NYCFPA Launches Investigative Report on UAE Money Laundering

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on whatsapp

The New York Center for Foreign Policy Affairs (NYCFPA) has issued an investigative report on recently leaked documents from the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) indicating the participation of the Central Bank of the United Arab Emirates in the money laundering activities that allowed Iran’s Central Bank to evade sanctions. 

The cases involving Standard Chartered Bank go back to 2011 and 2012. Dubai has adapted to the changing sanctions and their enforcement to continue business with Iran and support private enterprises by using no-name companies in countries other than the Middle East region, private citizens other than Iranians, and banks present in Dubai. 

Based on the evidence, it appears that ignoring U.S. sanctions has become standard practice for UAE financial institutions. It was reported that the UAE and UAE CB violated sanctions against Iran. There were leaked documents showing Dubai-based Gunes General Trading processed $142m in suspicious transactions through the UAE financial system in 2011 and 2012, and UAE Central Bank was involved in this to take their transaction. Since 2010, the U.S. Treasury has negotiated with at least half a dozen companies to acquire all Iran investments. There were companies from UAE sanctioned for failing to terminate business with Iran, but this does not prevent them from being called U.S. allies and receiving benefits from the U.S.  

The newly-imposed Iranian sanctions were controversial. The European Union was one of the most prominent critics of these sanctions. Due to the U.S. sanctions, the E.U. had no choice but to take their losses and remove themselves and their companies from Iran. While most in the international community (including most American allies) are demonstrating solidarity with the U.S., the UAE continues to work with Iran by using shadow financing schemes and money laundering processes. The UAE’s recent efforts to restrain illicit money transfers remain inadmissible in addressing concerns about eluding U.S. sanctions and money laundering.

“Triangle” financial transactions have grown in popularity in regards to misleading the U.S. watchdogs. Products were being sold by one country to another when it was solely produced in Iran. The companies that provided the correspondent bank in the United States the documentation of transactions did not show that Iran provided the goods. These transactions are unequivocally in violation of the current sanctions. Without a resolution from Congress, tension will continue to rise on a broader spectrum. The money laundering refuge in Dubai and the other Emirates can grow more rapidly in the COVID-19 economic crisis. Although, the U.S. economists are projecting about a -6% of GDP recession in Dubai with a shallow recovery. It is hard to imagine that the UAE will show its inclination to stop using inappropriate practices by facing these difficulties. It is currently difficult to estimate the magnitude to which Iranian-related transactions are flowing through Dubai. The trading volume between the two countries was about $1.6 – $1.8bn in 2019. Inevitably, the unofficial trade and money movement can easily rival those figures.

The U.S. has previously tried to utilize its diplomatic tools by intensifying pressure on the UAE CB. Holding a series of face-to-face meetings, Iranian institutions have transposed their activities to other regional centers, where they already had historical ties, Istanbul and Beirut. While the pressure seems to be reaching its intended audience, it is also clear that Dubai has conveyed its official and unofficial banking operatives to be sophisticated and robust. H.Res.671, introduced in Congress a year ago, gave a strong indication of sanction violations in the UAE. There are no active examples of the U.S. imposing sanctions on allies’ central banks, only Central Banks of rogue countries (Iran, Venezuela, North Korea).

With these concerns in mind, the Center urges the following action from the United States government:

  1. Understanding that the diplomatic tools are not enough enforcement, the NYCFPA recommends putting forth companion legislation. We recommend Congress prohibit any U.S. banks or regulated financial institutions from participating in the primary market for non-dirham denominated bonds issued by any ministry, agency, fund of the United Arab Emirates (including the Central Bank of the UAE) and/or lending non-dirham denominated funds to the United Arab Emirates. 
  2. We also recommend that the United States suspend or halt the extension of any loan, financial or technical assistance to the United Arab Emirates by international financial institutions, such as the World Bank, International Monetary Fund, or Export-Import Bank. Along with the immediate suspension of all foreign military sales (as regulated by the Defense Security Cooperation Agency) to the United Arab Emirates for a term no less than twelve months or until the Central Bank of the United Arab Emirates can demonstrate compliance with sanctions requirements.
  3. Lastly, the NYCFPA recommends the immediate suspension by the Department of State of all Direct Commercial Sales of military/defense articles for a term of no less than twelve months or until the Central Bank of the United Arab Emirates can demonstrate compliance with sanction requirements.

The UAE is laundering money through Iran routinely, and they are actively trying to upgrade their weapons with their newest interest in the United State’s F-35’s. This brings extensive concern to U.S. national security. UAE officials say that Iran is a new threat in the region; a nation immensely concerned that Iran is actively laundering money through them and the central bank. The NYCFPA urges Congress, the State Department, and the Department of Defense to support this resolution and companion resolution. Supporting this resolution would be the first step in ensuring that the U.S. no longer contributes to a never-ending arms race in the region and will help strengthen the U.S. national security and our interest.

For press inquiries: info@nycfpa.org

About New York Center for Foreign Policy Affairs: The New York Center for Foreign Policy Affairs (NYCFPA) is a policy, research, and educational organization headquartered in New York State with an office in Washington D.C. NYCFPA is an independent, non-profit, non-partisan, institution devoted to conducting in-depth research and analysis on every aspect of American foreign policy and its impact around the world. The organization is funded by individual donors. The organization receives no corporate or government donations. The New York Center for Foreign Policy Affairs (NYCFPA) is currently conducting research on American foreign policy interests in the world’s hot zones and has forthcoming reports and educational briefings on: China, Russia, North Korea, Middle East, Latin America, and Africa. Their mission is to be an educational resource for policy makers and foreign policy leaders to best promote American interests and values around the world.

###

Sign up for our Newsletter

Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit