Is Dubai a home for dirty money? Regulatory Reform in the United Arab Emirates

Is Dubai a home for dirty money? Regulatory Reform in the United Arab Emirates
People sit under a display showing the values of different stocks at the Dubai Financial Market stock exchange in the Gulf emirate on April 12, 2022. - GIUSEPPE CACACE/AFP via Getty Images

ImpACT International for Human Rights Policies, a nongovernmental think-tank based in London, United Kingdom concerned with policies at the intersection of states and businesses warns that the United Arab Emirates must do more to tackle tax evasion. Indeed, not only has there been an excessively permissive attitude towards financial matters, the UAE has also tolerated tax evasion, and made itself a destination for storing assets that would otherwise be subject to sanctions. It has also become commonplace to offshore the proceeds of crime and corruption.

Whilst there is some movement and efforts to its reputation, this is minimal. The decision of the government of the UAE to allow its Federal Tax Authority (FTA) to receive reports from persons informing the FTA of instances of tax fraud, evasion, and breaches of the law is insufficient to end the high levels of criminality. The ‘whistle-blower program for tax violations and evasion’ programme is known as Raqeeb. The FTA now joins the Dubai Financial Services Authority, which also recently announced a whistleblowing programme. However, it just appears that the latest scheme is a public relations exercise designed to deflect attention away from Dubai’s many fiscal wrongdoings. Indeed, the system may be worse than useless, that presumes that the aim is to begin complying with accepted financial procedures.

The UAE is diversifying its economy from oil and is now fuelling its economy with the proceeds of crime and corruption.

– Robert Oulds, Executive Director of ImpACT International

There is a litany of unethical business practices in the UAE, these include the sale of assets stolen from war zones, such as blood diamonds and precious metals. This comes on top of the Pandora Papers which exposed the covert channelling of money by criminals using financial institutions based in Dubai. Furthermore, according to the US Financial Crimes Enforcement Network, the Central Bank of the United Arab Emirates enabled Iranian avoidance of American sanctions. This pattern is continuing, Russian citizens are using cryptocurrency to purchase property and businesses in the UAE to evade the sanctions which were enforced following the invasion of Ukraine. It is also likely that Russian flows of laundered money into the UAE are increasing. Moreover, the international regulator tasked with tackling money laundering, the Financial Action Task Force recently raised the alarm about the level of money laundering in the UAE and its financing of terrorism.

Lax transparency and lack of regulation are turning the UAE into a kleptocracy. Given the criticisms that has been levelled at the UAE it would be logical to expect that serious reform would be forthcoming. What has emerged, is at best underwhelming. Indeed, it does little to address the reputational damage that businesses in the UAE, and by extension the whole region, will suffer as a result of disreputable business practices. The provision of a home for the wealth of Russian oligarchs evading sanctions also has human rights considerations. The freezing of their assets is intended to apply pressure on the government of President Putin to end the invasion of Ukraine which has caused a humanitarian crisis, including the deaths of civilians, destruction of homes, livelihoods, and the displacement of millions of people. The UAE, with its refusal to expand supply of hydrocarbons to offset any move away from Russian resources and moves to associate itself with China has already incurred the ire of the Biden administration in America. The failure to address Dubai’s financial irregularities and especially the bypassing of sanctions will further lead to tensions emerging between the UAE and Britain, the United States, and the European Union.

The recent initiative by the UAE regarding whistle-blowers involves the informant officially registering and recording their details with authorities. The widespread corruption, and intertwined kleptocratic networks with state and business dominated by the representatives of the same prominent Emirati ruling families may bring into question the level of protection that a whistle-blower may receive. The suppression of dissident voices and the widespread use of Pegasus spyware in the United Arab Emirates do not make human rights and anti-corruption campaigners confident.

The UAE’s use of intrusive spyware has previously been covered by ImpACT International. Click here to watch the webinar on spying, surveillance, and censorship in the UAE and other jurisdictions:

Webinar: Spyware, surveillance, and civil liberties - YouTube

Ethical questions may also be raised regarding the offering of monetary rewards for disclosures of information, but given the Emirati’s financial free for all, this is perhaps not surprising and may be a prerequisite for any such programme to operate successfully. Nevertheless, the UAE’s efforts so far are insufficient to deliver change. As the Raqeeb programme is unlikely to alter the business culture in the UAE, ImpACT recommends that they must take the following action:


ImpACT International recommends:

  1. International standards:
    1. International Organization for Standardization (ISO) guidelines must be adopted immediately and in full.
    2. ISO 37002 proposals for improved Whistleblowing Management Systems should be implemented.
  2. Sanctions
    1. The UAE should cease handling the assets of those accused of human rights abuses and facilitating, war and similar abuses.
    2. Sanctions against rogue regimes should be respected and adhered to.
    3. The United Arab Emirates must end its golden visa scheme granting access to individuals that have been sanctioned over human rights abuses.
  3. Compliance
    1. The UAE should implement in full both the spirit and the letter of Organisation for Economic Co-operation and Development tax conventions.
    2. The authorities in the United Arab Emirates should share information with other jurisdiction pertaining to measures regarding withholding tax.
    3. Transparency and effective regulatory oversight must end the fraudulent offshoring of funds in the UAE.
  4. Level playing field
    1. The UAE, to avoid unfair tax competition, should expedite the introduction of a corporate tax.
  5. Responsibility and Restitution
    1. Given that it is widely acknowledged that the UAE is often the final destination of unlawfully obtained monies, and the home of improper financial schemes, the victims of fraud should be reimbursed by the Emirati state which is undisguisable from the corrupt business activities which take place there.

Robert Oulds, Executive Director of ImpACT states that,

“The UAE is diversifying its economy from oil and is now fuelling its economy with the proceeds of crime and corruption. Dubai’s finance industry is in danger of earning the UAE a reputation as a financially rogue state; operating outside of ethical boundaries.

“Whilst we welcome some of the steps that the UAE are taking to support whistle-blowers, authorities must do more. Its current actions on their own are not enough to offset the self-induced problems caused through allowing the laundering of Russian money and sanction busting activities. This is compounding the UAE’s reputation as a safe haven for those who commit the most egregious financial irregularities and hide wealth gleaned from other countries be that for the purposes of tax evasion or escaping international sanctions.

“To avoid becoming a pariah, aligned only with China and Russia and their satellites, the United Arab Emirates must start working towards international standards, share information, institute transparency, and end its association with rogue regimes and criminal elements.”


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