With its luxury hotels, skyscrapers and man-made islands, Dubai projects an image to the world of an ultra-modern luxury paradise. Behind the shimmering cityscape lies one of the most secretive — and cash-friendly — money-laundering hubs in the world.
Over the past months, the UK government has been taking important steps to keep suspicious foreign wealth out of the London property market and clamp down on anonymous company ownership in the overseas territories. This will slowly make it more difficult for the world’s corrupt politicians and organised crime groups to launder their dirty billions through the combination of offshore tax haven and luxury real estate sector that exist within the British system.
But even as one door begins to close, another remains wide open. A new investigative report released this week by the Organized Crime and Corruption Reporting Project (OCCRP) shows that the Emirate of Dubai offers criminals and the corrupt an easy alternative for laundering their ill-gotten assets — particularly through high-end real estate.
“This place is a money-laundering paradise.”
According to the report, apartments in Dubai worth millions of pounds can be bought in exchange for bags of cash, with startlingly few questions asked. A few days after the purchase is complete, the transaction can be cancelled and the money electronically refunded to a bank account chosen by the buyer. “This place is a money-laundering paradise,” one business expert told reporters.
On paper, the United Arab Emirates’ anti-money laundering law requires firms to conduct due diligence on their customers and verify who is actually behind the money or company buying property there. In reality, however, individuals under international sanctions, including organised crime figures from Russia and Central Asia, have managed to stash their money in Dubai’s thriving property sector.
Once through the door, these criminals are encouraged to make themselves at home: a property investment of just US$275,000 buys a Dubai residency visa that can be extended to family members.
Dubai is also a well-known centre for the centuries-old honour-based hawala system for moving money, in which a cash payment to a representative in one place is matched by a payment from a representative in another. The problem is that these transactions are almost impossible to trace or monitor for suspicious activity.
Corruption is all too often a cross-border crime, and it takes concerted international action to close the avenues through which the corrupt can flee justice, launder their stolen money and live the high-life with impunity.
Next year, the UAE will host Conference of the States Parties to the United Nations Convention against Corruption — one of the most important international gatherings for advancing the global fight against corruption. If the Emirates really want to establish their anti-corruption credentials among their peers, however, they can start by taking a tougher stance against the abuse of their property and financial sectors.
The first step should be to establish an open-data register of beneficial owners of companies and property. This would make it easier to enforce existing anti-money laundering laws and ban financial institutions, lawyers, accountants, real estate agents and trusts and corporate service providers from processing transactions if the beneficial owner of their customer cannot be identified. It would also mean they can take appropriate steps if the beneficial owner is on a sanctions list or is a politically exposed person.
In recent months, alongside the UK, we’ve seen countries with a fraction of Dubai’s per-capita wealth, like Afghanistan, Ghana and Nigeria commit to taking a similar step. The UAE already has some of the most advanced e-government services in the world, and access to the best information and communications technologies on the planet. Establishing a beneficial ownership register would be child’s play for the Emirate.
The question is, do its leaders have the political will?