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The Emirati royal families' participation in hidden money transfers is revealed in the Pandora Paper

The UAE is open for business, with skyscrapers rising in the desert and free-trade zones selling gold and diamonds. However it is not uncommon for this business to cover up shady corporations and international criminal activity.

Sheikh Zayed Road's glass-and-steel office skyscrapers and luxury hotels are gleaming reminders of Dubai's transformation from a collection of villages to “one of the urban miracles of the modern world” — “a futuristic city rising in the middle of a desert.”


Today, the regional headquarters of General Motors, Shell, and other global giants lured by the Persian Gulf nation's reputation for stability and openness-to-business attitude call this important traffic artery, named for the United Arab Emirates' first president, home.


An office on the 16th level of the H Hotel Office Tower, at the famous location of 1 Sheikh Zayed Road, was the genesis of a constellation of lesser-known organizations – dozens of offshore corporations sold to clients who wish to keep their names hidden.


The Pandora Papers, a treasure of confidential documents obtained by the International Consortium of Investigative Journalists, demonstrate that the true owners of these corporations are a slew of unscrupulous offshore individuals.


Among them is a Belgian entrepreneur accused of benefitting from the smuggling of "conflict gold" snatched from the Democratic Republic of Congo's war-torn areas. An internet magnate from Quebec was convicted in the United States of money laundering for allegedly transferring $250 million to fraudsters, child pornographers, and other criminals, according to police. A 26-year-old criminal lord whose "dark web" website sold firearms, stolen bank information, counterfeit documents, dangerous chemicals, and massive amounts of illegal substances, including heroin and fentanyl, which have been connected to overdose deaths across the United States.


The narrative of the offshore firms established within Dubai's corporate enclave sheds new light on Dubai's growth as one of the world's financial capitals—as well as the UAE's position as a money laundering and other financial crime hotspot.


The UAE has a booming financial secrecy industry. It provides shell companies that hide the identities of their real owners; dozens of internal free-trade zones that provide even more shadows for them to hide in; and a regulatory system known for its "ask-no-questions, see-no-evil approach" to dealing with money linked to gold smuggling, arms trafficking, and other crimes, according to anti-corruption advocates.


“The UAE provides secrecy, complexity and control,” Graham Barrow, a money laundering expert and co-host of The Dark Money Files podcast, told ICIJ. “It’s a perfect storm. An invitation to criminals to make the most of it.”


The United Arab Emirates (UAE) is a confederation of seven sheikdoms (emirates) that earned independence from Britain and came together half a century ago under the leadership of the late Sheikh Zayed bin Sultan Al Nahyan, the UAE's first president and the namesake of Sheikh Zayed Road.


Members of the six royal families that rule the seven emirates have a hand in almost every business activity in the UAE, whether as landlords of office towers and other properties, owners of major corporations, silent partners who take a cut of profits in other businesses, or public officials overseeing sovereign funds and government-owned businesses. As a result, the rulers of the emirates choose who will act as regulators over firms from which they and their family may profit.


Offshore sheikhs

190,000 secret papers from SFM Corporate Services, a UAE-based corporation that bills itself as "the World's #1 Offshore Company Formation Provider," are among the more than 11.9 million data in the Pandora Papers. SFM is one of hundreds of organizations in the UAE that assist customers in forming businesses, including hard-to-find corporations for persons who live and work outside of the UAE. These company creation services are part of a worldwide network of attorneys, accountants, and other professionals who enable the offshore financial system to function.


The owners of at least 2,977 entities in the UAE, the British Virgin Islands, and other offshore financial hubs that were created with SFM's aid or received additional SFM services were identified in the ICIJ's investigation. The Belgian gold tycoon, the internet entrepreneur, the dark web impressario, and more than 20 other persons accused of financial crimes and other misconduct throughout the world are among the owners of these firms, according to ICIJ investigation.


In a statement, SFM stated that it works in a “absolutely legal in every aspect. SFM abides by the applicable laws and regulations in every jurisdiction it operates in.”


