The Financial Action Task Force (FATF) is an intergovernmental organization that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. Being placed on the UAE FATF Grey List indicates that a country has strategic deficiencies in its anti-money laundering and counter-terrorist financing regimes that pose a risk to the international financial system.
The United Arab Emirates’ (UAE) inclusion in the FATF grey list back in March 20222 could have stemmed from various reasons. Some potential factors might include weaknesses in its regulatory framework, enforcement mechanisms, or international cooperation in combating financial crimes. These deficiencies could have been identified through FATF’s mutual evaluation process, where countries undergo thorough assessments of their anti-money laundering and counter-terrorist financing systems.
Removal of the UAE from the FATF Grey List
In March 2024, the UAE reached an important milestone in combating financial crime. The Financial Action Task Force (FATF) recently removed the UAE from its financial crime watch list.
While this move demonstrates the UAE’s ongoing commitment to improving its anti-money laundering and counter-terrorism financing efforts, it is also expected to boost economic growth, particularly in the real estate investment sector. Dubai expected a ‘boost’ in foreign direct investment.
Following the country’s removal from the FATF’s financial crime watch list, Allsopp predicts an increase in direct foreign investment, led primarily by major institutional investors.
The Dubai real estate market would benefit the most from this. In 2023, Dubai sold more residences valued at more than $10 million than any other city globally.
In Q1 of 2024, we observed an increase in the number of global CEOs, institutional fund managers, and high-net-worth individuals relocating to Dubai and purchasing constructed and off-plan properties in luxury residential areas such as Al Barari, Jumeirah Golf Estates, The Palm, and Dubai Hills. “I predict that global institutional investors will find Dubai’s large, single-owner commercial and residential developments simply irresistible in 2024.
Positive Effects on Dubai Real Estate Market
Capital Apprecation & More Property Sales
The Dubai real estate market would benefit the most from this. In 2023, Dubai sold more residences valued at more than $10 million than any other city globally.
In Q1 of 2024, an increase is ovserved in the number of global CEOs, institutional fund managers, and high-net-worth individuals relocating to Dubai and purchasing constructed and off-plan properties in luxury residential areas such as Al Barari, Jumeirah Golf Estates, The Palm, and Dubai Hills. It is predicted that more global institutional investors will find Dubai’s large, single-owner commercial and residential developments simply irresistible in 2024 after UAE’s removal from the FATF greylist.
Attracting a Larger Investment Pool
Institutional investors, who typically oversee substantial capital reserves, have historically faced limitations in investing within greylisted countries. With Dubai’s removal from such lists, these funds freely pour in Dubai as an attractive investment destination, opening up avenues for injecting international capital into the market. This influx of funds holds the potential to significantly boost real estate projects in Dubai to levels previously unattainable.
New Avenues for Real Estate Investment
In Dubai, institutional & overseas investors will have a diverse of real estate investment opportunities. They can invest in properties such as luxury villas, townhouses, apartments & penthouses, renowned for their robust capital gains and impressive rental returns. Alternatively, they may opt for enduring income-generating assets such as commercial office buildings, logistics hubs, or hotels, ensuring steady cash flows over time.
Boom for Luxury & Trophy Properties
The luxury real estate market in Dubai has flourished over the years, and its removal from the UAE FATF Grey List will ignite demand for premium properties. High networth individuals, including overseas investors from Russia, China & European Union. Who previously relied on unofficial financial channels, may now find Dubai’s high-end real estate sector more appealing for investment.
Reduced Bureaucratic Hurdles
The FATF greylist often leads to additional checks and documentation for financial and real estate activities. Dubai’s removal could streamline the property buying process for foreign investors by reducing unnecessary paperwork and speeding up approvals. The ease of the process will surely bring in more investment influx in Dubai’s real estate market.
More Transparent Data: Better Decisions
Increased transparency might also mean more readily available data, the stats, facts, and figures, on Dubai’s property market. This could include comprehensive listings, historical price trends, and property valuations. This increased access to information allows investors to make informed decisions. That reduces the risk of hidden costs or unexpected issues.
However, the UAE’s fight against financial fraud ‘isn’t concluded
While the country’s removal from the FATF grey list is a significant step forward, Mohamed Daoud, Industry Practice Lead at Moody’s Analytics, believes the fight against financial crime is far from ended.
It is critical for long-term progress that it maintains its robust AML/CFT regime, especially as the next round of rigorous FATF evaluations approaches in 2026,” he added, adding that this announcement will increase trust in the UAE’s financial sector.
He noted that this might result in smoother foreign exchange, lower interbank costs, and increased commerce and investment.
Even so, do not expect the international compliance community to quickly modify its approach to the country.
Foreign institutions must upgrade their anti-money laundering and counter-terrorist financing (AML/CFT) measures over time. Thus, the full advantages may not be realized until after the official announcement. Think of it as a gradual removal rather than an abrupt spring.
