UAE no longer attractive Investment Hub for ” Hot money “

Financial Action Task Force (FATF) , a Paris-based global watchdog , has categorised UAE  on the FATF  ‘gray list’ endangering its position as a regional financial centre . Now transactions and commercial trade in the seven Emirates of the United Arab Emirates will be strictly monitored  otherwise the Emirates may risk reputational damage, ratings adjustments, trouble obtaining global finance and higher transaction costs. UAE serves as a regional hub of commerce and business, the real estate sector is cash based as well as the metals trade particularly gold trade  . A gold refinery established in Dubai for more then 3 decades has been blacklisted by the UAE authorities as it failed to comply with FATF standards . UAE’s role as a safe haven for wealthy individuals facing Western sanctions , countering of  Russian invasion of Ukraine and a rollback on Iran’s nuclear drive may have prompted FATF to place UAE into the grey jurisdiction to prevent misuse of Russian funds flowing through the Emirate . More then half of Irani crude is clandestinely routed , through offshore ship to ship transfers at sea , to the ports of Dubai where the ship owner or charterer is issued a certificate of blending and can merrily ship the fuel cargoes to even Western countries.

A report by the International Monetary Fund in 2021 share that being gray- listed causes an average decline in capital flows coming into a country equal to 7.6 % of gross domestic  product.

UN FATF & Crypto currency

The UAE abstained twice from voting against Russia when it had a temporary seat at the UN Security Council .The UAE may no longer be the choice destination for Indians and Pakistanis seeking a safe haven to park their tax evaded money. The glitter of Dubai may be wearing off. It is expected that the flow of investment from UAE to India and Pakistan may decline as the UAE financial authorities impose stringent disclosure requirements to become compliant with FATF guidelines.The Indian Reserve Bank has placed restrictions on the extent of investments from non compliant jurisdictions and it is likely that the State Bank of Pakistan may take similar measures.Any hurdles faced by UAE because of FATF could enable Bahrain to take up the slack and become the new boy in the crypto space of the Middle East region .