The UAE’s reluctance to tackle corruption and money laundering is a global challenge that needs to be addressed, according to a US think tank.
A new report of Carnegie Endowment found that the wealth that underpins “Dubai’s prosperity is a constant flow of illicit proceeds from corruption and crime.”
The US-based think tank’s report will likely cast a further shadow over its much-vaunted projected image as a haven for respectable investments.
Dubai is one of the seven emirates that make up the United Arab Emirates (UAE) and has built its reputation as a regional business center in the Middle East.
The city has gained worldwide fame for being the kind of place where supercars deliver mangoeswhile islands were built in the shape of palm trees.
Behind the façade of respectability that Dubai has carefully cultivated over the years, the flow of illicit funds “helped fuel the emirate’s booming property market; enrich its bankers, money changers and business elites; and transform the city into a major gold trading hub,” the authors of the Carnegie report added.
Transparency International, an anti-corruption group, has past said that “Dubai has become an active global hub for money laundering…where corrupt criminals and the like can go and buy luxurious property without any restrictions.”
The report, titled “Dubai’s Role in Facilitating Corruption and Global Illicit Financial Flowswarns the international community against “turning a blind eye”.
“Corrupt and criminal actors 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 good place to operate” , warns the report.
“With around 30 free trade zones, Dubai is a haven for trade-based money laundering,” the report adds.
More worryingly, the authors noted that UAE authorities have the tools and technical knowledge to crack down on illegal practices such as money laundering, but choose to avoid doing so, a decision that may threaten the overall financial viability of the city.
“Dubai is 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 struggled significantly in recent years – its debt load is around $135 billion (125% of GDP).
A $10 billion loan from neighboring Abu Dhabi, granted at the height of the financial crisis in 2009, remains unpaid and it has now been postponed a second time.
The global fallout from the coronavirus will also likely impact Dubai, which is increasingly reliant on tourism and the service sector as it tries to diversify away from oil.
Tourism wins the UAE 43.3 billion dollars and represents more than 12% of its GDP. Dubai is responsible for the vast majority of this revenue.
As the global economy largely came to a devastating halt across the globe, Dubai itself felt the full force of its impact.
Its airports closed, international air travel was halted, the price of oil plummeted and lockdowns prevented people from spending – all of the city’s vulnerabilities were exposed.
With such economic prospects, the “secret and distant” Dubai could become more dependent on illicit funds.
The Carnegie Endowment report noted that “Dubai often fends off outside attempts to discern whether kleptocrats and criminals are buying up property or laundering money through the emirate.”
In a post-coronavirus world, such state practices may well become essential to the survival of the city.
The Intergovernmental Financial Action Task Force (FATF) in April of this year, called the United Arab Emirates for its reluctance to tackle money laundering and as a result placed the country under observation for a year to ensure that it enforces the recently passed laws.
Countries that fall under the FATF regime could see a dampening effect on foreign direct investment as the financial system is perceived to be under the influence of corrupt groups or individuals.
The report also warned that unless the world puts pressure on the UAE’s elites to tackle corruption and money laundering more seriously, “Dubai will remain a challenge to efforts to fight against corruption and crime on a global scale”.
Source: World TRT