The United Arab Emirates (UAE) has been placed on the Financial Action Task Force’s (FATF) ‘gray list’, and as per experts gold and diamond deals with Dubai companies may now face greater scrutiny, according to a story by Rob Bates on 9 March in jckonline.com.
FATF, the international anti-money-laundering group established by G7 countries in 1989 says that countries placed on the FATF gray list are subject to increased monitoring and must address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.
While it’s common for smaller countries to get gray-listed, applying the designation to a major financial center is unprecedented and has been called ‘the most significant step’ in FATF’s 30-year history, says Rob Bates.
In the past, Dubai officials have denied and brushed aside reports of it being a haven for dubious money and smuggled gold as lies and nationally targeted insults. Meanwhile, market watchers do not expect any major negative effect on business growth in Dubai with the Dubai Multi Commodities Centre (DMCC) Dubai overtaking Antwerp, Belgium as the top trading center for rough diamonds.
According to the JCK story, Sara Yood, deputy general counsel for the Jewelers Vigilance Committee (JVC) claims that banks' compliance departments will scrutinise transactions between the US and the UAE, as UAE transactions are now considered a higher risk level. “I am not sure there will be a significant change in how the jewelry industry deals with UAE. Long term, it could have an effect if the UAE does not correct their deficiencies,” she warns.
Erik Jens, CEO and founder of Luxury Fintech and the former head of ABN-Amro’s diamond division, says a lot depends on how Dubai acts going forward. “It could push companies who don’t pay attention to CSR [corporate social responsibility] and ESG standards to move elsewhere to escape from those pressures,” he added.
And reportedly, a former U.S. Treasury official told JCK that the FATF designation means that any deals with Dubai companies will call for increased due diligence, especially if they involve gold or diamonds, which have been linked to corruption and conflict.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished
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