EU Parliament Blocks UAE and Gibraltar Delisting Amidst AML Concerns: Impact on Regulatory Alignment and Bilateral Relations

The recent decision by the European Parliament to block the removal of the United Arab Emirates (UAE) and Gibraltar from Europe's list of "high-risk countries" has triggered significant debate and concerns within regulatory circles. Despite efforts by the European Commission to align Europe's list with that of the Financial Action Task Force (FATF), which had recently removed the UAE and Gibraltar, a resounding majority of 490 MEPs voted against their delisting.

This decision poses a considerable challenge for both the European Commission and EU Member States, potentially leading to the implementation of dual lists, which present daunting technical hurdles. The MEPs' decision stemmed from concerns raised about reports indicating the UAE's potential involvement in sanctions circumvention activities, prompting them to advocate for the retention of these jurisdictions on Europe's watchlist.

Beyond impacting the UAE and Gibraltar, the decision also affects other countries previously delisted by the FATF, such as Uganda, Barbados, and Panama, all of which now find themselves remaining on Europe's roster of 'High-Risk Third Countries.'

Typically, the European Commission would seek to address this issue by presenting another motion to parliament for the removal of these countries from the list. However, given the recent rejection and the current parliamentary schedule, such action seems unlikely until the new parliament convenes in July, leaving the status of these jurisdictions uncertain.

The decision has left the UAE government disappointed, especially considering its extensive campaign efforts and tangible progress in enhancing anti-money laundering measures. Similarly, the UK government expressed dismay over the European Parliament's accusations against Gibraltar, particularly regarding allegations of undermining sanctions against Russia.

Criticism of the decision extends beyond governmental circles, with organizations like Transparency International EU and The Sentry urging MEPs to maintain the UAE on the grey list. They cite concerns about potential political influence on the FATF's delisting decision and point out shortcomings in the UAE's enforcement and implementation of anti-money laundering measures.

Allegations of illicit activities involving the UAE, including arms and gold trade with Sudan, as well as questionable gold transactions, further complicate matters. Such allegations reinforce calls for rigorous regulatory scrutiny and oversight.

Moreover, the timing of the decision adds strain to EU-UK relations, particularly concerning ongoing negotiations over Gibraltar's post-Brexit status. Despite recent progress in discussions, the rejection of certain texts by EU lawmakers—such as references to Gibraltar as a "colony" of the UK—underscores the complexity of the situation and the potential for further discord in bilateral relations.

By fLEXI tEAM