Introduction: Financial Fraud in the UAE
The phenomenon of financial fraud is, unfortunately, one of the most common crimes committed in the environment of the global economy nowadays. Despite the promotion of consistent and regular audits, the requirement to file detailed reports, and other tools of supervision introduced into the designated area to execute complete control over the financial transactions, a range of organizations manage to commit financial fraud and evade the appropriate punishment, the UAE companies being no exception to this rule.
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However, the fact that most of the money retrieved in the course of financially fraudulent actions are used as the resources for supporting terrorist organizations, in general, and ISIS, in particular, clearly is a shockingly unpleasant discovery that needs to be handled correspondingly.
Despite the numerous actions that the UAE government has undertaken to make the problem of terrorism funding via money laundering impossible, the issue is getting increasingly large because of the necessity to establish a stronger control over the subject matter at all levels from the state one to the level of local organizations management.
The accomplishment of the specified goal will require the cooperation between the state government and the representatives of the UAE organizations, as well as the coordination of the latter’s actions with the ones of the international agencies.
Money Laundering in the UAE
According to a recent report published by the IMF, the UAE has been facing serious problems as far as the issue regarding money laundering for their further use to support terrorists deserves to be mentioned. Much to the state authorities’ credit, new laws have been passed to prevent the problem from expanding and nip it in the bud, but, once having gained momentum in 2008, the problem has been growing since.
The issue is currently being addressed by the UAE government with the help of the Anti-Money-Laundering Act, which has been reinforced, and in which the regulations regarding the process of money transfer by the representatives of nationalist organizations should be restricted substantively:
A Cautionary Notice has been issued in the Arabic Press advising both Nationals and Residents to exercise prudence while transferring cash funds abroad or while receiving funds from abroad. The same notice is being prepared and will be released in the English Press.1
The specified amendments made to the preexisting regulation point quite graphically to the fact that the state authorities are eager to address the current problem and block the process of illegal money transfer, therefore, preventing local organizations from funding terrorists.
The effects of the law mentioned above have been quite impressive, as the percentage of instances of the crime in question has dropped lately. Nevertheless, the battle against the specified problem continues due to a range of factors that make the UAE a target for fraudulent actions:
The UAE is a significant financial center in the Middle East region, as well as a leading trade and transportation hub. Due to its geographic location, the UAE is vulnerable to money laundering and terrorist financing. As well, many Canadian REs (such as MSBs) use the UAE as a hub for funds which are then distributed to other jurisdictions.2
As the recent report published by the United Nations and the data provided by the leader of the Central Bank of the UAE, Sultan Bin Nasser Al Suwaidi, show, a range of organizations condone funding criminal organizations, mainly, the ones that are connected directly to terrorism, primarily, infamous ISIS3. Despite the attempts of the UAE to address the increasingly threatening issue of terrorist support through international money laundering, the threat is growing and, thus, needs to be handled.
The phenomenon of money laundering can also be explained by the factors that create the environment, in which the crime becomes possible to commit. On the one hand, the UAE market has been known for its resilience to strong economic shocks; on the other hand, the market is open to large-scale manipulations that have drastic effects on a range of its segments, especially the real estate segment, in general, and its residential segment, in particular.
Where the Money Goes: Financed Terrorism
Although personal financial gain is typically the basic driving force behind financial scams, some of the money laundering activities are based on a certain political agenda. Reports show that most of the illegal money raised with the help of money laundering in the UAE is used to support terrorist movements such as ISIS. The existing evidence indicates that, by fighting the finance-related fraudulent activities in the designated area, one addresses the issue of terrorism and restricts the financial resources thereof.
Hence, the struggle against the illegal disposition of financial resources in the UAE is likely to affect the current international political agenda in a very powerful manner by reducing the threat of terrorist attacks and limiting the opportunities for the proponents of the terrorist actions.
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The execution of the strategies aimed at eradicating money laundering from the current political system not only improves the economic profile of the state but also leverages the political situation within the state, thus, providing more opportunities for fighting international criminals successfully and ridding the society of the threat of terrorism.
Combating Financial Fraud: What Can Be Done
While it is barely possible to control every instance of money laundering in the state, the fact that the money is used to support terrorist movements points to the need of introducing a significant change in the current supervision of the essential financial processes in the UAE.
