‘You Don’t Kill a Story by Killing a Journalist’
Three years ago today, Corinne Vella received a call that would forever change her family, her life, and even her homeland, the small Mediterranean island of Malta.
Dubai went from the land of sand to skyscrapers in less than 20 years as the tidal wave of money — some of it dirty — flowed in.
This was accompanied by robust growth in property values, with prices quadrupling from 2002 to 2008. Rental yields on residential and commercial properties range from 8 to 10 percent, meaning owning property is lucrative. And save for Dubai’s 4 percent property registration tax, no other fees apply.
In 2017, both the residential and commercial markets experienced declines. Office landlords were forced to offer concessions to attract or retain tenants and the average sales price and rent of residential properties dipped.
A former sales representative at one of Dubai’s most prominent property development companies told OCCRP that his organization engaged in fake deals to help the rich launder cash.
It worked like this: The clients walk in carrying a bag filled with millions of dollars. They “buy” a property, then cancel the transaction after a few weeks. The refund comes through a bank, essentially cleaning the money.
In one case, the developer sold four buildings for about 800 million dirhams (about US$ 218 million) in a transaction that was cancelled a week later, according to the former salesman.
Everyone involved benefited because the client paid the development company 30 to 40 percent commission. Five percent went to the broker, one percent to the salesman and the rest to the company owner, who had close ties to Dubai’s royal family.
The sales representative noticed the fake deals after two months at the company and said colleagues ignored the sketchy dealings.
“Whether it’s black money, or whatever, no one cares,” he said. “Money is money. They all take their commission at the end of the day.”
Nevertheless, the Dubai Land Department (DLD) reported 69,000 real estate transactions worth over 285 billion dirham ($77.6 billion) that year, marking a steady increase in overall volume over the two previous years.
More than half the investors were foreigners. Emirati nationals led the list, followed by Indians, Saudis, British, and Pakistanis. Now real estate executives want to push the number of international investors even higher.
At an event hosted by the International Property Show and the DLD last summer, developers called on the government and banks to provide more investment incentives, according to coverage in the Khaleej Times, Dubai’s largest state-run English-language newspaper.
Experts say purchasing property in Dubai is already a very simple process, with few questions asked and little if any due diligence, the industry term for checking into applicants’ backgrounds and the source of their funds.
An OCCRP reporter went to seven different real estate agencies in Dubai, posing as a potential client, to test just how lax the buying process might be.
All agents said they preferred cash and noted there were no rules or requirements before buying property as long as the reporter could pay. The agents showed little interest in where the money might have come from.
Foreigners are allowed to own Dubai property outright in special investment zones. Sales don’t require state consent and paperwork is minimal, making it attractive for buyers who can’t easily access real estate markets in Europe or the US.
The emirate’s penchant for secrecy is another perk. The origins of wealth are rarely checked and properties can be purchased through untraceable corporate vehicles or money transfers.
“It would be impossible for information to be shared with your government and very expensive for your government to try. There won’t be a response,” one estate agent said.
What’s more, while it’s increasingly difficult to move illicit money through the international banking system, there have been almost no curbs on money laundering in real estate, says Louise Shelley, founder and director of the Terrorism, Transnational Crime and Corruption Center at George Mason University in Fairfax, Virginia.
Laundering money in other economic sectors may cost 10 to 20 percent of the total, but individuals can make a profit from property investing, Shelley says.
These features of the market make it particularly attractive for organized crime figures and corrupt officials looking to stash ill-gotten gains.
The US Treasury has sanctioned a number of Russian and Eurasian organized crime kingpins over the past decade, and the records show that many of them have residency in Dubai.
“Dubai has become something of a hub and a haven for gangsters from Russia and other post-Soviet countries,” says Mark Galeotti, senior researcher at the Institute of International Relations Prague.
For example, a man named Kamchybek Kolbayev owns property there despite being sanctioned by the US in 2012 for his involvement in the Brothers’ Circle, labeled by the Obama Administration as a transnational organized crime group. According to the US Treasury, Kolbayev oversaw the circle’s Central Asian activities, including drug trafficking.
Kolbayev is listed in the database obtained by OCCRP as connected to an apartment at Bahar 1 on Dubai Marina, the man-made canal that links some of Dubai’s most sought-after real estate.
It’s not just Russians or Central Asians. Nick Donovan, Campaign Director for Conflict and Fragile States at Global Witness, says Dubai property investing is a preferred method for Afghans taking illicit cash out of the country.
OCCRP data shows Sherkhan Farnood and Khalil Fruzi, main players named in the 2010 Kabul Bank scandal that drained almost 10 percent of Afghanistan’s GDP, were linked to Dubai properties in 2014-2016.
In response to reporters’ inquiries, the Dubai Land Department said that all its processes comply with the law and are “in line with international regulations aimed at promoting global peace, eliminating organized crime, and combating the financing of terrorism.”
In a letter describing measures intended to combat money laundering, the department noted its “absolute non-handling of cash,” its “absolute control over real estate professionals, including real estate agents and developers,” its implementation of a “Know Your Customer” system, and its participation in the “World-Check One” global search system for identifying people with criminal backgrounds.
This story is part of the Global Anti-Corruption Consortium, a collaboration started by OCCRP and Transparency International. For more information, click here.