29 August 2024
The UAE’s real estate market is one of the most buzzing globally, with Dubai alone seeing valuations surge by around 38% this year. This is driven largely by foreign investment, with foreign ownership in Dubai's housing market currently estimated1 at over $160 billion. However, this demand does not come without its pitfalls, with the market vulnerable to financial crime, as criminals seek to exploit the sector to launder illicit assets and the proceeds of their illegal activities. Just like anywhere in the world, where there is significant capital and investment, criminals are quick to follow.
In response to these vulnerabilities, the UAE has expanded the scope of rules covering the real estate sector to enhance accountability and transparency across the industry. Recent measures2 now require real estate brokers and agents to report transactions involving large sums or virtual assets through the Real Estate Activity Report (REAR), focusing on amounts over AED 55,000. These regulations, aligned with international standards, underscore the UAE’s commitment to a secure investment environment.
For real estate professionals, it's crucial to stay vigilant about financial crime risks and understand your due diligence and reporting obligations. Criminals have historically used Dubai's property market to launder money, as seen with figures like Daniel Kinahan, an alleged criminal leader with substantial property holdings in the UAE. The risks are real, and the penalties for non-compliance are growing – fines have tripled3 since 2022 as regulators enforce strict AML standards.
What are key risks for real estate businesses?
The UAE property market has been used as an avenue for illicit activities by criminals and corrupt individuals. Normal, everyday transactions like real estate purchases offer criminals convenient cover for carrying out shady business under the guise of a legitimate transaction. Key financial crime risks4 in the real estate sector include money laundering, terrorist financing, fraud, tax evasion, and sanction evasion. Criminals may look to use5 shell companies, family or third-party associates, or professional intermediaries to hide their links to property, protect their assets, and carry out criminal activities.
A high-profile example of this is Daniel Kinahan, the alleged leader of the renowned Kinahan crime cartel, which emerged in Dublin in the late 1990s and has since expanded internationally, now operating in the UK, Spain, and the UAE. The cartel is known for drug trafficking, among other criminal enterprises, and has been linked6 to at least 20 killings in Europe.Kinahan was sanctioned7 by the US and placed under an asset freeze8 by the UAE in 2022, during which US authorities listed him as living and largely operating out of the Dubai.
An OCCRP investigation9 found that Kinahan’s wife, Caoimhe Robinson, has bought and sold properties in Dubai despite these sanctions Kinahan. For example, she reportedly bought a villa for about $2.1 million last year. Kinahan has likely used his wife to purchase property as she herself is not directly sanctioned. Leaked records show that Kinahan and his wife are listed as the owners of a combined four properties in Dubai. Kinahan also reportedly owns commercial office spaces in Dubai, which authorities have said served as headquarters for two of his businesses – MTK Global and Ducashew General Trading.
The OCCRP’s investigation also revealed that Dubai’s property market is home to several other individuals with transnational criminal backgrounds. Among them are Vinod Adani, an Indian billionaire accused10 of stock market manipulation and money laundering through a network of shell companies, and Othman El Ballouti, reportedly11 a key player in Europe’s cocaine trade, both of whom own properties in the same upscale apartment complex.
Why should real estate businesses care?
Real estate businesses in the UAE need to stay sharp in fulfilling their financial crime duties. Despite a boost in suspicious transaction reports since 2022, the surge in fines signals that authorities expect more robust efforts from industry professionals. This increase underscores the UAE's firm stance on AML enforcemen t, making it crucial for agents to fully understand and comply with their obligations, particularly in reporting suspicious activities (see here for a Themis guide on these obligations).
What to learn more about financial crime risks and obligations in the real estate sector?
To help you navigate these requirements, Themis has released a new UAE Real Estate AML Training. This digital course is designed specifically for the UAE market, guiding learners through the complex landscape of AML compliance. Accredited by the London Institute of Banking & Finance, the course provides an interactive, scenario-based learning experience, placing learners in the role of a real estate broker handling a potentially suspicious client. Upon completion, learners receive a certificate that demonstrates learners’ readiness to meet legal and regulatory standards.
We also offer Themis Insight reports exploring key risks and trends across the real estate sector, including:
And check out other Themis Research to explore more financial crime risks across other sectors in the UAE and beyond.
References
1. https://apnews.com/article/dubai-economy-real-estate-tourism-regional-tensions-bb31da8b712b9b34086a997943e6a03a
2. https://www.occrp.org/en/project/dubai-unlocked/what-is-dubai-unlocked-everything-you-need-to-know
3. https://www.moec.gov.ae/documents/20121/387526/Circular+No.+5-2022+MOE_REAR+final+clean.pdf/2770819d-999a-d2eb-66e5-2b84141eda48?t=1656231114928
4. https://amlctf.gov.ae/en/media-center/news/23/2/2024/uae-plays-leading-global-role-in-combating-financial-crimes-hamid-al-zaabi
5. https://wearethemis.com/media/lk5fwwym/common-financial-crime-risks-in-the-uae-s-real-estate-sector-key-financial-crime-risks-4.pdf
6. https://wearethemis.com/media/3uecxkcf/typologies-and-red-flags-indicators-of-financial-crime-within-the-uae-real-estate-sector.pdf
7. https://www.icij.org/investigations/panama-papers/europol-links-kinahan-drug-cartel-to-murders-in-four-countries/
8. https://home.treasury.gov/news/press-releases/jy0713
9. https://www.bbc.com/news/world-europe-61182648
10. https://www.irishtimes.com/crime-law/2024/05/15/kinahan-investigation-how-the-cartels-dubai-properties-were-secretly-sold-off/
11. https://www.occrp.org/en/project/dubai-unlocked
12. https://www.forbes.com/sites/giacomotognini/2023/03/30/is-vinod-adani-the-mastermind-behind-his-brothers-empire/
13. https://home.treasury.gov/news/press-releases/jy1629