The Central Bank of the United Arab Emirates (CBUAE) recently issued new guidelines for virtual asset service providers (VASPs) in the country, aiming to crack down on unlicensed operations. The move comes as part of the UAE’s efforts to improve its standing on the Financial Action Task Force’s (FATF) “grey list.”

The published guidelines outline various red flags for identifying suspicious VASPs, including the absence of a proper regulatory license, dubious claims, poor communication practices, and insufficient regulatory disclosures. To bolster compliance, the authorities expect licensed financial institutions, non-financial businesses, and licensed VASPs to report any suspicious activities related to unlicensed virtual asset operations.

The CBUAE emphasized that unlicensed VASPs will face severe consequences, such as civil and criminal penalties, financial sanctions against the entity, its owners, and senior managers. Furthermore, any regulated entities demonstrating a willingness to engage with unlicensed VASPs will also face legal actions.

In a statement, Khaled Mohamed Balama, the CBUAE’s governor and chairman of the NAMLCFTC, highlighted the significance of these measures in light of the increasing accessibility of virtual assets. He underscored the importance of intensifying efforts to combat financial crimes and uphold the integrity of the UAE’s financial system in the context of the evolving digital economy.

UAE lawyer Irina Heaver explained that these efforts are part of the UAE’s broader strategy to improve its AML and CTF frameworks and eventually exit the FATF’s grey list. Since its placement on the list in 2022, the UAE has undertaken significant reforms, positioning itself for potential removal in the next FATF review, projected for April or May 2024, provided it continues to exhibit consistent compliance with the regulatory requirements.