Sheikh Hazza bin Zayed Al Nahyan, the UAE's former national security adviser and brother of Sheikh Mohammed bin Zayed, the crown prince of the emirate of Abu Dhabi and the next in line to become UAE president, reportedly owned an office on the 16th floor of the H Hotel tower at 1 Sheikh Zayed Road for several years.


Sheikh Hazza has not responded to questions sent to him by the ICIJ through the UAE Embassy in Washington and the Abu Dhabi Executive Council's media office.


The Pandora Papers contain tens of thousands of more files relating to the UAE, including papers from Seychelles and other countries that disclose offshore holdings of at least 35 members of the UAE's ruling families, in addition to internal SFM data.


Sheikh Hazza, his successor as national security adviser, Sheikh Tahnoon bin Zayed, and the UAE's prime minister and ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, are among the heavyweight Emirati royals with offshore interests exposed in the report.


The data suggest that the prime minister is linked to the founder of Dark Matter, a UAE-based cybersecurity business that has been accused of spying on human rights activists and government officials in various countries, through two firms domiciled in the British Virgin Islands.


In September, three former top officials at Dark Matter, all of whom were former American military and intelligence officers, acknowledged to helping hack mobile phones and computers all over the world in a deferred prosecution arrangement with US authorities. No charge has been placed on Dark Matter. It has admitted to collaborating closely with the UAE government, but denies hacking.


Sheikh Tahnoon, the UAE's security adviser, was also found to control a British Virgin Islands firm using unregistered "bearer shares," which give extreme confidentiality because they are held by whoever physically holds the share certificates. Bearer shares, which have a long history of being involved with financial fraud, have been outlawed in a number of nations.


Sheikh Tahnoon became entangled in a political controversy in the United States this year involving Thomas Barrack, the head of President Donald Trump's 2016 inauguration committee. According to a US indictment, Barrack operated as an unregistered agent for the UAE by assisting high-ranking Emiratis — including an Emirati official commonly assumed to be Sheikh Tahnoon — in their efforts to impact Trump administration policy in secret. Barrack has entered a not guilty plea.


Sheikh Mohammed and Sheikh Tahnoon declined to comment for this report. Other Emirati royals, the UAE embassy in Washington, and the Dubai and Abu Dhabi governments' media departments all declined to answer to ICIJ's queries.


The Emirati government has previously said: “The UAE takes its role in protecting the integrity of the global financial system extremely seriously.”


A crucial ally

For decades, there have been concerns about the UAE's role as a financial crime hotspot. The Bank of Credit and Commerce International, a global institution controlled by the Abu Dhabi royal family and government, was accused of bribery, money laundering, sex trafficking, and terrorism financing in the 1990s, earning it the derisive moniker "Bank of Crooks and Criminals International."


Over the last decade, the UAE's standing in the world's offshore financial secrecy system has risen dramatically. Based on their levels of financial secrecy and the scale of their offshore financial activities, the Tax Justice Network, an anti-corruption research and advocacy group, ranked Dubai 31st among the most important offshore jurisdictions in 2009. The UAE will be ranked No. 10 on the Financial Secrecy Index by 2020.


The United States regards the UAE as a critical military ally and a bulwark against terrorism in the Middle East, which distinguishes it from other secrecy havens.


According to Jodi Vittori, an expert on terrorism financing and a non-resident fellow with the Carnegie Endowment for International Peace, the United States hasn't put the same pressure on the UAE as it has on Switzerland, the British Virgin Islands, and other offshore havens because of the role the UAE plays in American national security and economic interests in the region.


According to Vittori, the US has pressed the Emirates to work harder at times, such as after the 9/11 attacks, to stem the flow of money that funds terrorism. "By and large, the U.S. seems to have turned a blind eye to their role in the facilitation of illicit finance, conflict minerals and organized crime.," she said.


Illegal businesses

Last year, Firoz Patel, the Quebec internet magnate convicted of laundering $250 million for child pornographers and other criminals, told an American judge that he was "humbled and humiliated" by his actions.


“Somewhere along the way,” he said, “I lost myself. … I started to cut corners.”


