A new report has identified Nigeria as one of the major countries whose citizens use Dubai, the economic capital of the United Arab Emirates (UAE), to launder proceeds of corruption and other illicit financial activities. Carnegie Endowment for International Peace sponsored the report titled, “Dubai’s Role in Facilitating Corruption and Global Illicit Financial Flows.”
The authors are eight globally renowned anti-money laundering (AML) and financial crime specialists. They include Policy Director for Global Financial Integrity (GFI), Lakshmi Kumar, and Associate Fellow, Chatham House, and non-resident scholar, Carnegie Endowment for International Peace, Matthew Page, and a Fellow of the United Kingdom-based Centre for Democracy and Development (CDD).
One of the authors, Jodi Vittori, is also a non-resident scholar in the Democracy, Conflict, and Governance Programme, and an expert on the linkages of corruption, state fragility, illicit finance, and United States national security.
The report states that while the vast majority of financial, business, and real estate transactions in Dubai are not associated with illegal activity, part of what underpins its prosperity is a steady stream of illicit proceeds from corruption and crime. It adds that the foremost obstacle to reduction of Dubai’s problematic role is its economic dependence on illicit financial flows.
It notes that corrupt and criminal actors from around the world operate through or from Dubai, stressing, “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.”
A Nigerian, Ramon Olorunwa Abbas, popularly known as “Hushpuppi”, was recently arrested in Dubai and is currently facing trial in the United States for alleged money laundering and cyber fraud. According to the report, Dubai’s property market is a magnet for tainted money.
It says the Dubai property market is, “Built to attract foreign buyers, the emirate is dominated by towers of upscale flats and man-made islands studded with luxury villas. Property developers and real estate agents accept huge sums from politically-exposed persons – individuals entrusted with a prominent public function, as well as their families and associates – and other suspicious buyers.” International law enforcement agencies, the report stresses, find it especially difficult to acquire information and solicit cooperation from Emirati authorities.
It notes that in its April 2020 report on the UAE, the intergovernmental Financial Action Task Force (FATF) specifically called out Dubai for its limited number of money laundering prosecutions and convictions, adding that as a result, the FATF has placed the emirate under a year-long observation to ensure that it fully implements recently passed anti-money laundering legislation, actively works to dismantle international money laundering networks, and improve formal cross-border cooperation on criminal cases. It says, “Indeed, the emirate’s comparative advantage as a trade and financial hub relies to a large extent on its openness to dubious characters and transactions.
“The wealth has helped to fuel the emirate’s booming real estate market; enrich its bankers, moneychangers, and business elites; and turn Dubai into a major gold trading hub. “Meanwhile, both Emirati leaders and the international community continue to turn a blind eye to the problematic behaviours, administrative loopholes, and weak enforcement practices that make Dubai a globally attractive destination for dirty money.”
The report adds, “Even individuals targeted by international sanctions use Dubai property to launder money due to weak regulations and lax enforcement. “Now, one of the world’s largest gold hubs, Dubai is also a place to launder artisanally-mined gold, especially from conflict-prone parts of East and Central Africa. Opaque business practices and regulatory loopholes allow this laundered gold to enter world markets on a massive scale.
“With approximately 30 free trade zones, Dubai is a haven for trade-based money laundering. Operating with minimal regulatory oversight or customs enforcement, these zones allow businesses to disguise the proceeds of crime via the over- and under-invoicing of goods, multiple invoicing, and falsifying of other trade documentation.
“Many migrant workers are also treated as commodities in Dubai through the kafala system, an exploitative migrant labour scheme that shares some characteristics with human trafficking.”
The report states that the central government of the UAE, Dubai officials, and Emirati law enforcement agencies largely possess the technical knowledge and capacity to tackle these challenges. It points out that Emirati regulators, officials, and law enforcement agents are aware of how Dubai is being used as a conduit for illicit financial transactions, noting, “This is a feature, not a bug, of Dubai’s political economy.”