Dubai’s Virtual Assets Regulatory Authority (VARA) has tightened compliance measures for Virtual Asset Service Providers (VASPs) operating in the UAE.

The regulatory body has issued a circular emphasising the need for VASPs to align with updated Anti-Money Laundering (AML) regulations, particularly concerning high-risk jurisdictions identified by the Financial Action Task Force (FATF).

VARA is urging all VASPs to comply with mandatory rulebooks, notably the Compliance and Risk Management Rulebook, as part of its ongoing effort to ensure market stability and maintain financial integrity within the virtual assets sector.

VASPs are required to prioritise strict compliance with AML and Combating the Financing of Terrorism (CFT) regulations.

This includes implementing Enhanced Due Diligence (EDD) for transactions involving jurisdictions flagged as high-risk by the FATF, and regularly verifying lists and updates from both the FATF and the UAE’s National Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations Committee.

The circular underlines the FATF’s call for increased scrutiny on jurisdictions with significant deficiencies in addressing money laundering (ML), terrorism financing (TF), and proliferation financing (PF).

This involves applying targeted financial sanctions and implementing counter-measures to protect the UAE’s financial sector. Supervisory authorities in the UAE, including VARA, are empowered to take legal action against VASPs and their senior management for failing to comply with these regulatory requirements, which could include fines, cease and desist orders, and potential criminal charges.

In October 2024, VARA intensified its enforcement program, issuing cease and desist orders along with fines to seven entities operating without the required licences.

This step aligns with VARA’s mission to protect the public from unregulated firms and uphold high standards of market conduct.

Additionally, the UAE’s Executive Office of Anti-Money Laundering and Counter Terrorism Financing (EO AML/CTF) has begun implementing over 100 recommendations from the National Risk Assessment (NRA) to mitigate risks in vulnerable sectors, especially those involving virtual assets.

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