Patel, on the other hand, had not run his online money-transfer enterprise as if he were an innocent man in over his head, according to the judge. Patel had been aggressively soliciting money transfers from "known illegal enterprises" for years, according to the judge, while "actively sanitizing client lists and other records" to hide his crimes and the crimes of his clients.


As US authorities began to draw in on him and his web of money-transfer enterprises in 2017, the Pandora Papers reveal that he sought to set himself up in an offshore corporation.


SFM, a Dubai-based business formation firm, was on hand to assist.


According to the papers, SFM provided Patel with a corporation in the emirate of Ras Al Khaimah in April 2017, a jurisdiction that offshore sector experts promote as having one of the highest degrees of anonymity accessible.


SFM quit as Patel's registered agent a year later, claiming "compliance reasons" according to the filings. Providers like SFM are required by international norms advocated by the US and other global powers to turn away potential clients who may be involved in money laundering and other crimes or attempting to escape government sanctions.


Patel pled guilty to money laundering in federal court in Washington, D.C. in 2020. He was sentenced to three years in jail by the judge.


According to an ICIJ assessment of the Pandora Papers data, Patel is one of at least 24 SFM clients who have been accused of financial crimes or other misconduct in criminal cases, lawsuits, regulatory proceedings, or UN reports. In criminal processes, at least 12 of them have been found guilty and condemned.


Patel claimed through his lawyer that the UAE firm had nothing to do with the US claims and that it had discontinued operations a year and a half after it was founded. He said that his operations were “not inherently illegal” and that his legal problems were caused by “a few bad employees and bad partners who brought us untold amounts of damage.”


In response to ICIJ's questioning, an attorney representing SFM said that discussing individual cases would be "a major breach of client confidentiality."


When SFM takes on clients, the attorney said, it “actively uses industry standard compliance monitoring tools.” He said the firm “routinely refuses to work with clients” when it finds negative information about their backgrounds.


High-risk

Reza Afshar, a former banker, launched SFM in 2006. Its headquarters were once located in Switzerland. It then relocated its headquarters to Dubai, with a presence in Switzerland.


SFM promotes themselves aggressively: SFM was "ne of Google’s biggest clients in Switzerland, spending more than two million dollars per year on pay per click" and other campaigns, according to a financial plan acquired by ICIJ.


Some of the services SFM promoted online were highlighted in 2013 by a French parliamentary inquiry investigating the involvement of banks and other financial entities in tax evasion. Among those services was the provision of a stand-in director or shareholder "whose function is explicitly to conceal the true manager or owner of the company," which is prevalent in the offshore industry.


SFM's web marketing were deemed an "incitement to evade taxes and commit tax fraud.”" by the French commission.


The attorney for SFM, when asked about the commission’s allegation, said the firm “does not believe that the statement is the least bit accurate,” adding that there is “nothing inherently wrong with the goal of minimizing taxes.”


SFM and other offshore services businesses are required to investigate not just their clients' backgrounds, but also their financial sources.


When SFM set up a corporation for Firoz Patel in 2017, publicly accessible information would have suggested that he was a high-risk customer.


An indictment charging him with two counts of money laundering was announced by federal authorities in Tennessee in 2012. Kentucky banking officials accused Payza, one of Patel's payment-processing enterprises, of "making fraudulent statements and misrepresentations" as well as "unlicensed money transmission activities" the following year.


In 2016, Payza was publicly linked to ZeekRewards, a deceptive web business based in a small North Carolina town that promised large returns to small investors all over the world. Payza has stuffed its coffers by supporting a $900 million Ponzi scheme, according to attorneys ordered by a bankruptcy judge to investigate the ZeekRewards scam. More than a year before SFM set up the UAE firm for Patel, news stories detailing the allegations were available on the internet.


SFM’s attorney said the firm conducts “the required due diligence” when it incorporates a new company for clients, but is “naturally not in a position to scour worldwide news.”


Five former SFM workers in Dubai and Europe told ICIJ that the company's desire to expand caused it to disregard warning signals and take on customers with shady histories.


