1、DUBAIS ROLEIN FACILITATING CORRUPTIONAND GLOBAL ILLICIT FINANCIAL FLOWSMATTHEW T. PAGE AND JODI VITTORI, EDITORSANDGLOBALILLICITFINANCIALFLOWSMATTHEWT.PAGEAND10%VTT0RlEDlT0RSCARNEGIEENDOWMENT FORINT ERNATI ONAL PEAC EDUBI S ROEINFACILITATINGCORRUPTIONTABLE OF CONTENTSAbout the Authors v HYPERLINK l

2、_TOC_250020 Abbreviations vii HYPERLINK l _TOC_250019 Summary ix HYPERLINK l _TOC_250018 CHAPTER 1 HYPERLINK l _TOC_250017 Introduction 1 HYPERLINK l _TOC_250016 JODI VIT TORI HYPERLINK l _TOC_250015 CHAPTER 2 HYPERLINK l _TOC_250014 The Political Economy of Dubai 13 HYPERLINK l _TOC_250013 KRISTIAN

3、 COATES ULRICHSEN HYPERLINK l _TOC_250012 CHAPTER 3 HYPERLINK l _TOC_250011 Dubai: Free Trade or Free-For-All? 23 HYPERLINK l _TOC_250010 LAKSHMI KUMAR iii HYPERLINK l _TOC_250009 CHAPTER 4 HYPERLINK l _TOC_250008 Dubais Problematic Gold Trade 35 HYPERLINK l _TOC_250007 SHAWN BLORE AND MARCENA HUNTE

4、R HYPERLINK l _TOC_250006 CHAPTER 5 HYPERLINK l _TOC_250005 Dubais Vulnerability to Illicit Financial Flows 49 HYPERLINK l _TOC_250004 PETER K IRECHU HYPERLINK l _TOC_250003 CHAPTER 6 HYPERLINK l _TOC_250002 The Illicit Allure of Dubais Luxury Property Market 59 HYPERLINK l _TOC_250001 PETER K IRECH

5、U AND JODI VIT TORI HYPERLINK l _TOC_250000 CHAPTER 7How Emirati Law Enforcement Allows Kleptocrats 67and Organized Crime to ThriveK AREN GREENAWAYCHAPTER 8The UAEs Kafala System: Harmless or Human Trafficking? 79MUSTAFA QADRI CHAPTER 9The Kabul to Dubai Pipeline: Lessons Learned 85From the Kabul Ba

6、nk ScandalBRIAN GEORGE CHAPTER 10Challenges and Recommendations 95JODI VIT TORI AND MAT THEW T. PAGEAppendix: UAE Free Zones 103Notes 107Carnegie Endowment for International Peace 130ivABOUT THE AUTHORSSHAWN BLORE, previously a journalist, is now an independent consultant specializing in the areas o

7、f natural resources, supply chains, smuggling, and clandestine financial flows. He has worked for a variety of nongovernmental organizations (including Impact, Partnership Africa Canada, and the Diamond Development Initiative) as well as the German aid agency Deutsche Gesellschaft fur Internationale

8、 Zusammerarbeit (GIZ) and the U.S. Agency for International Development.BRIAN GEORGE is an accountant and has spent the last twelve years investigating fraud, money laundering, criminal activity, and for-profit corruption schemes within Afghanistan and South America. George is considered a subject m

9、atter expert on the finances of the Revolutionary Armed Forces of Colombia and the Taliban, having worked within the U.S. Southern Command, Afghan ftreat Finance Cell, Task Force 2010, and the Counter Corruption Action Group (CCAG) Afghanistan.KAREN GREENAWAY is an attorney at law who served more th

10、an twenty-two years in the U.S. Federal Bureau of Investigation as both a special agent and supervisory special agent. She conducted and supervised investigations of transnational organized crime, mon- ey laundering, foreign bribery, and other corruption activities, focusing primarily on the former

11、Soviet Union, Russia, and Central and Eastern Europe. She is now an independent consultant, advising the bureau, civil society, nongovernmental organizations, and investi- gative journalists on their work on foreign corruption.vMARCENA HUNTER is a senior analyst at the Global Initiative Against Tran

