Drycleaners in the neighbourhood

Over the last decade or so, a new money laundering hub has sprung up in our neighbourhood - in slow-motion, seemingly without causing any major worldwide financial disruption. Dubai is secretive and cash friendly. But its luxury hotels, skyscrapers and man-made islands project an image of the world of an ultra-modern luxury paradise.
It is not only Dubai. Even Hong Kong and Singapore have started attracting tainted money from all over the world as doors on decades old wide-open avenues in Europe, the UK and the US and their offshore safe havens are starting to close down.
A new investigative report released by the Organized Crime and Corruption Reporting Project (OCCRP) claims that the emirate of Dubai offers criminals and the corrupt an easy alternative for laundering their ill-gotten assets - particularly through high-end real estate.
The report discussed in a write-up (Dubai real estate: money launderers' paradise - published in Transparency International in its year-end newsletter) says that apartments in Dubai worth millions of pounds can be bought in exchange for bags of cash, with startlingly few questions asked. A few days after the purchase is complete, the transaction can be cancelled and the money electronically refunded to a bank account chosen by the buyer. "This place is a money-laundering paradise," one business expert told reporters.
"Over the past months, the UK government has been taking important steps to keep suspicious foreign wealth out of the London property market and clamp down on anonymous company ownership in the overseas territories. This will slowly make it more difficult for the world's corrupt politicians and organised crime groups to launder their dirty billions through the combination of offshore tax haven and luxury real estate sector that exist within the British system. But even as one door begins to close, another remains wide open.
"On paper, the United Arab Emirates' anti-money laundering law requires firms to conduct due diligence on their customers and verify who is actually behind the money or company buying property there. In reality, however, individuals under international sanctions, including organised crime figures from Russia and Central Asia, have managed to stash their money in Dubai's thriving property sector.
"Once through the door, these criminals are encouraged to make themselves at home: a property investment of just US$275,000 buys a Dubai residency visa that can be extended to family members.
"Dubai is also a well-known Centre for the centuries-old honour-based hawala system for moving money, in which a cash payment to a representative in one place is matched by a payment from a representative in another. The problem is that these transactions are almost impossible to trace or monitor for suspicious activity.
"Corruption is all too often a cross-border crime, and it takes concerted international action to close the avenues through which the corrupt can flee justice, launder their stolen money and live the high-life with impunity.
"Next year, the UAE will host Conference of the States Parties to the United Nations Convention against Corruption - one of the most important international gatherings for advancing the global fight against corruption. If the Emirates really want to establish their anti-corruption credentials among their peers, however, they can start by taking a tougher stance against the abuse of their property and financial sectors.
"The first step should be to establish an open-data register of beneficial owners of companies and property. This would make it easier to enforce existing anti-money laundering laws and ban financial institutions, lawyers, accountants, real estate agents and trusts and corporate service providers from processing transactions if the beneficial owner of their customer cannot be identified. It would also mean they can take appropriate steps if the beneficial owner is on a sanctions list or is a politically exposed person.
"In recent months, alongside the UK, we've seen countries with a fraction of Dubai's per-capita wealth, like Afghanistan, Ghana and Nigeria commit to taking a similar step. The UAE already has some of the most advanced e-government services in the world, and access to the best information and communications technologies on the planet. Establishing a beneficial ownership register would be child's play for the emirate."
The relationship between civil liberties and corruption is said to cut both ways. Academic research points to a vicious cycle, where widespread corruption chips away at remaining civic space and targets groups that pose a challenge to authority. At the same time, the inability of citizens to hold their governments accountable contributes to even greater abuse.
TI claims that its experience of working with more than 100 chapters around the world has shown that civil society organisations, grassroots movements and journalists are vital for improving the quality of governance. However, respect for civil liberties, such as freedom of expression and association, is said to be only one component of an effective anti-corruption agenda. According to TI, these elements prove all the more powerful when combined with genuine political will on the part of governments to tackle problems at their root.
Since the revelations made in the Panama Papers in April 2016 most of the well-known safe havens are in the process of closing down or are being under pressure to close down. However, the menace of golden visa continues to offer the corrupt an assured passage to safety. The citizenship- and residency-by investment programmes, commonly known as golden visas, offered by some EU Member States have repeatedly sparked controversy.
Applicants and grantees associated with dubious sources of wealth have made headlines in various countries, and the opacity which characterises many of the schemes has raised concerns over risks of money-laundering and to the security of the EU and its Member States.
A new report (Risky business: Europe's Golden Visa programmes - Oct. 10, 2018) by Transparency International and Global Witness analyses these schemes, finding that over the past decade the EU has welcomed more than 6,000 new citizens and nearly 100,000 new residents. Spain, Hungary, Latvia, Portugal and the UK have granted the highest number of golden visas to investors and their families, ahead of Greece, Cyprus and Malta.
Such programmes are big business. Around €25 billion in foreign direct investment has flowed into the EU through these schemes over the last ten years. The amount of money one person might invest to be granted a passport can reach €10 million in Austria.
With huge volumes of money involved, checks for money laundering and corrupt and illegal origins of the investment have to be especially rigorous, but that doesn't appear to be the case. In fact, as the report highlights, scandals are rarely far from these schemes.
Between 2008 and 2015, the UK Tier 1 Investment Visa suffered from a 'blind faith' period during which 3,000 high net worth people entered the UK, bringing with them at least £3.15 billion (€3.6 billion) of questionable legitimacy. The scheme has now been reformed, and visas granted during this time are being reviewed.
Authorities claim to follow best due diligence practices during the screening of applicants. But TI's report finds plenty of reasons to question this claim.
But even if it is true, what matters even more is how countries assess their due diligence findings to make decisions - in other words, the size of their risk appetite.
Together with Global Witness, TI is calling on the EU to take action to set common standards and mechanisms for reducing the corruption risk posed by golden visas programmes.
At the national level, governments running these schemes need to be sure that the individuals they welcome into their countries and, by extension, the EU, are clean - and that their money is, as well. That means proper oversight to make sure the appeal of large profits doesn't create an unhealthy appetite for taking chances.