Even if staff felt something suspicious, one ex-employee claimed that they would typically accept the clients' word for it when it came to their backgrounds and financial dealings.


“The client can say anything about their business,” the ex-employee said. “It’s easy to play dumb and say, ‘This is what the client told us.’ ”


Because of legal concerns, the former employees spoke on the condition of anonymity.


SFM took on clients from Iran and other nations that had been sanctioned by the US or other Western powers, according to two former employees, despite the danger that such clients may be linked to persons or entities on sanctions lists.


According to the ICIJ's study of SFM's internal documents, the business formed two firms for Abdolhadi Tabibi, an Iranian-born German citizen. Mehr Trade Ltd, based in the United Arab Emirates, was one of them. Tabibi is the director of GIC International, which is listed in Iran's national corporate registry as a subsidiary of Ghadir Investment, which is part of a multibillion-dollar foundation run by Ayatollah Ali Khamenei, Iran's supreme spiritual and political leader who directs the country's national and foreign policies.


The United States has sanctioned both Khamenei's foundation and his investment arm. Iran's capacity to produce nuclear weapons was the focus of the sanctions, which were eased and reimposed several times over the years. Iran has taken advantage of long-standing commercial connections with the United Arab Emirates to gain access to worldwide markets.


Tabibi and his firm did not answer to ICIJ's queries regarding the purpose of SFM's enterprises or if they are tied to Iran's supreme commander.


Other SFM clients revealed by the ICIJ through the Pandora Papers include Samir Traboulsi, a Lebanese banker who was convicted and fined in 1993 for his role in the worst insider-trading case in French history. They also include Ajaz Saddique, who was forbidden from functioning as a business director in the United Kingdom for 15 years in 2014 following an inquiry into a multimillion-dollar tax scam, according to officials.


Alexandre Cazes, who, like Patel, was an online entrepreneur from Quebec, was another SFM client, though the two do not appear to be related. Cazes was identified by US officials as the "young genius" behind AlphaBay, the world's largest "dark web" bazaar. Thousands of vendors allegedly utilized the clandestine website to market illegal products and services while laundering hundreds of millions of dollars from the unlawful transactions, according to a federal indictment in California.


After making multiple undercover purchases of heroin, methamphetamine, and other street narcotics, US investigators built a case against Cazes and linked him to an email account, Pimp_Alex_91@hotmail.com, that was used in AlphaBay's welcome and password-recovery emails.


In 2017, Cazes was apprehended in Thailand. A week later, he was discovered dead in a Thai prison, apparently by suicide.


According to the Pandora Papers, SFM's Dubai branch furnished Cazes with at least five offshore entities. After Cazes' death, SFM continued to send him bills.


Royall privileges

The United Arab Emirates has two personalities: an open economy and a police state.


The UAE, like other tax havens and secrecy countries, provides citizens with opportunities to preserve their assets and keep their business operations private. The UAE has low corporate taxes and strict confidentiality, making it difficult to determine who owns many of the firms incorporated there.


It's tough to criticize the system or uncover dubious business deals when royals are involved because of mass monitoring and the monarchy's tight influence on the courts and media.


The United Arab Emirates, a largely desert country bordering Oman and Saudi Arabia, has a population of over 10 million people. Expatriates account for about 90% of the population, with many of them being guest workers from India and Pakistan who do low-wage professions that most Emiratis dislike.


Since the emirates merged in the early 1970s, Abu Dhabi, the country's biggest and wealthiest emirate, has held the presidency. Sheikh Khalifa bin Zayed, the current President of the United Arab Emirates, is a member of Abu Dhabi's Al Nahyan ruling dynasty. He hasn't been seen in public since suffering a stroke in 2014. Sheikh Mohammed bin Zayed, the UAE's de facto ruler, rose to notoriety during the last decade as the man in charge of the country's armed adventures in Yemen and Libya.


In a volatile area, the UAE sells itself as a steady, forward-thinking partner of the West. It has hosted desert sequences for "Star Wars: The Force Awakens," provided money to storm assistance in the United States, and made the "Fly Emirates" shirt one of the most popular soccer jerseys in the world through sponsorships of professional soccer clubs by the government-owned Emirates airline.


