Free zones in focus of anti-laundering drive

The Central Bank signs agreement with Dubai facility over the provision of transaction data.

The Jebel Ali Free Zone in Dubai is one of many in the Emirates.

Free zones have become the latest focus of a drive by regulators to staunch illicit flows of money as officials confirm they have frozen some Iranian bank accounts.

The Central Bank yesterday signed an agreement with the Dubai Multi Commodities Centre (DMCC) requiring the free zone to share information on any financial transactions suspected of having links to terrorism or other money laundering crimes.

"We have a legal framework, which we call a safety net," said Abdulrahim al Awadi, the executive director and head of the Central Bank's anti-money laundering and suspicious cases unit.

Under the agreement, a compliance officer will be trained to operate within the DMCC to monitor financial transactions. Mr al Awadi said the Central Bank would sign similar agreements with other entities, without giving further details.

The regulator has already signed 35 such deals with other countries and organisations within the country such as the Dubai Financial Services Authority (DFSA).

The latest agreement is significant as it comes at a time when international watchdogs have flagged the risks posed by free trade zones.

The Financial Action Task Force (FATF), an international anti-money laundering group, warns that free zones could be used for illicit trade and money flows that fall below the radar of regulatory authorities.

International pressure has also intensified for the UAE to more closely monitor its commercial relations with Iran, an important trading partner for the country.

A UN resolution of June includes 40 entities and one individual on a blacklist of those whose assets worldwide should be frozen for allegedly assisting Iran's nuclear ambitions.

"The UAE with its commitment towards the UN implemented all UN resolutions against Iranians as these resolutions are implemented against others," said Mr al Awadi. "Some of the UN resolutions said you have to freeze accounts. The resolution has been implemented."

The Central Bank has already told banks to provide more frequent details of remittances to Iran. In addition, the DFSA in August froze the accounts of Persia International after the bank was added to the EU's sanctions list.

Ras al Khaimah (RAK) Free Trade Zone has already stopped issuing licences to new Iranian companies and is observing international trade sanctions, Oussama el Omari, its chief executive, said in July.

Free zones have become an increasingly popular mechanism for the UAE and other countries looking to lure international investment and boost foreign trade.

However, FATF argues that exemptions from tax and duties and the simplified administrative procedures found within such zones could be open to abuse by illicit operators.

"Weak oversight and the lack of transparency existing in some free trade zones may be misused by those attempting to move illicit funds from one part of the world to another in order to facilitate money laundering, terrorism financing or proliferation of weapons of mass destruction," said Vincent Schmoll, the senior policy analyst at the Paris-based FATF.

"This can make it difficult to investigate potential illegal money flows."

UAE Free Zones

•Abu Dhabi Airport Free Zone
•Higher Corporation for Specialised Economic Zones
•Industrial City of Abu Dhabi
•Khalifa Port and Industrial Zone
•twofour54 media and production free zone
•Dubai Airport Free Zone
•Dubai Car and Automotive City Free Zone
•Dubai Gold and Diamond Park
•Dubai Flower Centre Free Zone – at Dubai International Airport
•Dubai Health Care City
•Dubai Industrial City
•Dubai International Financial Centre
•Dubai Internet City
•Dubai Knowledge Village
•Dubai Media City
•Dubai Multi Commodities Centre
•Dubai Gold and Commodities Exchange
•Dubai Silicon Oasis
•Dubai Technology and Media Free Zone
•Economic Zones World – includes Techno Park, Dubai Auto Zone, Jafza International
•Jebel Ali Free Zone
•Ajman Free Zone
•Fujairah Free Zone
•Fujairah Creative City
•RAK Free Trade Zone
•RAK Investment Authority Free Zone
•Ras Al Khaimah Media Free Zone