The Financial Action Task Force (FATF) published its Fourth Round Mutual Evaluation Report (MER) on Qatar’s Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regime on May 31, 2023.[1] The highly anticipated report renders an authoritative verdict on AML/CFT improvements implemented by Qatar during a time when the Gulf country was simultaneously managing the 2017-2021 blockade crisis, a worldwide pandemic, and FIFA World Cup Qatar 2022. The evaluation generated a high level of interest among FATF watchers because Qatar is the first GCC country to undergo FATF scrutiny following FATF’s placement of UAE on its “Grey List” of countries under increased monitoring.
A Good Result for Qatar
FATF’s 276-page report on Qatar’s AML/CFT regime generally affirms the efficacy of Qatar’s government-wide effort to address ML/TF risks and to implement an effective targeted financial sanctions (TFS) regime.
“Qatar has all of the key structural elements required for an effective AML/CFT system including political and institutional stability, the rule of law, a professional and independent prosecution and judiciary and a high-level political commitment to AML/CFT.” FATF Report, p.24.
Qatar was given FATF’s highest rating in 32 of the 40 technical compliance areas, and was rated substantially or moderately effective in 10 of the 11 effectiveness categories covered by the FATF MER. The Report identifies specific accomplishments including: 1) an updated comprehensive AML/CFT law (Law 20 of 2019) which provides law enforcement with important tools and improves interagency coordination; 2) a strong, well-equipped and effective Financial Information Unit (FIU) that distributes high-quality strategic analysis to a wide range of cooperating agencies; 3) a well-regulated Qatar Financial Centre (QFC) which conducts robust, risk-based supervision with an accomplished AML/CFT supervisory team at the QFC Regulatory Authority (“QFCRA”); and 4) an upgraded and effective domestic TFS regime established by Law 27 of 2019 on Combating Terrorism. The Report notes that Qatar has exercised its domestic TFS regime on multiple occasions, including a joint bilateral action with the United States involving seven persons based in Qatar, Bahrain and Saudi Arabia who provided financial support to Hizballah, and associated asset freezes totaling more than 3.6 billion Qatar Riyals. FATF Report, p.115.
Work Remains to Be Done
While Qatar generally exceeded expectations in the Fourth Round, the MER discusses many important areas in which Qatar can still improve. Given Qatar’s past record of directing resources to remediate identified gaps, the FATF report lays out a roadmap showing where Qatar’s ministries and supervisory authorities may focus their attention in the short to medium term. While some of the gaps identified by FATF relate to law enforcement and intelligence equities, many relate to matters of immediate importance to Qatar’s business community:
- Beneficial Ownership (BO) and Unified Economic Register: The MER encourages the Ministry of Commerce and Industry to finalize the collection of BO, to adopt measures to ensure accurate and up-to-date BO information, and to address unmitigated risks associated with the use of nominee directors and shareholders.
- Non-Profit Organizations: To ensure that charities and non-profit organizations (NPOs) are not abused for TF, the MER encourages the Regulatory Authority for Charitable Activities (RACA) to apply enhanced supervision of most at-risk NPOs while implementing a proportionate regulatory burden on the rest of the NPO sector.
- DNFBPs: Additional supervisory attention is required to ensure that regulatory obligations are met, including filing of Suspicious Transaction Reports (STRs).
“NAMLC should ensure the effective implementation of the new law regulating cash use, including through industry guidance to understand and implement the law and mechanisms for supervisory authorities to ensure compliance.”FATF Report, p.36.
- STRs: The volume of filings remains low. Some DNFBPs still submit STRs manually, and certain DNFBPs outside the QFC remain unfamiliar with general STR requirements including whom they should file them with.
- Regulation of Cash Use: The MER encourages the National Anti-Money Laundering Committee to issue guidance to businesses on the new Cash Transactions Law (Law 4 of 2022) and to enforce compliance with the law.
- Virtual Assets Service Providers (VASPs): Although currently prohibited by law, enforcement is not prioritized. The prohibition may be subject to review if the Qatar considers policy changes and whether to adopt a digital currency.
- Proliferation Financing (PF): The MER judges Qatar to have exposure to PF threats based on trade and transport links with Iran, and the threat of foreign state actors who may seek to exploit Qatari banks and companies to finance and facilitate the proliferation of WMDs. Financial Institutions and DNFBPs may see increased regulatory attention paid to PF per FATF’s findings in Chapter 4 of the MER.
Conclusion
Qatar did well in the FATF Fourth Round Evaluation, receiving generally positive ratings in most of the technical compliance and effectiveness categories. The MER confirms Qatar’s high level of commitment to FATF’s AML/CFT principles and the MER will enhance Qatar’s reputation as a good place to do business. Qatar is now likely to direct resources toward improving its overall AML/CFT performance in accordance with the guidance outlined in the MER. Companies may prepare for increased regulatory attention by taking stock of risks associated with their business sectors, refreshing compliance policies and practices, and providing training that prioritizes PF, STRs, DNFBP responsibilities, the Cash Transactions Law, and other matters covered in the FATF Report.
Michael Gunnison is a Senior Counsel in Crowell & Moring’s Doha office. He was a member of U.S. observer delegations to MENA FATF while serving as the U.S. Department of Justice (DOJ) Resident Legal Advisor to UAE the GCC countries in 2006-2008 and 2013-2016. He served as the DOJ Resident Legal Advisor to the Government of Qatar in 2018-2021.
[1] https://www.fatf-gafi.org/content/dam/fatf-gafi/mer/Mutual-Evaluation-Qatar-2023.pdf.coredownload.pdf
For further information, please contact:
Michael J. Gunnison, Crowell & Moring
mgunnison@crowell.com
