Financial crime does not pay

Fighting the practice in the UAE will require nuanced laws that do not hamper the wider economy

Financial crime is becoming easier as economies digitise. Reuters
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The world needs to make solving its money laundering problem a priority. The UN estimates that globally the source of as much as $2 trillion of dirty money is concealed from authorities every year. That's just under the amount the US spent on two decades of war in Afghanistan, or roughly 5 per cent of global GDP. The problem is showing no signs of abating. On Tuesday, US officers seized $3.6 billion in stolen cryptocurrency – the largest financial seizure on record – and arrested a husband and wife accused of trying to launder it.

The practice is proving so challenging to defeat because it thrives in the otherwise beneficial conditions of today's globalised digital economy. It requires a collaborative approach. In the UAE, law enforcement agencies have taken increasing steps to crack down. The country’s economy has risen rapidly in large part due to its open, flexible and modern markets – advantageous qualities that, unfortunately, can sometimes provide a backdoor for international criminals.

While policymakers continue to promote economic openness as a basis for growth, they are also starting to set out in greater detail a strategy for tackling money laundering, as well as financial crime more generally. In a recent article for Forbes Middle East, Sheikh Abdullah bin Zayed, Minister of Foreign Affairs and International Co-operation, said the UAE takes the matter of combatting financial crime "extremely seriously" and outlined five principles for doing so.

As one of the Middle East's leading commercial centres, the UAE is drawing up regulations to deal with money laundering. AFP

They are centred on two key themes. The first is increasing the UAE's knowledge of the challenge, by understanding how complex it is, using advanced analytics, technology and investigation and conducting economy-wide risk assessments on money laundering and terrorist financing. The other is boosting co-operation in addressing financial crime between the private and public sector, as well as international partners, particularly focussing on increasing the ease at which different groups across industry and government can share information. At home, a huge number of entities are now involved in the mission, including the Central Bank, the Ministry of Justice, the Ministry of Economy and new anti-money laundering courts in Abu Dhabi and Dubai.

Sheikh Abdullah wrote that the UAE's approach "will enact a true step change in our ability to prevent illicit financial flows" helping to meet the country's goal of being "one of the strongest and most respected economies in the world".

New regulations are critical. At the same time, there will be a balance to strike; authorities know that clamping down on people transferring funds illegally must not come at the expense of the openness and flexibility that make the economy, and the vast majority of people that contribute to it legally, thrive.

The Emirates is as much a home for global trade as it is for families and networks that, given tough circumstances, might not otherwise have the luxury of being within the same financial jurisdiction as loved ones and colleagues. These scenarios are all too common in some countries of the Middle East, where the same poor governance that has disrupted business and family life has also created a breeding ground for financial crime. Within the region, the UAE is an increasingly rare, stable and profitable home to people from the region's many diasporas. The country is showing it can also serve as an important model for the region as it starts to deal with a seemingly intractable problem. The standards developed here will, moreover, provide important benchmarks for other parts of the region, and possibly the world, that need to tackle this issue. The UAE is showing commitment and seriousness in this regard.

In any country, sustainable growth is about more than increasing profits, creating jobs and building companies. It is also about creating a set of institutions and laws that protect the system without stifling those operating within it. As far as defensive measures go, building a system to tackle money laundering is among the most important. There is, after all, as much as $2tn on the line.

Published: February 10, 2022, 3:00 AM