This is the point at which the concept of the anti-money-laundering policy factors in. Anti-money laundering is a set of strategies aimed at preventing the crime in question and penalizing those who have committed it; therefore, as its definition suggests, it should embrace every single financial, economic, and political opportunity that can be used against the crimes related to financial fraudulence.
The tools that are typically used to transfer the money acquired in the course of fraudulent actions to terrorist organizations are strikingly numerous. As recent studies show, the approaches in question include the latest technological developments along with the ones that have been in existence for a couple of decades, such as WAP.
In fact, the tendency to utilize digital tools and devices for laundering money and transferring it to the accounts of terrorist organizations can be viewed as the defining characteristics of the subject matter nowadays. Seeing that the report mentioned above points quite graphically to the existence of not only money laundering practices but also financing terrorism, the situation warrants the use of the anti-money laundering approach.
Measures to Be Taken
As it has been stressed above, the UAE state government has been taking exhaustive measures to address the problem outlined above, including the update of the 2004 Anti-Money-Laundering Act.
Although ISIS has emerged comparatively recently, and the phenomenon of political money laundering for the ISIS terrorist funding is a relatively new phenomenon, a range of tools, including e-devices and software, have been created to deter the related crimes. For instance, the IRIS anti-money-laundering software4 offers a strong opportunity for the identification of the wrongful financial transactions through performance monitoring and analysis.
On the governmental level, the subject matter is tackled with the help of the policy known as the ‘five mutually reinforcing lines of effort’5, as a recent report says. According to the official statement of the U.S. Government, the strategy under analysis was designed to counter ISIS by attacking several aspects of its operations.
In other words, a coherent strategy that will help identify the weaknesses of the current money laundering processes has to be designed so that these organizations could be deprived of an opportunity to carry out financial transactions.
At a smaller scale of handling the issue in question, the creation of a committee that will identify the instances of money laundering as the tool for supporting terrorist movements has been suggested by the UAE authorities. The Anti-Money Laundering and Suspicious Cases Unit (AMLSCU) has been tackling the problems related to financial crimes and their possible link to the external political threats for quite a while with an impressive success, as the recent data shows quite graphically.
In particular, the department has contributed to passing the law that permitted a closer supervision of the target processes in the UAE business environment with the further possibility for reporting about the findings to the corresponding authorities. Therefore, it is recommended that additional tools for supervising the financial interactions between organizations should be included into the state’s framework of audits.6
Needless to say, the adoption and update of the corresponding laws that will prevent people from condoning terrorism and supporting it financially are going to play a huge part in the fight against the terrorism-based financial fraud. However, seeing that the issue has been gaining an increasingly large scale, the information regarding the subject matter has to be processed on an international level, which calls for cooperation with the FBI.
The latter, in fact, has developed a range of programs aimed at combating the phenomenon of money laundering as the source of terrorist organizations funding; for instance, the creation of financial intelligence units can be viewed as a primary example of resisting the threat of terrorism.
It should be noted, though, that the specified measures have their disadvantages and, therefore, should be taken with a grain of salt as a powerful tool for improving the current political and financial situation in the UAE. When it comes to defining the weaknesses of these strategies, one must admit that they lack the technological strength.
Therefore, the introduction of new and improved technology along with the training program helping the participants to acquire the necessary IT skills is imperative to prevent and thwart the attacks of cybercriminals attempting at committing financial fraud.
Similarly, the interventions made at the governmental level and promoted by the United States as he tools to combat terrorism are rather tricky, though not impossible, to implement as the existing terrorist organizations (ISIS, Jahhat-al-Nusra, al-Quaeda, etc.) are funded with the help of different financial models; hence, each time, a unique approach toward cutting the terrorists’ way to accessing financial resources.
Also, the issue concerning the improving technological advances of the people and organizations contributing to the evolution of terrorism needs to be brought up as a serious obstacle to fighting the threat and promoting democracy to and safety for all members of the society.
While the improvement and further development of technology can be deemed as a fairly positive phenomenon, it can also be used for the purposes of concealing the instances of financial fraud and, therefore, making committing a crime easier and available to the supporters of the corresponding terrorist organizations.7
Avoiding the Roadblocks
Despite the admittedly complicated route that the current anti-terrorist and anti-money-laundering campaign leaders have to take to advance in their fight against terrorism, several tools have been created to address the increasingly hard task of identifying the illegal money flow and repress the crime.
