A new report titled ‘Dubai’s Role in Facilitating Corruption and Global Illicit Financial Flows’ published on Wednesday by Carnegie Endowment For International Peace, has identified Dubai, a global financial centre and a shopper’s paradise, thriving largely on steady stream of illicit proceeds borne from corruption and crime.
The report stated that the wealth from the illegal channels had 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.
According to the research paper edited by Matthew Page and Jodi Vittori with contributions from various AML and financial crime specialists, including Lakshmi Kumar, Policy Director for Global Financial Integrity (GFI), these illegalities have become more accentuated due to the Emirati leaders and the international community’s non-charlant attitude to the problematic behaviours, administrative loopholes, and weak enforcement practices that make Dubai a globally attractive destination for dirty money.
While noting that though Dubai is just one of many enablers of global corruption, crime, and illicit financial flows, the authors noted that addressing the emirate’s role presented anticorruption practitioners, law enforcement agencies, and policymakers with particularly complex challenges.
The report listed some of these challenges as including the huge scope and sophistication of illicit financial flows and global facilitation networks that terminate in or transit through Dubai.
It further stated: “These problematic linkages intersect with a range of other regional and functional policy concerns. Secretive and standoffish, Dubai often rebuffs outside attempts to discern whether kleptocrats and criminals are buying property or laundering money through the emirate.
“As leaders in Washington and several other Western capitals reassess their strategies and relationships in the Gulf to reflect changing geopolitical realities, new economic imperatives, and growing divergences with regional partners on a range of policy issues, there is a fleeting opportunity to elevate and address widespread concerns about Dubai’s role in enabling global corruption and its many destabilizing effects”, it added
The researchers pointed out, however, that doing so will require a fine understanding of why and how corruption has become such a central element of Dubai’s political economy as well as the need for anticorruption practitioners to recognize that traditional – and largely punitive- policy instruments will not succeed without a more affirmative and sustained effort by Emirati leaders to ensure that Dubai’s economy remains competitive and attractive over the long term.
Some of the concerns raised in the report as fuelling Dubai as a hub of global illicit financial flows and corruption include, corrupt and criminal actors from around the world operate through or from Dubai; the Emirate’s property market as a magnet for tainted money; its ranking as the world’s largest gold hubs; and Dubai’s approximately 30 free trade zones which make it a haven for trade-based money laundering, amongst others.
On the way ahead to address the worrisome trend, the authors believed that incremental reforms were feasible, realistic, and in the strategic interest of Emirati leaders and their international partners.
This is even as they projected that being placed under observation by the Financial Action Task Force (FATF) remained an important signal that international scrutiny and pressure on Dubai’s activities will only increase.
The report also recommended that Western policymakers can also play a role in encouraging and pressuring the Dubai government and the UAE to implement reforms, striking a balance between their anticorruption concerns and other strategic priorities.
It further canvassed: “International organizations, civil society groups, and Western governments could also distance themselves from Dubai’s reputation laundering efforts, such as by avoiding counterproductive or mixed messages when participating in events that burnish Dubai’s anticorruption, human rights, or conflict prevention credentials.
“These international actors would need to work together to craft a coherent and coordinated set of incentives and disincentives—the so-called carrots and sticks—that would influence Emirati leaders’ decision making calculus”, the researchers added.