The Central Bank of the United Arab Emirates (CBUAE) is increasingly tightening management regulations for virtual asset service providers (VASPs) operating in the country.
Recently, CBUAE introduced new regulations, including penalties for VASPs who do not have an operating license. This move is part of the UAE’s efforts to escape the “grey list” of the Financial Action Task Force (FATF).
These regulations highlight what are considered “Red Flags” for VASP, including lack of regulatory licenses, making unrealistic commitments, and other signs of suspicious activity. The UAE government requires licensed financial institutions and VASPs to report all transactions involving suspicious third parties.
If a VASP operates without a valid license, CBUAE will not only impose civil penalties but also initiate criminal penalties, including financial sanctions on organizations, owners, and senior management. Furthermore, individuals transacting with an unlicensed VASP may also face other serious legal actions.
CBUAE Governor, Khaled Mohamed Balama, emphasizes the significance of the new guidelines in the context of the growing demand for access to virtual assets. He also declares that as the digital economy advances, efforts to detect external fraud risks, especially cybercrime across both traditional and digital channels, must be strengthened to protect the transparent financial system that the UAE is aiming for.
The new guidelines and regulations are introduced as the Central Bank of the UAE intensifies efforts to exit the FATF gray list. When FATF places a country on the enhanced monitoring list, it means that the country must commit to swiftly addressing deficiencies outlined within agreed-upon timeframes and undergo enhanced supervision. Since being placed on the gray list in March 2022, the UAE has implemented significant legal reforms. According to UAE lawyer Irina Heaver, if the country continues to demonstrate compliance, the UAE may exit the gray list in the next FATF assessment expected in April or May 2024.