(Bloomberg) -- Efforts by the United Arab Emirates to exit a global watchdog’s “gray list” are gaining momentum, with some members warming to the idea of recognizing recent progress in tackling illicit flows, according to people familiar with the matter.

Delegates from at least three nations of the Paris-based Financial Action Task Force, who previously backed the UAE’s inclusion on a list of jurisdictions subject to more oversight, have now expressed the view that the Gulf state could be removed as early as February 2024, the people said. 

No final decisions have been made and delegates have conveyed some remaining concerns, they said, requesting anonymity as the matter is private. The FATF is set to hold its plenary this week and members are expected to finalize the details of a site visit to the UAE, which is one of the final steps before a potential delisting. 

To get off the gray list, a significant majority of the FATF’s membership must vote that a country has made sufficient progress since the evaluation period began. Just a few votes to the contrary can result in a jurisdiction staying on the list, people familiar with matter said. The group has just under 40 members, some of whom have greater sway. 

Read More: The Global Task Force That’s Going After Dirty Money

Emirati officials have embarked on a tour to key FATF states, including trips to Washington and Bern, Switzerland, to rally support. Russian sanctions evasion and cryptocurrencies are among the topics central to the dialog with foreign partners, the people said. 

Higher Compliance Costs

Wall Street banks, many of them with large operations in the UAE that are grappling with increased compliance costs since the March 2022 gray-list designation, have also participated in some of the consultations, they said.

Gray listings have historically led to “statistically significant reduction in capital inflows,” according to a 2021 report by the International Monetary Fund, yet the UAE weathered the designation better than most countries. 

S&P Global Ratings said last year that it was unlikely to significantly impact the economy, though added compliance requirements could “increase the cost of foreign funding and potentially make financial transactions more onerous.” 

At its most recent plenary in June, the FATF highlighted progress by the UAE in a number of areas, but it downgraded the Gulf state’s rating on new technologies, including virtual assets, to “partially compliant” with standards. 

Since then, Dubai’s Virtual Assets Regulatory Authority has stepped up enforcement actions against unregulated firms and emphasized how a shift to more transactions on the blockchain from cash can help combat issues such as money laundering.

One remaining question is how UAE authorities will handle Binance, the world’s largest crypto exchange, which is being investigated by the US Justice Department to determine if it was used illegally to let Russians skirt sanctions and move money. Its chief executive officer Changpeng “CZ” Zhao lives in Dubai. 

Read More: Binance Founder’s Adopted Home Dubai Tightens Crypto Scrutiny


People familiar with the FATF proceedings said the UAE has made significant strides in overhauling some anti-money laundering and counter-terrorist financing regulations, though issues remain in execution of those policies. 

The FATF declined to comment. A UAE official said the country is continuing its efforts to identify, disrupt and punish criminals as well as illicit financial networks. 

Read More: UAE Ramps Up Extradition Pacts in Bid to Fight Dirty Money

The government said it has boosted its mutual legal assistance treaties to 45, including with Turkey. Officials sent 119 outgoing MLA requests to more than 40 jurisdictions in the first half of 2023, according to the UAE. In that span, the country said it received 202 incoming MLA requests, providing responses to 64% of them. 

“The global community and FATF observers are keen to witness robust enforcement measures to confirm that these changes are not mere cosmetic enhancements,” said Ibtissem Lassoued, the Dubai-based head of advisory in regional financial crime at law firm Al Tamimi & Co.

Read More: UAE Says Escape From Gray Listing Hinges on Policy Effectiveness

--With assistance from Lydia Beyoud, Chris Strohm and Malaika Kanaaneh Tapper.

©2023 Bloomberg L.P.