Specifically, the task of stemming the flow of funds directed at the designated terrorist organizations such as the FININT (a specimen of actionable financial intelligence) organization has been created and proven to be rather efficient as far as the provision of international security is concerned.
As far as the technological development of the physical and legal persons liable for financial fraud in the UAE public and private sector is concerned, the problem can also be managed on several levels, i.e., the local and the governmental one. For instance, it is highly recommended that the use of digital currency should be tracked carefully and that the instances of its misuse should be reported correspondingly.
Indeed, according to the recently published data, the use of the so-called cryptocurrency affects the rates of people’s security significantly due to the numerous opportunities for money laundering that it opens: ‘where there are opportunities to exchange real money for online money, there money laundering can also exist’8.
It should be noted that there are no tools for tracking the use or exchange of cryptocurrency online at present, which makes the process of identifying the possibility of financial support of terrorists barely possible. Herein the need to promote the further evolution of the technology used by the governmental bodies so that the cryptocurrency transactions could be traced and analyzed correspondingly lies9.
Therefore, while made in the distant 2008, the findings of the IMF are still topical nowadays. Furthermore, the outcomes of the study have gained even greater significance after the numerous terrorist attacks made by the ISIS members and the development of the ongoing conflict in Syria.
Since the strategies adopted to address the threat of terrorism and eradicate the phenomenon have been failing miserably and the ongoing conflict in Syria has only been aggravating, it is essential that the problem of terrorism funding via money laundering tools should be managed.
Conclusion: Addressing the Issue
The fact that a range of residents and organizations of the UAE fund ISIS truly is a shocking discovery; however, by incorporating the global strategies of preventing the money flow from the UAE to the corresponding terrorist organizations with the process of monitoring suspicious activities on a local level, one is likely to create a sustainable alarm system that will permit a rapid and efficient response to the emergent threats of a terrorist attack.
It is doubtless that the problem needs to be managed on a governmental level so that large organizations could be screened for possible financial frauds and the use of money laundering techniques for funding terrorist organizations, ISIS being the primary one. Despite the numerous measures that have been adopted to avoid the further development of terrorist movements, the issue has only increased its scale.
Therefore, the IMF findings are still relevant in 2016; furthermore, the number of countries, where the members of the society along with local organizations support terrorist movements, has also increased significantly, which calls for the development of a more efficient remedy than the one proposed by the IMF.
It is expected that an enhanced control is likely to spawn a series of even more intricate tools for transferring organizational money illegally to ISIS and the related terrorist groups. Underestimating the opponent means creating a loophole for them to attack one in an unexpected and robust manner; therefore, it will be reasonable to assume that the organizations funding ISIS will seek the ways of avoiding the specified restrictions and providing financial support to the terrorist organization anyway.
However, the further advancement in identifying the tools that criminals use to support terrorist organizations will allow for locating a specific pattern and, thus, predict the change in the opponent’s strategy, therefore, leading to complete eradication of financial fraud as the tool of funding ISIS and the related organizations.
Anti-Money Laundering and Suspicious Cases Unit (AMLSCU) 2010. Web.
Anti-Money Laundering – New Law 2016. Web.
IRIS 2016, IRIS Anti Money Laundering Software. Web.
Levitt, Mathew 2014, Terrorist financing and the Islamic State. Web.
Money Laundering and Terrorist Financing Trends in FINTRAC Cases Disclosed Between 2007 and 2011 2012. Web.
Tracking the Financing of Terrorism 2016. Web.
Williamson, Cindy, Jason Vazquez, Jason Thomas, and Katherine Sagona-Stophel
2013, Technology in the Fight Against Money Laundering in the New Digital Currency Age. Web.
1 Anti-Money Laundering – New Law (2016).
2 Money Laundering and Terrorist Financing Trends in FINTRAC Cases Disclosed Between 2007 and 2011 (2012).
3 Tracking the Financing of Terrorism (2016).
4 IRIS (2016), IRIS Anti Money Laundering Software.
5 Mathew Levitt (2014), Terrorist financing and the Islamic Stat.
6 Anti-Money Laundering and Suspicious Cases Unit (AMLSCU) (2010).
7 Anti-Money Laundering – New Law (2016).
8 Cindy Williamson, Jason Vazquez, Jason Thomas, and Katherine Sagona-Stophel (2013), Technology in the Fight Against Money Laundering in the New Digital Currency Age.