UAE regulator publishes terrorist red flag guidance that includes virtual assets

The regulatory authority of Abu Dhabi Global Market, the FSRA ( Financial Services Regulatory Authority), Financial Crime Unit, has published an update on terrorist and proliferation financing red flags guidance that include a new section for specific red flags applicable tovirtual assets and virtual asset service providers (VASPs).

The update is related to the provisions already in place by the UAE Cabinet Resolution No (74) of 2020 which pertains to the UAE list of terrorists and the implementation of the United Nations Security Council decisions relating to preventing and countering financing terrorism and leveraging non-proliferation of weapons of mass destruction.

The Executive Office for Control & Non-Proliferation (EOCN) has published updated guidelines on Terrorist & Proliferation Financing Red Flags, along with the incorporation of a new section addressing specific red flags applicable to Virtual Asset Service Providers (VASP) and virtual assets.

As per the FSRA all Relevant Persons, Financial Institutions (“FIs), Virtual Assets Service Providers (VASPs) and Designated Non-Financial Businesses and Professions (DNFBPs) are required to refer to the updated Terrorist & Proliferation Financing Red Flags Guidance and incorporate the most up-to date Red Flags indicators in their screening systems.

The updated red flag guidance will allow VASPs and other relevant persons to effectively recognize uncommon or suspicious transactions/activities associated with Terrorism Financing (TF) and Proliferation Financing (PF), including those related to the evasion of Targeted Financial Sanctions (TFS) imposed under United Nations Security Council Resolutions (UNSCRs) or by local designations.

FSRA reminds that all relevant persons are obliged to ensure compliance with Federal AML Legislation, Cabinet Resolution No. (74) of 2020 and the ADGM AML Rulebook.

The FSRA adds, that it will take appropriate action against Relevant Persons who contravene FSRA-administered regulations and rules and the Federal AML/CFT Laws. The new Terrorist & Proliferation Financing Red Flags Guidance is published on the FCCP website and can be accessed through this Link.

This comes as the UAE moves to become more compliant with FATF Travel Rule and other international legislations and requirements.

In late December 2023, the FSRA issued a guidance requesting that all registered companies in ADGM adhere to the AML ( Anti money laundering) TFS ( targeted Financial sanctions) legislations and policies of the UAE Federal government. What this means is that even if companies have registered in ADGM as offshore or freezone entities they will still be legally bound to the UAE AML/TFS legislations which also include virtual assets, with specific emphasis on FATF Travel rules.

The FSRA announced these revisions that clarify the requirements that previously appeared in the AML Rulebook, reflecting the federal regulatory framework the UAE has put in place to combat money-laundering, the financing of terrorism and proliferation financing and ensure compliance with targeted financial sanctions. In particular, minor drafting changes have been made to the provisions relating to wire transfers in order to provide greater clarity that the FATF “Travel Rule” applies to Virtual Assets.

The FSRA in its amended rule book clearly states, “Federal AML Legislation applies in the ADGM.”

All these amendments and guidance by FSRA come after  FinCEN (U.S Department of the Treasury’s Financial Crimes enforcement network) proposed new regulations to enhance the transparency in convertible virtual currency (CVC) mixing and combat Terrorist Financing, mentioning Hamas, Palestinian Islamic Jihad.