Dubai is a ‘haven for money laundering’
The UAE’s unwillingness to tackle corruption and money
laundering, is a global challenge that must be addressed, says a US think tank.
A new report from Carnegie Endowment has found that the
wealth underpinning “Dubai’s prosperity is a steady stream of illicit proceeds
borne from corruption and crime.”
The report from the US-based think-tank will likely further
cast a long shadow on its much-vaunted projected image as a haven for
respectable investment.
Dubai is one of the seven emirates that make up the United
Arab Emirates (UAE), and has built its reputation on becoming a regional
business hub in the Middle East.
The city has acquired global fame by being the sort of place
where supercars deliver mangoes, while islands have been built in the shape of
palm trees.
Behind the facade of respectability that Dubai has carefully
cultivated over the years, the flow of illicit funds “has helped to fuel the
emirate’s booming real estate market; enrich its bankers, moneychangers, and business
elites; and turn the city into a major gold trading hub,” the authors of the
Carnegie report added.
Transparency International, an anti-corruption group, has in
the past said that “Dubai has become an active global hub for money laundering
… where the corrupt and other criminals can go to buy a luxurious property with
no restrictions.”
The report, titled as “Dubai’s role in facilitating
corruption and global illicit financial flows”, warns the international
community against turning a “blind eye”.
“Corrupt and criminal actors from around the world operate
through or from Dubai. Afghan warlords, Russian mobsters, Nigerian kleptocrats,
European money launderers, Iranian sanctions-busters, and East African gold
smugglers, all find Dubai a conducive place to operate,” warned the report.
“With approximately thirty free trade zones, Dubai is a
haven for trade-based money laundering” the report went on to add.
More worryingly, the authors noted that UAE authorities have
the tools and the technical knowledge to clamp down on illegal practices such
as money laundering, but they choose to avoid doing this, a move that can
threaten the city’s overall financial viability.
“Dubai is being used as a conduit for illicit financial
transactions. This is a feature, not a bug, of Dubai’s political economy,” they
said.
The city’s economy has faced significant troubles in recent
years - its debt burden is at around $135 billion (125% of GDP).
A $10 billion loan from neighbouring Abu Dhabi that was
provided at the height of financial crises in 2009, remains unpaid and it has
now been rolled over a second time.
The global fallout from the coronavirus will also likely
impact Dubai which increasingly relies on tourism and the services sector as it
tries to diversify from oil.
Tourism earns the UAE $43.3 billion, and accounts for more
than 12 percent of its GDP. Dubai is responsible for the vast majority of that
income.
As the global economy has largely ground to a devastating
halt around the world, Dubai has itself felt the full force of its impact.
Its airports have closed, international air travel has been
halted, the price of oil has fallen, and lockdowns have kept people from spending
- all of the city’s vulnerabilities have been exposed.
With such an economic outlook, the “secretive and
standoffish” Dubai may become more dependent on illicit funds.
The Carnegie Endowment report noted that “Dubai often
rebuffs outside attempts to discern whether kleptocrats and criminals are
buying property or laundering money through the emirate.”
In a post coronavirus world, such state practices may well
become central to the city’s survival.
The inter-governmental Financial Action Task Force (FATF) in
April of this year, called out the UAE for its unwillingness to tackle money
laundering and as a result, placed the country under a one-year-long
observation to ensure that it is implementing recently adopted laws.
Countries that fall under the regime of the FATF could see a
dampening effect on foreign direct investment because the financial system is
seen as being under the influence of corrupt groups or individuals.
The report also warned that unless the world pressured
elites in the UAE to tackle corruption and money laundering more seriously,
“Dubai will remain a challenge to anti-corruption and anti crime efforts
globally.”
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