The role of Dubai’s free trade zones (FTZs) in trade-based financial crime is examined in a new analysis published by Global Financial Integrity (GFI), the Washington based think-tank focused on illicit financial flows.
Free-For-All Zones: The Case of Dubai summarises GFI’s contribution to the report Dubai’s Role in Facilitating Corruption and Global Illicit Financial Flows published earlier this year by the Carnegie Endowment for International Peace (Trade-based Financial Crime, 24 August 2020).
FATF report limitations
Analysis by GFI of Dubai’s FTZs draws on the 2020 Mutual Evaluation Report from the Financial Action Task Force (FATF), which GFI says provides concrete evidence of the myriad problems with Dubai’s administration of its free zones but is limited in its scope.
The fundamental premise on which the FATF assessment is based is challenged by GFI because it is limited to the study of 29 “commercial free zones’” and two “finance free zones” while the task force should have clearly identified the total number of FTZs in Dubai.
The lack of a clear identification of the correct number of free zones and an appropriate categorisation of the emirate’s FTZs has serious implications according to GFI.
The think tank says that while much attention is paid to the more well-known free zones, like Jebel Ali or the Dubai Multi-Commodities Centre, the real concern is that illicit activity through less well known free zones may be overlooked.
Dubai Cars and Automotive City Zone for example is one of the largest re-exporters of used cars to Asia and Africa and GFI points out that vehicles are known to play a key role in trade-based money laundering typologies to hide the movement of drug proceeds.
GFI concludes that it is clear that the economic incentives of free zones must be counter-balanced against their money laundering and terrorist financing risks, and that supervision and oversight must be in place.
GFI’s Free-For-All Zones: The Case of Dubai can be found here.
The Carnegie Endowment for International Peace report, Dubai’s Role in Facilitating Corruption and Global Illicit Financial Flows, can be found here.
Categories: Trade Based Financial crimes News