The EU is being heavy-handed in blacklisting the UAE

Late last year the EU Commission decided to put the UAE on its blacklist, on the grounds that the Emirates are facilitating money laundering - writes Anthony Harris, Former British Ambassador to the UAE.

This follows the FATF, the Financial Action Task Force, the group set up by the G7, putting the UAE on its "grey" watchlist at the beginning of last year. The Emirates were warned that they needed to make fundamental improvements in their monitoring of illegal financial flows, and tighten their compliance rules in areas that are vulnerable to abuse, like the trade in gold and precious stones and real estate.

I believe that singling out the UAE in this manner is not only unfair, but also hypocritical. As members of the G7 and EU will be aware, the UAE has made enormous strides in recent years. In the course of a couple of decades, it has become one of the largest trading hubs in the Middle East, and is an emerging power in a turbulent region. The Emirati authorities have made considerable efforts to cooperate with international bodies and demonstrate that they are able to apply rigorous standards in the commercial and financial sectors.

Indeed, early last year, in response to FATF's demands, the UAE established an Executive Office for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) at the centre of government. Ahmed Ali Al Sayegh, a close adviser to the President, declared that the UAE had an action plan to meet the FATF's requirements and would work to be taken off their grey list as soon as possible.

Furthermore, the UAE has taken several administrative steps to comply with the demands of the international community. The Emirates have strengthened their legislation to combat money-laundering and terrorist financing. They have set up an AML Task Force, led by the Foreign Minister, with the aim of improving coordination between the seven Emirates and bringing them all up to the same standard. Among other things, this Task Force has created a register of beneficial owners of UAE companies, and made this available to international organisations including the FATF. In fact, the FATF reported a few days ago that the UAE had demonstrated significant progress in implementing its FATF action plan over the past year.

The Emirates have also tightened the regulations governing trade in gold and precious stones and brought dealing in real-estate under the federal AML system. Another sign of progress is the introduction of VAT in 2018 and the new corporation tax, which is currently being implemented. The UAE government is making a major effort to modernise the economy and bring it more into line with international practice. The government is keen to demonstrate at COP28, which is due to be held in Dubai next November and December, that they are key participants in the world-wide drive to reduce carbon emissions.

The UAE has already demonstrated the ability to police the financial sector. The Dubai International Financial Centre (DIFC), where I am based, is sternly regulated. The Dubai Financial Services Authority (DFSA) imposes rules that are the equal of any other international financial centre. The task that the Emirates face, as they fully admit, is to ensure that all the individual Emirates come up to the same standard, but they have shown in other sectors, like travel, trade, hospitality and telecommunications, that they are able to comply with international regulations and compete with the rest of the world.

Thus, I am firmly of the view that the EU should work closely with the UAE to help remove it from their blacklist, which would assist the Emirates in getting off the FATF watchlist too. The EU should use their huge influence to encourage rather than penalise the UAE as a scapegoat.

There are complicating factors for the EU. The Emirates are currently home to hundreds of thousands of Russians who are fleeing their homeland to avoid conscription and the repercussions of the war. This is causing many problems, and not only in terms of financial flows, which the Emirates are struggling to deal with.

Most people would agree that the Russians who are driven to escape their country have to go somewhere, and they are clearly more welcome in the Emirates than in the EU and the West. This is another reason why the EU should work with the UAE, which would have benefits not only in the Emirates but also the wider Gulf region. The EU's policy has long been to broaden relations with the GCC.

The UAE is not shy to admit that it has a lot of work to do in implementing stricter rules in all sectors and in all Emirates, but they have shown a great deal more openness and transparency than most of the other states currently on the black and grey lists. The UAE has growing clout in the Arab world: a policy of cooperation with the Emirates would be smarter than stigmatising them in these troubled times.

Anthony Harris, Former British Ambassador to the UAE

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