The UAE Introduces Penalties for Unlicensed Virtual Asset Service Providers
The Central Bank of the United Arab Emirates (CBUAE) has recently joined other regulators in the country to release new joint guidance for virtual asset service providers (VASPs) operating within the UAE. These guidelines include penalties for VASPs operating without proper licenses within the jurisdiction.
New Guidelines and Red Flags
The National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC) and the CBUAE published a list on November 6 that they described as “Red Flags” for VASPs. This included indicators such as a lack of regulatory license, unrealistic promises, poor communications, and lack of regulatory disclosures that could identify suspicious parties.
Expectations from Licensed Institutions
According to the new guidance, the supervisory authorities expect all licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs), and licensed VASPs to report transactions from suspicious parties. The document emphasized that any information related to unlicensed virtual asset activities can be reported through whistleblowing mechanisms to help regulatory authorities uphold the law and protect the UAE financial system.
Penalties for Unlicensed VASPs
The central bank noted in the new document that VASPs operating in the UAE without a valid license will be subjected to civil and criminal penalties, including financial sanctions against the entity, owners, and senior managers. Additionally, LFIs, DNFBPs, and licensed VASPs that demonstrate a willingness to deal with unlicensed VASPs will also face actions from law enforcement.
Commitment to Combating Financial Crimes
In a press release, His Excellency Khaled Mohamed Balama, governor of the CBUAE and chairman of the NAMLCFTC, stated that this new guidance comes at a time when digital assets have become more accessible. He emphasized that as the digital economy matures, their work on combating all kinds of financial crimes intensifies to ensure the integrity of the financial system in the UAE.
Looking Ahead
In March 2022, the UAE was placed on FATF’s grey list due to deficiencies in AML and CTF. However, with significant reforms enacted since then, it is expected that these updates to its AML and CTF regulatory frameworks may lead to its exit from the grey list in April or May 2024 if consistent compliance is demonstrated during the next FATF review.
Hot Take: The Future of Virtual Asset Regulations in the UAE
The introduction of penalties for unlicensed VASPs marks a significant step forward in regulating virtual asset services within the UAE. With clear guidelines and severe consequences for non-compliance, it is evident that regulators are committed to ensuring transparency and security within this rapidly evolving sector.
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