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UAE’s reputation as hub for illicit money raises concern in US over Russia sanction

June 23, 2022 at 1:26 pm

An investor at the entrance to the Dubai Financial Market PJSC (DFM) in Dubai, United Arab Emirates, on Sunday, September 6, 2020 [Christopher Pike/Bloomberg via Getty Images]

The United Arab Emirates’ (UAE) reputation as a hub for illicit flows of money has raised alarm in the US, as officials in Washington express concerns over the Gulf state becoming a haven for corrupt Russian money which they say will undermine sanctions on Russia.

Financial institutions in the UAE have been told to remain vigilant in combating Russian sanctions evasion. Western states are fretting that their Gulf ally, and others such as Turkiye, may emerge as havens for illicit cash linked to the Kremlin.

“Financial institutions must be exceedingly cautious in handling any Russia-related businesses and in managing the risks associated with financial institutions that have exposure to the Russian financial system,” American Deputy Treasury Secretary Wally Adeyemo is reported saying in the Financial Times while warning of Russian money laundering.

“We know that Russian banks have employed deceptive payment practices and used shell companies and other means to hide the true nature of their transactions,” Adeyemo said according to a copy of his prepared address to a UAE banking roundtable released yesterday.

READ: The return of Saudi Arabia and the UAE to America’s embrace is inevitable

Western officials are said to have recognised UAE banks’ rigour in dealing with the inflow of tens of thousands of Russians into the Gulf’s commercial hub since Moscow’s invasion of Ukraine in February, but they are also aware that global lenders based in the UAE have previously been fined for transactions with neighbouring Iran, which has been under sanctions for years.

Adeyemo, who arrived in the UAE earlier this week, warned that insufficient due diligence “is not a defence” and the US could target non-US citizens for providing “material support” to a sanctioned entity.

The FT report mentioned that diplomats are concerned about the visible presence of yachts and private jets belonging to sanctioned Russians in the UAE, fearing that one of their closest regional security partners could undermine US and European attempts to constrain President Vladimir Putin.

The UAE’s reputation for money laundering was raised three years ago by the Financial Action Task Force (FATF). The Paris-based group said that Abu Dhabi is not doing enough to stem money laundering and terrorist financing.

A year later Abu Dhabi took steps in addressing its abysmal record in the proliferation of dirty money through two separate Memoranda of Understanding (MoUs) with Bangladesh and Somalia, a year after the global watchdog threatened to place the country alongside the likes of Yemen as having “strategic deficiencies.”