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UAE’s Progress on Money Laundering Concerns Unclear Amid Ongoing Gray Listing

The United Arab Emirates (UAE) has made some efforts to address concerns over money laundering and terrorist financing, but the extent of its progress remains unclear, experts say.

Background

In 2021, the UAE was placed under enhanced monitoring by the Financial Action Task Force (FATF), a global standard-setting body that sets guidelines for combating financial crime. The move came after FATF identified several deficiencies in the country’s anti-money laundering and counter-terrorist financing systems.

Key Concerns

One of the key concerns was the role played by enablers from the UAE in facilitating cross-border corruption cases, particularly those involving public officials and politically exposed persons (PEPs). A recent analysis found that enablers from the UAE were involved in at least nine out of 78 analyzed cases.

Notable Case

Dubai-based SFM Corporate Services, a corporate service provider, was highlighted as one of the firms at the heart of the Pandora Papers investigations. Journalists were able to identify the owners of 2,977 companies established by SFM between 2000 and 2019, which included PEPs and individuals accused of various financial offenses.

One notable case involved former Zambian civil servant Charles Sipanje, who relied on SFM’s services to establish a company in the UAE in 2018. The circumstances raised questions regarding the extent of SFM’s due diligence checks. Sipanje has claimed that the UAE company was never operational, while SFM denied accusations of wrongdoing.

Ongoing Gray Listing

It is unclear if the UAE authorities ever looked into this or other cases, and if SFM faced any investigations and/or sanctions. According to the UAE National Economic Register, SFM still owns a legal business license to provide corporate services.

FATF Concerns

FATF’s concerns also included:

  • Lack of investigations and prosecutions of corruption cases in line with the country’s risk profile
  • Inadequate international cooperation and financial intelligence sharing
  • Limited progress on these issues, despite increased number of prosecutions
  • Failure to make significant improvements in sharing intelligence and prosecuting money laundering cases
  • Non-financial gatekeepers’ reports account for only 3% of suspicious activity and transaction reports in the UAE

Refusal to Cooperate

The country has been accused of not cooperating with other jurisdictions on major money laundering cases. The infamous Gupta brothers, who were at the center of widespread corruption in South Africa under former president Jacob Zuma, are accused by South Africa of paying bribes in exchange for lucrative state contracts and influence over ministerial appointments. The UAE released the brothers after Interpol issued red notices for their arrest, following a request from the South African government.

South Africa isn’t the only country frustrated by the UAE’s refusal to cooperate on major corruption cases. Angola has also been unable to convince the UAE to extradite former president’s daughter Isabel dos Santos, who owns property in Dubai and has been charged with allegedly defrauding the country of US$219 million.

Experts’ Assessment

Despite recent reforms aimed at addressing FATF’s concerns, many experts believe that the country still has a long way to go. The limited availability of information and restricted space for activists and independent journalists to operate in the UAE make it essential for the international community to continue pressing the government to address remaining deficiencies and protect the global financial system.

Sources:

  • Financial Action Task Force (FATF)
  • Pandora Papers
  • Zambian authorities
  • UAE National Economic Register