12、snational Organized Crime, where she has worked since 2012. She specializes in gold-related crime, illicit financial flows, and the political and economic development impacts from and re- sponses to organized crime.PETER KIRECHU is the program director for the Conflict Finance and Irregular ftreats

13、Cell at the Center for Advanced and Defense Studies (C4ADS). He is a specialist on illicit transnational networks in the Middle East and Africa.LAKSHMI KUMAR is the policy director at Global Financial Integrity (GFI), a Washington, DCbased think tank specializing in research, advocacy, and advisory

14、services. Kumar works on issues of illicit finance and trade and the vehicles, systems, and institutions that facilitate movement of illicit money across borders.MATTHEW T. PAGE is a nonresident scholar with the Carnegie Endowment for International Peace, an associate fellow with the Africa Programm

15、e at Chatham House, and nonresident fellow with the Centre for Democracy and Development in Abuja. He does consultancy work and co-authored Nigeria: What Everyone Needs to Know (Oxford University Press, 2018). Until recently, Page was the U.S. intelligence communitys top Nigeria expert at the Depart

16、ment of States Bureau of Intelligence and Research. He has also served on the National Intelligence Council, at the Defense Intelligence Agency, and as an international affairs fellow with the Council on Foreign Relations.MUSTAFA QADRI is the founder and executive director of Equidem Research and Co

17、nsulting, which specializes in human rights and labor rights investigations. He is a hu- man rights research and advocacy expert with over fifteen years of interdisciplinary experi- ence in the government and public international law, journalism, and nongovernmental sec- tors. Mustafa has authored s

18、everal human rights reports on the construction industry, civil and political rights issues, and media freedom, including “fte Ugly Side of the Beautiful Game,” an investigation into labor abuse on Qatar 2022 World Cup construction sites.KRISTIAN COATES ULRICHSEN is a fellow with the Center for the

19、Middle East at Rice Universitys Baker Institute for Public Policy and an associate fellow at Chatham House. He has authored five books on the Gulf states, including The United Arab Emirates: Power, Politics, and Policy-Making (Routledge, 2016). His most recent book is Qatar and the Gulf Crisis (Hurs

20、t, 2019).JODI VITTORI is a nonresident fellow with the Carnegie Endowment for International Peace and the U.S. research and policy manager for Transparency Internationals Defense and Security Program. She is an expert on the linkages of corruption, state fragility, illicit finance, and U.S. national

21、 security. Vittori is the author of Terrorist Financing and Resourcing (Palgrave Macmillan, 2011) and a co-author of the handbook “Corruption ftreats and International Missions: Practical Guidance for Leaders.”viABBREVIATIONSADAAAbu Dhabi Audit and Accountability AuthorityAMLantimoney launderingAML/

22、CTFantimoney laundering and counterterrorism finance (law)ASGMartisanal and small-scale gold miningATFCAfghanistan ftreat Finance Cell (United States)CTFcounterterrorism financeDABDa Afghanistan BankDGDDubai Good Delivery standardDIFCDubai International Finance CentreDMCCDubai Multi Commodities Cent

23、reDNFBPdesignated nonfinancial business professionsDRCDemocratic Republic of CongoEUEuropean UnionFARAForeign Agent Registration Act (United States)FATFFinancial Action Task ForceFBIFederal Bureau of Investigation (United States)FIUFinancial Intelligence UnitGCCGulf Cooperation CouncilviiICGLRIntern

24、ational Conference of the Great Lakes RegionJAFZAJebel Ali Free ZoneMENAFATFMiddle East and North Africa Financial Action Task ForceMLOMoney Laundering Operation (Altaf Khanani)MOIMinistry of Interior (UAE)OCCRPOrganized Crime and Corruption Reporting ProjectOECDOrganisation for Economic Co-operatio

25、n and DevelopmentOFACOffice of Foreign Assets Control, Department of Treasury (United States)PEPpolitically exposed personSAIState Audit Institution (UAE)SCBStandard Chartered BankTBMLtrade-based money launderingUAEUnited Arab EmiratesUNCACUnited Nations Convention Against CorruptionUNODCUnited Nati

26、ons Office on Drugs and CrimeUNTOCUnited Nations Convention Against Transnational Organized CrimeVATvalue-added taxWCOWorld Customs OrganizationNote: ftis report uses the term “free zone,” as defined in the International Convention on the Simplification and Harmonisation of Customs Procedures (also

