The Dubai Virtual Assets Regulatory Authority (VARA) has published a circular requesting that VASPs adhere to the AML requirements for the updated list of high-risk jurisdictions set by the FATF.
In its communication, VARA requested that Virtual Asset Service Providers (VASPs) comply with all compulsory rulebooks, especially the Compliance and Risk Management Rulebook.
As per the announcement, this is part of VARA’s mandate to assure market stability, which is in turn contingent on every participant’s financial robustness and responsible market conduct. These rules collectively allow the industry to operate on par with best-in-class international standards.
VASPs required to comply with AML and CFC obligations
Accordingly, VASPs are required to prioritise strict compliance with all Anti-Money Laundering and Combating Financing of Terrorism regulatory obligations issued by the National AntiMoney Laundering and Combating the Financing of Terrorism and Illegal Organizations Committee (the Committee). It also requires them to verify and review the lists and information issued by the Financial Action Task Force (FATF) and the Committee, as amended and current at that time, on a regular basis.
VARA specifically referred to the High-Risk Countries & Counter Measures. The Financial Action Task Force (FATF) classifies high-risk jurisdictions as having significant strategic deficiencies in their regimes to counter money laundering (ML), terrorism financing (TF), and proliferation financing (PF).
For all high-risk countries, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence. In the most serious cases, it asks countries to apply counter-measures to protect the international financial system from ongoing ML/TF/PF risks emanating from the high-risk country. Such countries are often referred to as being on the “FATF blacklist.”
As per the document, “All FIs, DNFBPs, and Virtual Assets Service providers and non profit organizations shall apply enhanced due diligence measures to all business relationships and transactions with jurisdictions on the Black List, including natural persons and legal entities and those acting on their behalf.”
With respect to the UAE, all supervisory authorities in the UAE shall remind all FIs, DNFBPs, and Virtual Assets Service providers of the requirement to implement targeted financial sanction requirements in accordance with applicable UN Security Council Resolutions and CABINET DECISION NO. (74) of 2020 to protect financial and non-financial sectors in the UAE from ML, TF, and proliferation financing risks.
It notes that all supervisory authorities in the UAE must take legal action against FIs, DNFBPs, and Virtual Asset Service Providers, including their directors and senior management, in the event of failure to implement the measures stipulated in this decision.
VARA toughens its enforcement program
In October 2024, the Virtual Assets Regulatory Authority (VARA), in its efforts to toughen up in supporting and keeping the public safe, announced that it would issue cease and desist orders along with accompanying fines to seven entities for operating without a license and for breaching marketing regulations.
The enforcement notice on VARA’s website noted that VARA requests the public avoid engaging with unlicensed firms. Interacting with such entities exposes individuals and institutions to significant financial and reputational risk.
On July 10, 2024, the UAE Executive Office of Anti-Money Laundering and Counter Terrorism Financing (EO AML/CTF) started implementing over 100 recommendations from the UAE’s National Risk Assessment (NRA). This came after the twenty-first meeting of the Higher Committee Overseeing the National Strategy on AML/CFT, chaired by H.H. Sheikh Abdullah bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Foreign Affairs.
As per the announcement, efforts would focus on mitigating risks in high-risk sectors, enhancing transparency in legal entities, and supporting initiatives in the virtual assets sector.
