Suspect funds on the rise

More than 13,000 cases were detected last year and that number is expected to rise by as much as 10 per cent in 2009.

Suspected money laundering cases have risen by 10 per cent this year despite efforts by banks to introduce tougher international controls to curb the financial activities of criminal gangs. More than 13,000 cases were reported last year and that figure is expected to rise this year based on new data released by regulatory authorities yesterday. "It's a positive sign that such activities are being picked up and people are coming to us," said Saeed Abdullah al Hamiz, the senior executive director of the Central Bank's supervision and examination department. "These numbers prove that institutions in the region are growing more aware of these issues and are training their staff." Governments worldwide are cracking down on international crime gangs and militant groups that launder an estimated US$1 trillion (Dh3.67tn) every year. The IMF has stepped up its fight against money laundering since the attacks in the US on September 11 2001. The IMF also issued new guidelines last year to monitor wire transfers as small as Dh2,000 after Gulf states, including the UAE, were hit by a scam. However, money laundering controls in the Gulf still lag standards set in Europe and the US. "It is easier to do here in Dubai because laws and regulations still need time to get up to standards like in the US and Europe," said Issam Jaffal, a senior associate at KPMG. "Here, they have a liquidity issue and they are still in need of cash, which can present an opportunity for money launderers." Laws and regulations in place in the UAE are robust on paper, but need to be applied more effectively in practice, analysts say. "The laws are sufficient, but compliance of these regulations is a different story. It's becoming a general concern that it is in fact easier to launder money in the UAE than elsewhere," said Jochem Rossel, a senior tax manager at PricewaterhouseCoopers in Dubai. Money laundering involves transferring money from one institution to another, often across borders, in an attempt to hide the source or origin of the funds, which normally come from criminal activity. "The techniques used by criminals are creative and dynamic as they seek the weakest link in the system. With the increasing amount of trade taking place and more expatriates coming to the region, the problem becomes more complex," said Paul Koster, the chief executive of the Dubai Financial Services Authority (DFSA). The Central Bank's anti-money laundering governing unit is collaborating with the Emirates Securities and Commodities Authority (ESCA) and the DFSA to monitor the flow of funds and possible illegal activity. The Central Bank has hired Oliver Wyman, a management consultancy, to review its anti-money laundering measures and other functions. Last year, 13,101 suspicious transactions were reported to the financial intelligence unit of the Central Bank, which is responsible for monitoring money laundering activity. So far this year, 6,198 cases have been reported up to the end of last month. Mr Hamiz said that reported cases did not imply that the transactions were completed. "Only very few were completed." From Jan 2002, when the Central Bank began to monitor reports of suspicious transactions, to the end of last month, 80,592 cases had been reported and 285 of those were tried in court, he said. The DFSA has reported 18 cases so far this year compared with 28 last year. "Given the downturn in financial markets, these types of transactions seem to be on the rise and we've seen an increase in the DFSA of suspicious transactions," said Mr Koster. "This is the first time that we show a united front against money laundering. It is only through co-operation that we can properly address the topic." Reports of suspicious activity have been filed from banks, money changers, insurance companies, accountants and law firms. The UAE's anti-money laundering laws comply with the UN Security Council sanctions, which include monitoring transactions with Iranian banks. [e-mail]