Investigations by the Organised Crime and Corruption Reporting Project (OCCRP) and the Centre for Advanced Defence Studies (C4ADS) released today raise global red flags that Dubai has become an open market for money laundering and a safe haven for the corrupt.
The report exposed the darker side of money laundering in which the hot Dubai property market has become a preferred conduit. Some Nigerians especially politically exposed persons, have always used the Dubai property market as vent to siphon illicit money from the country.
Some politicians own estates and marbled mansions in the highly commercial United Arab Emirate which is also a thriving tourist resort.
This is made easy by the weak financial monitoring structure in the UAE which makes it easy for the establishment and registration of shadow companies purposely for the illicit movement of money.
The new push is aimed at unmasking the faces behind the long-existing syndicate of money laundering playing big in the UAE property market.
According to reports, the United Arab Emirates’ (UAE) secretive and weakly regulated financial sector, and unaccountable high-end real estate market combine to offer the world’s criminals a range of services. Reports show that a lack of enforcement and oversight in Dubai’s property sector is tarnishing Dubai’s shimmering cityscape with vast amounts of dirty money.
Reports also show that individuals under international sanctions are finding safe haven in Dubai. Leaked private real estate data cited in today’s reports reveals that organised crime figures and politicians are flocking to Dubai to purchase property.
On paper, Dubai has made promises to clean up its act. After international criticism, the country strengthened its anti-money laundering rules. For example, real estate agents, developers, trust and corporate services providers and lawyers involved in real estate transactions are now required to conduct due diligence on customers and register with the Dubai Financial Services Authority (DFSA) for anti-money laundering supervision. This includes identifying the beneficial owner of legal customers and applying extra scrutiny to foreign politically exposed persons.
Despite these improvements, the Dubai Financial Services Authority (DFSA) completed only two investigations by the end of last year. No enforcement action appears to have been taken in the real estate sector. Furthermore, only 12 entities actually registered with the DFSA last year – an alarmingly low figure that raises red flags over whether Dubai takes its own regulations seriously.
“Dubai has been attracting secretive high-end real estate purchases by foreign companies and individuals for years, but despite the high risks of money laundering, the Government of the UAE fails to ensure that information about companies buying property is sufficiently recorded and made available, and that estate agents ensure they are acquiring all the necessary information about who is behind the deal,” said Patricia Moreira, managing director of Transparency International.
Next year, UAE will host the eighth session of the Conference of the States Parties (COSP), which is the primary policy-making body of the United Nations Convention against Corruption. In advance of this event, Transparency International calls on UAE to strengthen the enforcement of its property and financial sectors and crack down on existing abuse in both areas.
Transparency International issues the following series of recommendations to authorities in UAE:
Foreign companies purchasing property in UAE should have the legally enforceable requirement to provide information on their beneficial owners, which should then be available in open data format in the land registry or a public beneficial ownership registry.
Companies incorporated in Dubai should also be required to disclose their beneficial ownership information at the point of registration. This information should be kept in a public database in accordance with open data standards.
The Financial Intelligence Unit (FIU) and DFSA should provide training and guidance on how and when to submit Suspicious Transaction Reports (STR). Consequences should be rendered to those financial institutions and professionals, including real estate agents and lawyers, who fail to submit an STR when required by law to do so.
National authorities should conduct a “fit and proper” test of the companies and professionals that register for anti-money laundering supervision in order to make sure they meet the necessary requirements and are able to fulfil their obligations. Authorities should punish companies that do not comply with registration requirements.
Dubai should set a global example and step up its anti-money laundering enforcement measures to demonstrate that accepting “dirty money” for real estate transactions will not be tolerated. Supervisory bodies should be required to publish detailed data on their enforcement activity on an annual basis.