The UAE has acquired a large number of American-made weaponry and sent F-16 fighter planes to Afghanistan to bolster US operations. The nation was dubbed "Little Sparta" by US generals.


The country has also bolstered its image by holding international events — such as a 2019 United Nations anti-corruption conference — that contrast with its reputation as a dictatorship that imprisons dissidents and acts as an offshore financial center.


Most importantly, the UAE's authorities have advertised their country as a destination where every type of company, including the world's largest firms, is welcome.


When the economy is performing well, the governing families benefit greatly.


According to 10 persons familiar with the UAE royal families' commercial interests, numerous members of Emirati royal families open doors and support various firms in exchange for fees that can equal up to 25% of revenues. Seven former royal family members, two former government officials, and an investor who worked closely with renowned sheikhs are among them.


Influential royals run their companies through private offices that cater to enterprises and high-net-worth individuals. According to a former private office consultant, private offices may assist investors in opening accounts at UAE banks and give access to top bankers who can then approve credit lines.


"The more senior the sheikh, the more profitable the business, the less questions asked in banks, the more access businessmen get, the better cover and incentives they get in return for a commission or a share or a percentage," a former UAE official told ICIJ.


People come to the private office of Sheikh Saeed bin Ahmed Al Maktoum, a member of Dubai's royal family, because it provides them contacts and "the family name that we represent," according to a video put on the homepage for the office.


“With our name and our reputation, there isn’t any contact that we can’t really reach,” she said.


Having a royal address for your firm, according to one corporate lawyer who works for a company formation service in the UAE, is vital because "it gives protection."


According to ICIJ's investigation, former national security adviser Sheikh Hazza owns the H Hotel Office Tower at 1 Sheikh Zayed Road, where the offshore services business SFM held its Dubai headquarters until at least 2017. Sheikh Hazza has owned the tower building since at least 2012, according to two previous managers. The skyscraper is owned by Capital Investment International, which is operated by Sheikh Hazza and his offspring, according to a judgement in a Dubai appeals court.


According to the ICIJ's investigation, SFM was one of at least four businesses with offices in the building providing financial or company formation services to offshore clients.


Furthermore, records in the Pandora Papers referring to roughly 150 offshore companies established up by SFM for customers have the following reference in the incorporation address: "Office No-1602, owned by Sheikh Hazza Bin Zayed Al Nahyan."


Firms founded for Patel, the SFM customer subsequently convicted of money laundering, and Tabibi, the businessman with links to Iran's top leader's financial empire, include incorporation paperwork that relate to Sheikh Hazza.


SFM's attorney told ICIJ that its clients' businesses frequently used SFM's office as their official address, and that "it is absolute standard practice in the UAE to mention the name of the owner of the building in the registered address of all companies having their address in that building."


The attorney said there are “absolutely no business relationships” between SFM and “any Sheikhs, or any private office of the ruling family in UAE.”


Sheikh Hazza owns offshore firms outside the UAE, created with the aid of a UAE legal firm, according to the Pandora Papers, in addition to his connections to the country's offshore financial industry as a landlord.


According to the leaked records, Hadef & Partners was created by a former UAE minister of justice and has incorporated offshore corporations for numerous notable Emirati royals.


Hadef & Partners, which has offices in Abu Dhabi and Dubai, assisted Sheikh Hazza in forming Loomington Investments Ltd in the UAE in 2016. Sheikh Hazza also held two additional businesses in the British Virgin Islands and Seychelles with the same name, according to the documents, and he transferred shares from the Seychelles firm to the UAE company. The offshore firms' objective, according to the documents, is to possess "immovable properties" in Seychelles. According to the documents, Hazza owns another offshore business in the British Virgin Islands, WestShore Finance Limited, in which his mother, Sheikha Fatima bint Mubarak Al Ketbi, is also a stakeholder.


Hadef & Partners' attorney stated the firm "complies with applicable laws and regulations" in an email response to ICIJ, but declined to speak more due to client confidentiality.


