While cryptocurrency-related crimes are punishable offense as per the Federal Decree number 20 of 2018 on Anti-Money Laundering and Countering the Financing of Terrorism in Dubai, large number of crypto-scammers are already operating in the city while law enforcement agencies are not taking any action against the perpetrators of such punishable offense.
The UAE’s fight against money laundering started in 2002 with the entry in force of Federal Law No. 4 on Criminalization of Money Laundering. Since then, a number of laws and cabinet decisions developed the UAE’s tools in its fight. The main legal framework for anti-money laundering (AML) being Federal Decree Law No. 20 and its implementing regulations (the AML Law), was enacted in 2018, with the aim of enhancing the legal regime governing the AML to ensure compliance with international recommendations and standards. The new legal framework empowers the authorities to collect and use data related to AML, as well as impose stricter punitive measures and hasten procedures of freezing suspected money. In furtherance to the new legal framework, the UAE Central Bank has been actively enacting guidance aimed at tracing and containing AML activities.
Despite the UAE’s ongoing efforts to be at par with international standards on AML, in April 2020, the Financial Action Task Force (FATF), an independent inter-governmental organization tasked with developing AML policies, intimated to the UAE that it should tighten its grip against money laundering or it will risk being included on its international watch list (along with other countries such as the Cayman Islands, Malta and Panama). This led to the UAE visibly increasing its efforts to mitigate money laundering risks coming from the influx of investments and capital into the country.
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As a part of UAE’s drive to become a global crypto hub, Dubai’s government has enacted a new law aiming at establishing the Emirate as an international center for crypto assets and related industries like the metaverse. Sheikh Mohammed bin Rashid Al Maktoum, the Prime Minister of the United Arab Emirates stated in his twitter account “Today, we approved the virtual assets law and established the Dubai Virtual Assets Regulatory Authority. A step that establishes the UAE’s position in this sector. The Authority will cooperate with all related entities to ensure maximum transparency and security for investors”.
Under the new legislation, a Dubai Virtual Assets Regulatory Authority will be established, which would be responsible for regulating virtual assets. In addition, it is also planned to be an independent authority which will oversee the regulation, governance, and licensing of cryptocurrencies, non-fungible tokens (“NFT”) and other virtual assets.
Unfortunately, the government’s efforts to secure cryptoasset transactions does not yet prevent scams. Indeed, the downside of the exponential growth of crypto industry is the increase of crypto scams in the UAE.
Several UAE authorities have raised concerns about cryptoasset transactions, including the Securities and Commodities Authority who has previously issued several warnings to UAE residents about cryptoasset-related frauds.
The dangerous aspect of cryptoasset transactions is its online anonymous nature which is a medium that can lead to fraud.
Therefore, according to Tarek Mohammed, Head of the Digital Assets Crime Section at the Dubai Police, in the first half of 2021, there were hundreds of cases of crypto scams in Dubai with victims losing up to 80 million AED in total.