27、known as the Revised Kyoto Convention). A free zone is “a part of the territory where any goods introduced are generally regarded, insofar as import duties and taxes are concerned, as being outside the customs territory.” fte broad category of free zones includes, but is not limited to, free trade z

28、ones, commercial free zones, financial free zones, export processing zones, and some industrial parks.According to the Financial Action Task Force (FATF) 2020 evaluation on the United Arab Emirates (UAE), the UAE has twenty-nine commercial free zones and two financial free zones. ftese are specific

29、subsets of free zones and do not constitute the number of free trade zones in the UAE. As noted in this report, the UAE has approximately forty-five free trade zonesof which about thirty are located in Dubai.It is difficult to determine the exact number of free zones (including free trade zones), as

30、 there is no comprehensive official list. See the appendix for a list of all known Emirati free zones.viiiSUMMARYA TWENTY-FIRST-CENTURY CITY, Dubai is a global financial center, a shoppers para- dise, and an oasis for the worlds well-to-do. While the vast majority of financial, business, and real es

31、tate transactions in Dubai are not associated with illegal activity, part of what underpins Dubais prosperity is a steady stream of illicitproceeds borne from corruption and crime. fte wealth has helped to fuel the emirates booming real estate market; enrich its bank- ers, moneychangers, and busines

32、s elites; and turn Dubai into a major gold trading hub.Corrupt and criminal actors from around the world operate through or from Dubai.Meanwhile, both Emirati leaders and the international community continue to turn a blind eye to the problematic behaviors, administrative loopholes, and weak enforce

33、ment practices that make Dubai a globally attractive destination for dirty money.As leaders in Washington and several other Western capitals reassess their strategies and re- lationships in the Gulf to reflect changing geopolitical realities, new economic imperatives, and growing divergences with re

34、gional partners on a range of policy issues, there is a fleet- ing opportunity to elevate and address widespread concerns about Dubais role in enabling global corruption and its many destabilizing effects. But doing so will require a fine under- standing of why and how corruption has become such a c

35、entral element of Dubais political economy. It will also require anticorruption practitioners to recognize that traditionaland largely punitivepolicy instruments will not succeed absent a more affirmative and sus- tained effort by Emirati leaders to ensure that Dubais economy remains competitive and

36、 attractive over the long term.ixMAJOR AREAS OF CONCERNCorrupt and criminal actors from around the world operate through or from Dubai. Afghan warlords, Russian mobsters, Nigerian kleptocrats, European money launderers, Iranian sanctions-busters, and East African gold smugglers, all find Dubai a con

37、ducive place to operate.Dubais property market is a magnet for tainted money. Built to attract foreign buyers, the emirate is dominated by towers of upscale flats and man-made islands studded with luxury villas. Property developers and real estate agents accept huge sums from politi- cally exposed p

38、ersonsindividuals entrusted with a prominent public function, as well as their families and associatesand other suspicious buyers. Even individuals targeted by international sanctions use Dubai property to launder money due to weak regulations and lax enforcement.Now one of the worlds largest gold h

39、ubs, Dubai is also a place to launder artisanally mined gold, especially from conflict-prone parts of East and Central Africa. Opaque business practices and regulatory loopholes allow this laundered gold to enter world markets on a massive scale.With approximately thirty free trade zones, Dubai is a

40、 haven for trade-based money laundering. Operating with minimal regulatory oversight or customs enforcement, these zones allow businesses to disguise the proceeds of crime via the over- and under- invoicing of goods, multiple invoicing, and falsifying of other trade documentation. Many migrant worke

41、rs are also treated as commodities in Dubai through the kafala system, an exploitative migrant labor scheme that shares some characteristics with human trafficking.fte central government of the United Arab Emirates (UAE), Dubai officials, and Emirati law enforcement agencies largely possess the tech

42、nical knowledge and capacity to tackle these challenges. Emirati regulators, officials, and law enforcement agents are aware of how Dubai is being used as a conduit for illicit financial transactions. ftis is a feature, not a bug, of Dubais political economy.What happens in Dubaiand the UAEmatters b

43、ecause both are strategically impor- tant to the United States, United Kingdom (UK), and other countries. fte UAE is one of Washingtons and Londons key security and trading partners in the region. Dubai, in particular, has close historical and commercial ties to neighboring Iran. Moreover, many of t