Sheikh Khaled, the son of the UAE's most prominent prince, Mohammed bin Zayed, is also a partner in an offshore investment agreement with Singapore billionaire Ong Beng Seng and UAE billionaire Ali Saeed Juma Albwardy, according to the Pandora Papers.


With the aid of Hadef & Partners, Sheikh Khaled, a high-ranking security officer, became the sole owner of Desroches Island Ltd. in Abu Dhabi.


Along with Ong and a company owned by Albwardy, that corporation is a stakeholder in a BVI company with a virtually identical name, Desroches Island Holdings Ltd.


In 2006, a former US ambassador to Tanzania said in a diplomatic cable released by WikiLeaks that Albwardy bribed Tanzania's president while negotiating with the government for the establishment of a hotel chain in Tanzania. According to Michael Retzer, a former ambassador, Albwardy gave $1 million to President Jakaya Kikwete's political party and purchased him beautiful outfits. The charges were disputed by Albwardy and Kikwete.


The Organized Crime and Corruption Reporting Project, an ICIJ media partner, reported in 2018 that leaked documents revealed Ong had allegedly treated top Maldivian officials to luxury hotel stays around the time his resort company received a no-bid contract from the Maldivian government to lease a dazzling barrier reef island. ICIJ reached out to Ong for comment, but he did not answer.


According to documents, Desroches Island Holdings, the BVI corporation, requested a $40 million line of credit from HSBC Bank's Dubai headquarters in 2016. The assets of the corporation were valued at $50 million in 2017, according to the filings.


The documents said the funds would be used to operate the Four Seasons resort on Desroches Island, which promotes itself as a “private paradise on a lush coral island” that will “make you feel like a castaway who has struck gold.”


City of gold

Gold is one of the most important economic drivers in the UAE, as well as a source of money laundering.


To compensate for the depletion of its oil reserves, Dubai turned to the gold market. The United Arab Emirates is currently one of the world's top gold importers. According to United Nations estimates, the UAE bought $37 billion in gold in 2020 and exported $29 billion in bullion.


According to a 2016 study, approximately half of the gold imported by the UAE comes from countries where militias and other armed groups extort money from miners and use the earnings to fund their murder campaigns.


Conflict gold from places like Congo is transported into neighboring nations, then through airports to Dubai. Before exporting the gold to Europe and the United States, traders and refiners conceal its provenance.


“Dubai is … a place to launder artisanally mined gold, especially from conflict-prone parts of East and Central Africa,” a report from the Carnegie Endowment for International Peace said last year. “Opaque business practices and regulatory loopholes allow this laundered gold to enter world markets on a massive scale.”


The UAE's Economy Ministry told Reuters earlier this month that refineries will be subjected to yearly audits to ensure that their suppliers are obtaining gold ethically.


According to the Pandora Papers, SFM created up two businesses in 2016 for Belgian gold trader Alain Goetz, both named Al Jur investment Ltd. One was formed in the United Arab Emirates, while the other was formed in the Seychelles.


Goetz was linked to a big gold trader suspected to have gotten gold from parts of the Congo controlled by a militia accused of murdering and maiming civilians, according to a 2009 United Nations assessment. Goetz denied having a "ongoing business relationship" with the dealer, according to the investigation.


Smugglers and traffickers claimed Goetz's corporate network had acquired conflict gold smuggled from eastern Congo, according to The Sentry, a non-profit investigative and policy organization. His network's tactics, according to the group, raised red flags regarding possible money laundering.


According to the Pandora Papers, Goetz was a customer of SFM until at least April 2019.


A representative for Goetz said that “claims and accusations contained in different media articles related to the involvement of Mr. Goetz in conflict gold from the Democratic Republic of Congo are either biased or false.” The representative said Goetz sold his shares in the offshore companies in 2019.


A Belgian court found Goetz guilty of fraud and money laundering in February 2020 and sentenced him to an 18-month suspended sentence. According to Reuters, the court determined that Goetz assisted in the creation of a black market business that allowed consumers to sell gold secretly to his family's refinery in Belgium.


