It is now widely recognized that foreign investment into real estate has become arguably the most attractive vehicle for international oligarchs and other notable figures to launder illicit cash while increasing their equity as well as their access to new, high-class jurisdictions. The U.S. Treasury Department has found that those involved in organized crime, the international drug and human trafficking trades, and even politically exposed persons (PEPs) have ventured across international borders seeking to integrate their ill-gotten funds into the international financial system through the purchases of property, all while being shrouded in relative anonymity. With global real estate markets booming over the better part of the past two years, the sheer number of cash buyers of lucrative residential and commercial real estate has grown exponentially in the United States and abroad, creating problems for international authorities in tracking the origins of the funds utilized in what are often multi-million dollar transactions, as well as identifying the true individuals behind them. Given very lax requirements with respect to personal and beneficial ownership structure identification, the U.S. real estate market, as well as that of certain international counterparts, remains ripe for exploitation, with this practice threatening both national security as well as the integrity of the global financial system.
Recent reporting from several major international news outlets have highlighted the fact that nowhere on earth is this activity running as rampant as it is in the United Arab Emirates (UAE). A closer look at Dubai property data has shown that the glamorous, cosmopolitan allure of what is developing in to one of the world’s most popular tourist destinations has also attracted some of the world’s wealthiest individuals seeking to invest in a rather exclusive market. A recent data leak has now exposed the fact that wealthy foreigners are taking advantage of Dubai’s booming real estate industry, with all signs pointing to the market being exploited for purposes of money laundering. The new financials highlighted in the report were obtained by the Center for Advanced Defense Studies (C4ADS), a non-profit organization based in Washington, D.C., that researches international crime and conflict. Since its release, multiple other publications including the Organized Crime and Corruption Reporting Project (OCCRP) have come together to further expose those behind Dubai-based real estate investments. Altogether, the data showed that in 2020 a total of 800,000 properties that were purchased or held by 274,000 people and businesses located across the globe.3 All told, the Dubai housing market saw approximately $35 billion worth of property market transactions in 2021, the highest total since well before the global financial crisis. But more striking than the figures themselves are the individuals behind the transactions. While the investigation has shown that many real estate investors in Dubai properties are legitimate, numerous owners of properties were either accused or convicted of crimes, while many others were or are currently under international sanctions. Of these, more than 100 happen to be members of or are directly associated with Russia’s political elite. Multiple European public officials and lawmakers that had previously been accused of mishandling public funds are also listed owners of properties, with several failing to formally declare their Dubai properties.1 Aside from the luxury lifestyle seen across the UAE’s most populous city, further adding to its appeal was the fact that the region was quickly becoming one of the world’s largest corporate tax havens before recently announcing a new corporate tax to take effect in mid-2023. The UAE still does not impose a country-wide income tax however.
The ongoing military conflict in Ukraine is also undoubtedly contributing to the current number of Russian oligarchs and other foreign investors in the region potentially seeking to avoid international sanctions by using the United Arab Emirates as a safe haven for their fortunes. The UAE’s property magnate Hussain Sajwani has come out with a strong public statement that the UAE does not intend to stand by and just let this continue to happen. “I’m sure a lot of Russians are trying to fix their problems and their issues, but Dubai will benefit ultimately from any crisis,” he said. The statement comes after the UAE, which has long held close ties with Russia, decided not to match sanctions imposed by Western nations on the Kremlin for its invasion of Ukraine – a move that was heavily criticized by multiple international figures in wake of this crisis.2 Despite the tough statement from the Emirati property magnate, the fact of the matter is that the UAE is still known as a tax haven for a reason. The nature of its financial secrecy policies are the primary reason why money launderers are attracted to Dubai in the first place, with the UAE lagging behind its international counterparts with respect to having measures in place to appropriately extradite alleged white-collar criminals.
“Dubai has ask-no-questions, see-no-evil approach to commercial and financial regulation, as well as foreign financial crimes,” the OCCRP said in a 2020 assessment of the Gulf city. “It has consequently attracted large financial flows and some of the world’s most high-profile criminals.”1 Until Dubai improves oversight on their real estate industry with respect to the influx of foreign investment, wealthy criminals and sanctioned individuals alike will continue to use it as a haven. However, given the scope of Dubai’s economic boom in recent years after attracting these types of individuals, one would not expect things to change anytime soon.
Citations
- Kupfer, Matthew. “Dubai Uncovered: Data Leak Exposes How Criminals, Officials, and Sanctioned Politicians Poured Money into Dubai Real Estate.” OCCRP, 3 May 2022.
- Turak, Natasha, and Dan Murphy. “Property Booming in ‘Sanction Free’ Dubai as Russian Interest Spikes.” CNBC, CNBC, 17 Mar. 2022.
- MEE Staff. “Convicted Foreigners ‘Laundering Illicit Billions’ through Dubai Real Estate.” Middle East Eye, 3 May 2022.
