Global: UAE Central Bank Implements Penalties for Unlicensed Virtual Asset Service Providers

The Central Bank of the United Arab Emirates (CBUAE) has collaborated with national regulators to release joint guidance, introducing penalties for unlicensed Virtual Asset Service Providers (VASPs) operating in the country. The guidelines, published on Nov. 6 by the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC), outline “Red Flags” for VASPs, including a lack of regulatory license, unrealistic promises, and poor communications.

The supervisory authorities expect licensed financial institutions, designated non-financial businesses and professions, and licensed VASPs to report transactions involving suspicious parties. Unlicensed VASPs in the UAE will face civil and criminal penalties, including financial sanctions against the entity, owners, and senior managers. Additionally, actions will be taken against licensed entities that deal with unlicensed VASPs.

CBUAE Governor and NAMLCFTC Chairman, His Excellency Khaled Mohamed Balama, emphasized that the new guidance is crucial as digital assets become more accessible. Balama stated that their efforts to combat financial crimes intensify with the maturation of the digital economy, ensuring the integrity of the UAE’s financial system.

UAE lawyer Irina Heaver highlighted that these measures are part of the country’s broader initiative to exit the Financial Action Task Force’s (FATF) “grey list.” The UAE, placed on the grey list in March 2022, has committed to addressing Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) deficiencies. Heaver noted significant reforms since 2022 and suggested that the upcoming FATF review in April or May 2024 could potentially lead to the UAE’s removal from the grey list if consistent compliance is demonstrated.