Home Business Insights & Advice Global financial crime havens beginning to counter Wild West image

Global financial crime havens beginning to counter Wild West image

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23rd Aug 22 11:06 am

The UAE has just taken a vital step in tackling its deeply-entrenched money laundering problem that enables illicit trade and finances terrorism, introducing new rules that require cash and virtual currency real estate transactions of AED 55,000 and above (roughly $15,000) to be reported to the government’s Financial Intelligence Unit.

This measure follows a wave of criticism directed at the UAE for acting as a “hole in the bucket” for Russian oligarchs seeking to protect their assets from Western sanctions, which largely contributed to the country’s reputation-damaging gray-listing in March by the Financial Action Task Force, the international financial crime watchdog.

In the wake of this policy recalibration, the UAE is now intent on countering its image as a paradise for dirty money, joining a broader recent trend of well-known havens around the world beginning to crack down on high-level financial crime, from money laundering and embezzlement to illicit crypto activity.

Beginning of the end for “Londongrad”?

Among those trying to polish their image is the UK, long a haven for financial crime. Putin’s invasion of Ukraine shone an uncomfortable light on London as the laundromat for dirty Russian money, earning it the unfortunate moniker of “Londongrad.” Weak enforcement of financial laws – particularly those regulating overseas bank transfers to UK shell companies – and a well-oiled machine of crooked lawyers and accounts helping oligarchs “clean” their illicit funds through property and other asset acquisition have combined to make the British capital fertile ground for financial crime. According to an eye-opening report from The Economist, over $125 billion of “questionable funds” is laundered in the UK every year.

The war in Ukraine has triggered long-overdue UK Government intervention to repel high-profile oligarchs from London. In March, Parliament passed the Economic Crime Act to force overseas entities to register UK property ownership with the government and simplify the process of prosecuting people in international corruption cases, while February saw the Government terminate its “golden visa” scheme for wealthy foreign investors. What’s more, measures have been adopted to bolster under-used Unexplained Wealth Orders (UWOs), which require defendants to prove the origin of funds used to purchase assets in the UK. And a new Economic Crime legislation is in the works that could allow authorities to seize illicit crypto assets.

So UK financial regulation is finally catching up to its tough sanctions approach on Russia, which has seen over 1,600 individuals and businesses, including 100 Russian oligarchs, targeted since the passage of Act. But to truly gives these measures teeth, it will need to significantly boost its underfunded enforcement functions.

Cayman Islands in lockstep with UK crackdown

Like the UK, the Cayman Islands, a British Overseas Territory (BOT), has begun work to sanitise its unenviable reputation as a haven for dark money and illicit financial dealings. The Caymans have long acted as a hotbed for shady investment funds and shell companies, which the UK Government has been hesitant to redress. But they are also applying the UK’s Russia sanctions, with over 800 asset freezes amounting to $7.3 billion enforced since the start of the war.

Beyond taking on Russia, the Cayman Islands has taken broader steps to tackle financial crime on its territory, notably with a high-profile embezzlement case that has marked a historic shift. The Kuwait Ports Authority (KPA) and the Kuwaiti Public Institution for Social Security (PFISS) have been engaged in a long-running legal battle with the Caymans-based The Port Fund (TPF), an international investment fund of which the KPA and PFISS are major investors. In short, the Kuwaiti claimants accuse TPF of embezzling hundreds of millions in funds from the sale of the Clark Global City development in the Philippines, with fellow investors the Gulf Investment Corporation (GIC) and the state of Qatar subsequently joining the TPF takedown.

The case has sparked groundbreaking decisions from the Grand Court of the Cayman Islands, which last year ruled that TPF investors had legal grounds to file claims directly against the fund’s management, and in July this year, rejected the TPF management’s attempt to have the Court dismiss charges against it. These strong actions from the Court could herald a new era for financial crime enforcement in the Caymans.

Emerging global effort to combat cryptocurrency crime

The great anti-corruption awakening is coming at the right moment, as the new and rapidly emerging threat of cryptocurrency crime requires urgent enforcement action beyond tackling “traditional” financial fraud from Russia and other countries. Crypto crime reached a record high of $14 billion in 2021, nearly double the amount in 2020, largely driven by $3.2 billion worth of stolen funds and $7.8 billion in scams. What’s more, crypto platforms are increasingly being used for money laundering. The crypto sector’s lack of regulation provides corrupt actors an appealing avenue to store their illicit funds in foreign accounts, so attempts to combat money laundering must not overlook virtual trading.

Cyprus, another country known for hosting illicit foreign money, is taking a leading role in the nascent crypto crime crusade. The European Union Agency for Law Enforcement Training (CEPOL) has chosen the University of Nicosia (UNIC) to launch a training programme later this year for law enforcement officers around the world to boost global capacity in combatting illicit cryptocurrency activity.

Crucially, the course will help foster transnational cooperation between authorities investigating crypto crime. Furthermore, UNIC and the Dubai police have formed a partnership to train local officers in fighting digital financial crime, further demonstrating the UAE’s recent motivation to crack down on financial crime.

While the road to a more legitimate global financial system will be long and arduous, encouraging action is being taken in the countries that have historically been the most welcoming to international financial criminals. It is shameful that it took Russia’s invasion of Ukraine to truly accelerate the push back in hotspots like the UAE, UK and Cayman Islands, but now that the tide is beginning to turn, these countries must maintain a united, long-term front against financial crime, as new threats are always on the horizon.


The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.

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