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Last month, the UAE was taken off the Financial Action Task Force (FATF) grey list after nearly two years, which means it is no longer under increased monitoring, and experts believe that Dubai’s booming real estate market is likely to get another boost.

Farooq Syed, CEO of Springfield Properties, noted that “this achievement was possible through a collaborative effort involving various government departments and local entities, demonstrating the nation’s commitment to combating financial crime and promoting a secure investment environment.”

Syed added the implications are “profound”.

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In an emailed statement to Business Recorder, he said “this newfound transparency and accountability will bolster Dubai’s reputation as a safe haven for investments, attracting a surge of capital inflows into the real estate sector.”

George Khoury, Global Head of Education and Research at CFI Financial Group, told Business Recorder the UAE managed this by implementing significant reforms to its anti-money laundering (AML) and counter-terrorism financing (CFT) frameworks.

“Key actions included updating legal regulations, establishing dedicated courts for financial crimes, and enhancing international cooperation,” he said, adding that the UAE also developed “advanced risk-based analysis and intelligence platforms to identify and mitigate financial risks effectively.”

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One of the entities coordinating the response was Dubai’s Virtual Assets Regulatory Authority (VARA), created two years ago.

Last year at a media briefing attended by Business Recorder, its Managing Director & Vice Chair, Deepa Raja, said diving headfirst into the virtual assets space and creating regulations was “the only way you can get out from a cash-based economy” and create one that is “fully traceable, immutable and block-chain logged.”

She believed “the way to move from a grey list to a green list would be to facilitate transactions of this nature that are fully traceable on chain.”

One of the major steps it took was ensuring more than 800 companies that operated in the VA industry in Dubai without regulation either registered formally or had submitted the application to be licensed by VARA by end 2023, otherwise they would be shut down.

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“VARA contributed to improving regulatory oversight in the UAE and to the country’s efforts by establishing a stringent regulatory framework for virtual asset service providers aligned with FATF’s AML/CFT guidelines,” explained Khoury.

“VARA’s oversight and regulations, especially concerning the prohibition of anonymity-enhanced cryptocurrencies, played a significant part in strengthening the financial sector against illicit activities,” he said, adding that “their approach ensured that the virtual assets market operates transparently and in compliance with international standards, thereby addressing a key area of concern for FATF.”

So what does all this mean for the economy of Dubai in particular and the UAE in general?

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Earlier this month, VARA CEO Matt White said getting off the grey list will “remove the brakes” around virtual assets investments in the emirates.

“There is going to be expansion into new initiatives,” he said in a podcast with financial publication Zawya. “But I think it’s worth highlighting the baseline expectation will be to cement these robust supervision and enforcement frameworks that we’ve built, so that we don’t go backwards from where we currently are.”

So far, VARA has issued 20 licenses to regulated virtual asset service providers, with 11 of them already in operation, White said. Additionally, 80 others have received initial approvals, allowing them to begin commercial activities within a free zone or access banking services.

It is not just the VA space that will benefit, of course. As Khoury noted, “getting off the FATF grey list is a positive signal for Dubai’s economy, as it enhances the emirate’s reputation as a secure and transparent place to do business.”

“This move is likely to increase investor confidence, which in turn can attract more foreign direct investment into Dubai’s various sectors such as finance, real estate, and tourism.”

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Moreover, “improved relations with international banks may facilitate easier trade, reduce transaction costs, and encourage more robust economic activity.”

Echoing Khoury’s sentiments, Syed said that with enhanced corporate governance practices, investor confidence is bolstered, attracting both domestic and foreign investors, which will translate to higher foreign direct investment (FDI) inflows, stimulating economic growth and fostering a conducive environment for business expansion.“

He said the improved regulatory landscape positions Dubai as a more attractive destination for international businesses, leading to heightened business activity and further driving demand for real estate properties.“

“Overall, Dubai’s exit from the grey list is poised to fuel economic prosperity and solidify its status as a global hub for investment and commerce.”

Copyright Business Recorder, 2024

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John Mar 28, 2024 02:31pm
But the flow of black money is all time high!
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