44、he illicit activities outlined in this report have strategic consequences for the United States and UK insofar as they exacerbate conflict, transnational organized crime, terror- ism, and poor governance in countries all around the world.xTHORNY ANTICORRUPTION AND ORGANIZED CRIME CHALLENGESDubai is

45、just one of many criminal facilitation nodes throughout the world, but addressing the emirates problematic role presents anticorruption and law enforcement practitioners and policymakers with particularly complex and delicate challenges.Foremost among these challenges is the huge scope and sophistic

46、ation of illicit financial flows and global facilitation networks that terminate in or transit through Dubai. ftese problematic linkages intersect with a range of other regional and functional policy con- cerns. Secretive and standoffish, Dubai often rebuffs outside attempts to discern whether klept

47、ocrats and criminals are buying property or laundering money through the emirate.International law enforcement agencies find it especially difficult to acquire in- formation and solicit cooperation from Emirati authorities. In its April 2020 re- port on the UAE, the intergovernmen- tal Financial Act

48、ion Task Force (FATF) specifically called out Dubai for its lim- ited number of money laundering pros- ecutions and convictions. As a result, the FATF has placed the emirate under a year-long observation to ensure that it fully implements recently passed antiDubai is just one of many criminal facili

49、tation nodes throughoutthe world, but addressing the emirates problematic role presents anticorruption and law enforcement practitioners and policymakers with particularly complex and delicate challenges.money laundering legislation, actively works to dismantle international money launder- ing netwo

50、rks, and improves formal cross-border cooperation on criminal cases.1 With this charge, policymakers and practitioners cannot overlook Dubais failure to take the remedial policy and enforcement steps needed to stem illicit financial flows.Other major challenges are the emirates highly personalized i

51、nstitutions and lack of mecha- nisms to hold elites accountable. Although kleptocrats and criminals are similarly active and able to exploit lax regulations in the United States, the UK, and many other European countries, they face significantly more scrutiny from law enforcement, media, and civil s

52、o- ciety in those countries than they do in Dubai. fte emirate does not uphold open elections, a free press, a vigorous civil society, and the right to peaceful protest. Absent domestic and international pressure, Emirati elites are free to resist reforms that endanger their vested in- terests or th

53、eir preferred political economic vision for Dubai and the UAE overall. Until in- ternational policymakers and practitioners intensify their efforts to incentivize and pressure Emirati decisionmakers to make reforms and crack down on illicit financial flows through the emirate, Dubai will remain a ch

54、allenge to anticorruption and anticrime efforts globally.Finally, calling Dubai out on its prominent role in facilitating illicit financial flows bumps up against competing strategic policy priorities important to Western decisionmakers.xifte UAE is a stable and reliable regional ally of the United

55、States, the UK, and other European countries. fte Emirati government has long enjoyed a special friendship with Washingtonone that transcends political party lines. A former U.S. ambassador to the UAE has remarked, “It was well known that if you needed something done in the Middle East, the Emiratis

56、 would do it.”2 From a political-military standpoint, the UAE has publicly supported the U.S. governments hard-line policy toward Iran. Anticorruption advocates and law enforcement practitioners must acknowledge the genuine importance of these close strategic ties and take them into account when dea

57、ling with Western policymakers who look at the UAE with a broader spectrum of priorities in mind.WAYS AHEADIncremental reforms are feasible, realistic, and in the strategic interest of Emirati leaders and their international partners. Dubais role as a facilitator of corruption is unsustainable over

58、the long term because it is predicated on continued international tolerance of the emirates permissive attitude toward many types of illicit activities. Being placed under observation bythe FATF is an important signal that inter-Being placed under observation by the FATF (Financial Action Task Force

59、) is an important signal that international scrutiny and pressure on Dubais activitieswill only increase.national scrutiny and pressure on Dubais activities will only increase. Moreover, the emirate will remain disproportionately vul- nerable to external shocks like the 2008 global financial crisis,

60、 when not only le- gitimate business, real estate, travel, and finance markets suffered but also criminal enterprises. fte emirate could immediately begin weaning itself off illicit financial flowsby enforcing existing laws more effectively and transparently. Dubai could also tighten regu- lation of