The new regulation makes UAE one of the first countries to implement such a mechanism for real estate transactions involving virtual assets. Here’s everything you need to know
Payments for real estate transactions in the UAE through virtual assets, sale of virtual assets, or cash amounts above AED55,000 will now be subjected to additional reporting to authorities as per a new directive issued by the UAE.
It makes UAE one of the first countries to implement such a mechanism for real estate transactions involving virtual assets, and shows the country’s evolving approach to the global fight against money laundering and terrorist financing.
The decision was made following multiple meetings and discussions involving the MoE, MoJ, FIU, and other authorities like the Executive Office for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).
All real estate agents, brokers, and law firms are now obliged to file reports to the UAE Financial Intelligence Unit (FIU) for purchase and sale transactions of freehold real estate properties including any of the three methods of payment.
The payments methods include:
The introduction of new reporting requirements was announced by the Ministry of Economy (MoE) and the Ministry of Justice (MoJ) in partnership with FIU.
The decision was made following multiple meetings and discussions involving the MoE, MoJ, FIU, and other authorities like the Executive Office for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).
Ali Faisal Ba’Alawi, head of the UAE FIU, said: “These new measures will improve the quality of financial intelligence available to the FIU and will be used to trace the suspicious movement of funds or investments as part of our fight against money laundering and terrorism financing.
“Importantly, the requirements further strengthen the stability and integrity of the UAE’s real estate sector and provides all stakeholders with greater transparency in a sector that is a key contributor to the UAE’s economy.”
Abdulla bin Touq Al Marri, Minister of Economy, said the adoption of the highest standards of transparency and governance, in addition to the necessary regulations to ensure economic and financial stability while combating malpractice within the business community, are priorities of the Ministry of Economy and its partners in local, federal, and private sector entities.
Abdullah Sultan Bin Awwad Al Nuaimi, Minister of Justice, added: “The introduction of reporting rules for certain transactions in the real estate sector is another example of how the UAE is coordinating across the government and with the private sector to strengthen the national framework for anti-money laundering and countering the financing of terrorism.”
The agents, brokers and law firms will also need to obtain and record the identification documents of the parties to the applicable transaction. The rules apply to both individuals and corporate entities.
The relevant private sector entities have been informed about the specific requirements in regulatory circulators issued by the MoE and MoJ. The authorities are also collaborating to host three separate workshops with these parties to help guide them through the new requirements and enhance their familiarisation with the FIU’s goAML system.
In a recently published report “The UAE Virtual Assets Market“, Pwc talks about vulnerabilities of the real estate sector and how Dubai’s high-end luxury real estate market has been exposed to transactions in cash, has a highly internalised customer base, and is therefore prone to money laundering risks.
Here is an overview of recent events leading up to the announcement:
In his capacity as the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, issued the Dubai Virtual Asset Regulation Law to protect investors and govern the virtual assets industry – a move that experts within the industry believe is both timely and necessary to spur growth with the virtual assets sector.
The newly established Dubai Virtual Asset Regulatory Authority (VARA) will regulate, supervise, and control virtual asset services.
The authority will set the rules and controls that govern the conduct of virtual assets activities, including management, clearing, and settlement services, as well as classifying specifying types of virtual assets.
The approval of the virtual assets law and the establishment of the Dubai Virtual Assets Regulatory Authority is a step ahead for Dubai.
In a statement issued March 2022, Lewis Allsopp, the CEO of Allsopp & Allsopp said:
“The city remains at the forefront of emerging technologies and aligns with how the world is developing”.
“In my opinion, this will have an impact on business start-ups and established businesses opening offices in Dubai, innovation, creation, and so much more, which proves again that Dubai’s vision is set on the advancement for the future.”
The virtual assets law and the new regulatory authority is also likely to be welcomed by UAE residents, investors, and open up the Dubai property market.
“The real estate and holiday home industries are sure to benefit greatly. I predict this will entice property investors who can buy property with their cryptocurrency.”
Back in April 2022, Nakheel announced that customers can now pay for their rent, service fees, and real estate purchases using cryptocurrency, following an exclusive partnership between the Dubai property giant and Hayvn, which is a global institutional digital currency platform.
The CEO of Hayvn, Christopher Flinos, said: “Cryptocurrency is a $1.8 trillion asset class. When you open up a market to investors who together comprise $1.8 trillion, then you are going to see some investors switch out of crypto and into UAE real estate.
“This is the biggest change to UAE real estate since the Palm Jumeirah was announced. To be working with Nakheel, the original pioneer of Dubai real estate demonstrates the value of our ADGM regulated status.
This exclusive cryptocurrency agreement indicates the continuing evolution of real estate in the UAE.
In April, UAE’s Damac Properties announced that they will begin accepting Bitcoin and Ethereum as payments for property purchased.
Damac isn’t the first real estate group to accept cryptocurrency as payment. The company is part of a growing group that is accepting payments in virtual currencies.
“This move towards customers holding cryptocurrency is one of our initiatives to accelerate the new economy for newer generations, and for the future of our industry,” Ali Sajwani, general manager of operations at Damac and lead of the organisation’s digital transformation initiatives.
“It is crucial for global businesses like ours to stay at the top of evolution. Offering yet another transactional mode is exciting, and we are glad to recognise the value this technology brings to our customers.”
Outside real estate, some restaurants and other businesses, including startups have begun accepting cryptocurrencies as payment.
Dubai’s real estate market has witnessed rapid change in recent months, like the ones mentioned above and has seen a bull run with property deal transactions to the tune of AED1.6 billion on Monday, August 9, from a low of AED888 million recorded Wednesday last week.
The real estate sector was rated by FATF as a medium-high risk, regardless of whether real estate transactions took place on the mainland or in a freezone.
However, the UAE has been keen in addressing the FAFT points by implementing a National Action Plan to strengthen the effectiveness of its AML/CTF regime.
Explained: UAE’s new real estate rule regarding payments using virtual assets and cash
Dubai real estate deals hit 12-year-high in July at $5.7 billion
UAE is witnessing a massive influx of investors as the best country for entrepreneurs
