Amid Global Pressure, UAE to Fine Violators of New Corporate Transparency Rules
By Ndubuisi Francis
The United Arab Emirates (UAE), one of the world’s top emerging tax havens, will begin collecting penalties and fines on its requirement for reporting of company beneficial ownership information, as it faces international pressure to address money laundering concerns, International Consortium of Investigative Journalists (ICIJ) has revealed.
The tiny gulf country, which is a federation of seven emirates, is ruled by a mix of federal and local laws in addition to laws governing its sprawling free zones.
The legal environment, along with the absence of a single and centralised register and weak regulations, have turned the UAE to a safe haven for illicit activities, Transparency International said in a report last year.
The country is believed to be a safe haven for Nigerian officials who launder public funds.
An associate fellow, Chatham House, Matthew Page, recently disclosed that over 800 properties worth $400 million in Dubai, UAE were traced to Politically Exposed Persons (PEPs) in Nigeria.
Page, in a paper titled ‘Illicit Financial Flows (IFFs) in Real Estate and Education Sector: Implications for Investigators,’ delivered at a workshop organised by the Independent Corrupt Practices and Other Related Offences Commission (ICPC), revealed that 35 state governors in Nigeria had acquired a total of 69 properties; five presidency staff members were controlling 13 properties, while 16 lawmakers are in possession of 45 properties.
According to the findings, 15 ministers have 25 properties, 158 suspected politicians’ proxies are in control of 226 properties, 14 security sector leaders (71), 50 PEP-linked business persons (91), 13 known Nigerian law enforcement agency suspects (216), 16 heads of department and agency (25), 11 NNPC officials (19), and a judge, one.
Another report by Human and Environmental Development Agenda (HEDA Resource Centre), a good governance advocacy group, titled, ‘Fixing Nigeria’s Illicit Financial Flows: A critical review of UK and UAE Policies, Laws and Practices,’ had also linked 10 former Nigerian governors to properties worth £56 million (about N30 billion) in the United Kingdom, while 13 top military officers were also linked to 216 houses in the UAE.
The report gave graphic details of illicit financial flows (IFFs) from Nigeria to the UK and the UAE, specifically Dubai.
However, as the UAE prepares to implement the new rules on beneficial owners, there are questions about numerous exemptions and loopholes in the rules.
Companies may use brokers or banks as the legal owners, but the new laws that require the reporting of beneficial owners is focused on recording the true owners who reap the benefits of ownership, have 25 per cent or more of the company’s shares and voting rights at the company or the power to dismiss and appoint directors.
The Policy Director of Global Financial Integrity (GFI), Lakshmi Kumar, said: “Beneficial ownership truthfully provides you who is behind the company and gives you an individual to go after. It allows enforcement agencies that are genuinely invested in understanding and uncovering illicit financial flows to identify an individual.”
Since the September 11 attacks in the United States, the UAE has come under spotlight because of the role its banks and airports played in facilitating transfer of cash, weapons and other material to alleged terrorist groups, according to the Chicago Tribune.
“What makes the UAE attractive to illicit business is the absence of any kind of oversight, questioning (or) requirements.
“In a lot of other countries, they may not have the technological capacity, but that is not Dubai’s problem. Look at how the UAE monitors civil society groups, people who advocate against human rights violations with migrant labour. The UAE does an excellent job monitoring, enforcing and prosecuting them. There’s a lack of interest behind this beneficial ownership law,” Kumar said.
In 2020, the UAE was placed under a year-long observation by the Paris-based Financial Action Task Force (FATF) for concerns over money laundering, terrorism financing, weapons of mass destruction, loopholes in the property and precious metal industries and the lack of legal action against money laundering.
According to Kumar, this law, among others, may alter the perception among foreign investors that the UAE is a hub for illegal money movement.
The decision affects 513,000 non-financial businesses, according to Gulf News.
UAE’s minister of economy has yet to decide who the enforcement authorities of the law will be, according to the cabinet decision issued earlier this year.
The law applies to the entire country with the exception of the financial free zones of Dubai and Abu Dhabi.
Government-owned corporations and publicly traded entities are also excluded from the ownership reporting requirement.
It’s unclear how this data will be stored, and the information will not be publicly available.
The ICIJ investigations, such as the 2016 Panama Papers, have helped prompt numerous countries to enact beneficial ownership registries in recent years, including in Cyprus, Ghana and Kenya earlier this year.
More recent exposés by ICIJ, such as FinCEN Files and Luanda Leaks, have highlighted Dubai’s rise as a go-to secrecy haven for people looking to hide illicit wealth.
Administrative penalties and fines of up to 100,000 UAE dirhams for companies that don’t comply with reporting beneficial ownership information will begin July 1.
