In a collaborative effort with UAE supervisors, the National Anti-Money Laundering and Combating Financing Of Terrorism and Financing Of Illegal Organizations Committee (NAMLCFTC) has released guidance aimed at addressing the utilization of unlicensed virtual asset service providers.
The supervisory subcommittee played a key role in formulating this guidance, which is aligned with Decree Federal Law No. (20) of 2018 on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) and Illegal Organisations. This initiative is also consistent with the Financial Action Task Force (FATF) guidelines regarding a risk-based approach to virtual assets and virtual asset service providers.
The guidance is designed to educate licensed financial institutions (LFIs) and the broader public sector about the risks associated with unlicensed virtual asset service providers. It provides reporting entities, including LFIs, Designated Non-Financial Businesses and Professions (DNFBPs), and Licensed Virtual Asset Service Providers (VASPs), with a comprehensive roadmap for improving governance and operational processes. Emphasizing the importance of compliance with regulatory obligations under AML legislation, the guidance directs reporting entities to adhere to regulations, instructions, guidelines, notices, and rules issued by supervisory authorities.
Key aspects of the guidance include consulting the FATF Report on Red Flag Indicators of Money Laundering and Terrorist Financing related to Virtual Assets. Reporting entities are specifically instructed to remain vigilant against various fraudulent methods employed by unlicensed VASPs, manage money laundering, terrorism financing, and proliferation financing risks effectively, incorporate emerging risks into business and customer risk assessments, and conduct due diligence to identify instances of forged documents and sanctions evasion.
Supervisors underline that VASPs operating in the UAE without a valid licence may face civil and criminal penalties, including financial sanctions against the entity, its owners, and senior managers. Moreover, reporting entities displaying willful blindness in their dealings with unlicensed VASPs and possessing weak Anti-Money Laundering (AMLCFT) and Counter Proliferation Financing controls may be subject to enforcement action.
Khaled Mohamed Balama, Governor of the Central Bank of the UAE and Chairman of the NAMLCFTC, highlighted the timeliness of this guidance as virtual assets become increasingly accessible through digital channels. Further added that, as the digital economy evolves, efforts to combat financial crimes intensify, with a focus on raising awareness of associated risks and emphasising compliance with relevant regulations and legislation to uphold the integrity of the UAE’s financial system.
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