Dubai is a global financial center with an image that is marred with corruption and financial crime. Local and international governments and institutions are constantly failing to acknowledge the administrative issues and business practices that make Dubai a global hub for illegal financial flows.
Many financial crimes perpetrated by global actors operate through or from Dubai. Dubai’s property market is greatly involved in illicit transactions. Gold-laundering is another illicit trade that takes place in Dubai. Furthermore, due to its many free trade zones, Dubai has been home to trade-based money-laundering activities. Minimal regulatory oversight and customs enforcement help businesses to conceal the source of illegal money through false invoicing. Dubai is also witness to an exploitative migrant labor scheme not too different from human trafficking.
Addressing these problems by Dubai authorities is challenging due to several reasons. Firstly, the emirate provides a large scope and sophistication of illicit financial flows. Secondly, it is not sufficiently cooperative with international law enforcement agencies. In fact, Dubai is under a year-long observation by the FATF so that it completely implements the recently passed AML regulations and cooperates with other jurisdictions on cross-border criminal cases.
FATF’s step to keep Dubai under observation hints at increasing international scrutiny and pressure on the emirate’s activities. Dubai must start enforcing existing regulations more effectively and transparently. It should also intimately control the real estate, gold and banking sectors to make these sectors free of financial crimes. Moreover, liberalizing labor laws will help prevent exploitation of workers. Ensuring appropriate and timely cooperation with international law enforcement is also a must. Furthermore, international governments can increase pressure on the emirate by imposing travel and financial sanctions on facilitators of UAE-based financial crimes. Non-state entities such as the United Nations and the Bretton Woods institutions could also participate in checking financial crimes in Dubai by blacklisting it in various areas.
