dubai is running high.
“Following the measures that have been implemented in the financial system, my expectation is that the UAE will be removed from the gray list in the next evaluation,” Mohamed Al Ansari, chairman of UAE’s largest foreign exchange company, said last month.
A senior UAE official approached by POLITICO concurred.
“We’ve done everything FATF asked for,” said the official, who was granted anonymity because he wasn’t authorized to speak publicly. “We’re optimistic we will be off the list in the coming months.”