Thunder only happens
when it’s raining, and players only love you when they’re playing. Fleetwood Mac
could not have been more fitting and even more precise regarding the
recent money laundering trend in the UAE. Payment agents and real estate
brokers are cashing in on the unreported crypto funds of investors, making them
the darlings of the UAE FIU, who are trying to locate these facilitators.
In light of the recent BBC expose, the overwhelming criticism towards the regulators has shed light on one form of fraud conducted in the European Union
and the United Kingdom. Yet, a similar method of money laundering has been
highlighted by the UAE Ministry of Economics, which has made the UAE Government
very wary due to the FATF gray listing a year ago.
The #UAE has imposed a monetary penalty of Dh115 million ($31.3M) in the first quarter (Q1) of 2023 to combat #financial fraud, such as money laundering and terrorism financing. For more information click here: https://t.co/ZdIunxdcmUpic.twitter.com/WIEEGL109E
— Shufti Pro (@Shufti_Pro) May 2, 2023
Many investors wish to catch the wave and purchase property there as part of the real
estate boom in the golden city of Dubai and the marble city of Abu Dhabi.
Many of these investors hold cryptocurrencies, hoping
to liquidate their virtual assets into tangibles. The real estate brokerage
market in the UAE has picked up on this trend. Many brokerages follow this route and allow access to purchase apartments, housing, and office space in the UAE using cryptocurrencies.
The problem arises
when the main actors of the transaction: the buyers, real estate brokers, and
liquidity providers, work unregulated. This has been highlighted by the UAE
Ministry of Economics, which stated that such companies will now be in the
spotlight for money laundering indicators. Facilitators of such transactions
usually cover their money laundering schemes with claims of focusing on
financial markets, analytics, and extensive development while serving as a
liquidity provider for holders of cryptocurrencies vis-à-vis a third-party
provider.
Serving as a point of
contact for the third-party provider and later providing the real estate
opportunity creates a façade that the broker does not fall under any liability
for money laundering and KYC checks. Yet, this is precisely the root cause of a
money laundering indicator, facilitating a transaction for a third party, even
though the ultimate beneficiary owner will be the original client.
Crypto issues pop up increasingly in other committees of jurisdiction, and there are policy vectors to watch closely beyond the Banking and Ag committees. In this instance, Sen. Warren talking about her currently stalled validator KYC/AML bill in front of the Senate Armed… pic.twitter.com/rUNwHrRt87
— Alexander Grieve (@AlexanderGrieve) May 5, 2023
This trend, such as
the ICO and NFT trends at the beginning of 2020 and 2021, will soon reach its
melting point. The Governmental law enforcement agencies will have to
enforce the FATF Recommendations, such as Recommendation 15 on virtual assets,
and implement the risk-based approach for real estate as listed in the 2022
report.
As the report highlights, the use of the real estate as a means to launder
criminal and unreported profits allows criminals to pump the pricing of
housing and commercial real estate to dump illicit funds,
leaving the real estate market at a cliff, actual potential buyers at an abyss,
and the facilitators of the liquidity at a win at their expense.
This issue is then expected to be raised and dealt with towards the newly scheduled
rounds of the FATF negotiations with the UAE. Currently, the only way for the
UAE regulators, such as VARA, SCA, and the UAE Central Bank based in Abu Dhabi,
will be to enforce the warnings issued by the UAE Ministry of Economy and
ensure proper licensing of the liquidity providers, meaning their hide-and-seek
game of hiding as a third-party provider will not be tolerated anymore.
Thunder only happens
when it’s raining, and players only love you when they’re playing. Fleetwood Mac
could not have been more fitting and even more precise regarding the
recent money laundering trend in the UAE. Payment agents and real estate
brokers are cashing in on the unreported crypto funds of investors, making them
the darlings of the UAE FIU, who are trying to locate these facilitators.
In light of the recent BBC expose, the overwhelming criticism towards the regulators has shed light on one form of fraud conducted in the European Union
and the United Kingdom. Yet, a similar method of money laundering has been
highlighted by the UAE Ministry of Economics, which has made the UAE Government
very wary due to the FATF gray listing a year ago.
The #UAE has imposed a monetary penalty of Dh115 million ($31.3M) in the first quarter (Q1) of 2023 to combat #financial fraud, such as money laundering and terrorism financing. For more information click here: https://t.co/ZdIunxdcmUpic.twitter.com/WIEEGL109E
— Shufti Pro (@Shufti_Pro) May 2, 2023
Many investors wish to catch the wave and purchase property there as part of the real
estate boom in the golden city of Dubai and the marble city of Abu Dhabi.
Many of these investors hold cryptocurrencies, hoping
to liquidate their virtual assets into tangibles. The real estate brokerage
market in the UAE has picked up on this trend. Many brokerages follow this route and allow access to purchase apartments, housing, and office space in the UAE using cryptocurrencies.
The problem arises
when the main actors of the transaction: the buyers, real estate brokers, and
liquidity providers, work unregulated. This has been highlighted by the UAE
Ministry of Economics, which stated that such companies will now be in the
spotlight for money laundering indicators. Facilitators of such transactions
usually cover their money laundering schemes with claims of focusing on
financial markets, analytics, and extensive development while serving as a
liquidity provider for holders of cryptocurrencies vis-à-vis a third-party
provider.
Serving as a point of
contact for the third-party provider and later providing the real estate
opportunity creates a façade that the broker does not fall under any liability
for money laundering and KYC checks. Yet, this is precisely the root cause of a
money laundering indicator, facilitating a transaction for a third party, even
though the ultimate beneficiary owner will be the original client.
Crypto issues pop up increasingly in other committees of jurisdiction, and there are policy vectors to watch closely beyond the Banking and Ag committees. In this instance, Sen. Warren talking about her currently stalled validator KYC/AML bill in front of the Senate Armed… pic.twitter.com/rUNwHrRt87
— Alexander Grieve (@AlexanderGrieve) May 5, 2023
This trend, such as
the ICO and NFT trends at the beginning of 2020 and 2021, will soon reach its
melting point. The Governmental law enforcement agencies will have to
enforce the FATF Recommendations, such as Recommendation 15 on virtual assets,
and implement the risk-based approach for real estate as listed in the 2022
report.
As the report highlights, the use of the real estate as a means to launder
criminal and unreported profits allows criminals to pump the pricing of
housing and commercial real estate to dump illicit funds,
leaving the real estate market at a cliff, actual potential buyers at an abyss,
and the facilitators of the liquidity at a win at their expense.
This issue is then expected to be raised and dealt with towards the newly scheduled
rounds of the FATF negotiations with the UAE. Currently, the only way for the
UAE regulators, such as VARA, SCA, and the UAE Central Bank based in Abu Dhabi,
will be to enforce the warnings issued by the UAE Ministry of Economy and
ensure proper licensing of the liquidity providers, meaning their hide-and-seek
game of hiding as a third-party provider will not be tolerated anymore.