ICIJ reported last year that the US Treasury Department had failed to take action against Kaloti Jewellery Group, one of Goetz's competitors, despite US investigators discovering that Kaloti was purchasing gold from dealers suspected of laundering money for drug traffickers and other criminals. It "vehemently denies any allegations of misconduct," Kaloti, which refines roughly half of Dubai's gold imports, told ICIJ.


Former Treasury officials told ICIJ that the US withdrew because it didn't want to jeopardize its relationship with the UAE.


Tightrope

The UAE came under international criticism in April 2020 when it faced the possibility of being included to the "gray list" of nations targeted for extra scrutiny by the world's leading anti-money laundering watchdog, the Paris-based Financial Action Task Force, for the first time.


According to the task group, the UAE has to make significant adjustments to guarantee that its procedures for combating money laundering and terrorism funding are effective. Anti-corruption campaigners believe how far the UAE improves will be a measure of whether the United States, the United Kingdom, and other major task members have the political will to press its Persian Gulf friend to embrace true reform.


The UAE's expansion of "free zones" — unique regions within the country that allow corporations a haven where there are no taxes and no control — is one issue that anti-corruption groups are concerned about. Many UAE free zones allow you to form a business with only a few inquiries.


Many regulations in the UAE and the emirates where they are located exclude these zones, which are designed to stimulate commerce and other commercial activity. Although members of royal families maintain power by nominating free zone officials or participating on their governing boards, free zones have their own governing bodies and regulators.


In the United Arab Emirates, free zones exist to enable the sale of gold and diamonds, as well as flowers, carpets, and used automobiles. Nobody seemed to be able to agree on the exact number. According to a research published by the Carnegie Endowment last year, the UAE has 47 free zones, with around 30 of them in Dubai.


It's difficult to figure out what's going on within the UAE's maze of free zones, according to Lakshmi Kumar, policy director at Global Financial Integrity, a nonprofit anti-corruption organization. Some businesses do not have websites. Some free zones have their own free zones within them.


All of this, Kumar claims, produces a "bewildering patchwork" that allows money launderers, gold smugglers, and other criminals to put up murky firms that hide their identities while allowing dirty money to flow.


Officials in the UAE claim to have taken substantial actions to combat money laundering, including compelling numerous corporations to declare their genuine owners to UAE authorities. Dubai officials announced the formation of a specialist court focused on money laundering cases in August, following the directive of UAE Prime Minister Sheikh Mohammed.


According to Saboor Siddiqui, a member of the UAE Central Bank's financial intelligence section, authorities "are walking on a tightrope" as they enforce stricter restrictions for banks and enterprises.


“There is a lot of resistance from financial institutions, and to address that we are cooperating with them and we are checking they don’t take the regulators for granted,” he told ICIJ.


The UAE banking regulators said in January that they had penalized 11 institutions a total of $12.5 million for failing to maintain effective anti-money laundering measures.


Kumar, a corruption policy specialist, believes the UAE's recent steps are more of a show than a serious effort to address the country's money laundering and other financial crime issues.


Authorities did not name the institutions that were fined, and the penalty were so minor that banks might recoup the money "in two weeks," according to Kumar.


What about the new ownership disclosure requirements? This is not without flaws.


The information will not be made public; instead, it will be retained by government officials. And genuine owners' names are only required to be disclosed if they possess 25% or more of the firm, providing room for dodgy players to distribute ownership among family or acquaintances while keeping their participation hidden.


Ownership data is gathered in a national database maintained by the Treasury Department and made available to law enforcement and regulatory authorities in the United States. That information will be dispersed over roughly 40 distinct business registrations maintained by free zones and other political entities in the United Arab Emirates.


Transparency advocates fear that this may encourage free zones and other licensing agencies to compete for business by giving the least stringent methods for verifying ownership and capturing false information.


“If you look deeper, you see the cracks and the gaps. It’s an act of legal acrobatics,” Kumar said. “On paper there are all these things they’re trying to do. But the reality remains very much business as usual.”


By Flexi Team


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