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Tuesday, May 21, 2024

Shocking details about Pakistani politicians from Dubai leaks

The data, obtained by the Center for Advanced Defense Studies (C4ADS) and shared with various media outlets worldwide, sheds light on hundreds of thousands of properties in Dubai and their ownership status.

In recent years, Pakistani officials have attempted to uncover information about Pakistani citizens owning assets in Dubai to bring undisclosed assets and income into the tax system. However, progress has been minimal, as Dubai authorities are hesitant to share even basic details like the number of Pakistani citizens holding Dubai residence visas (iqamas or Emirates IDs).

This reluctance is partly due to Pakistan’s limited geopolitical influence, which undermines its ability to demand such information. Nevertheless, leaked data, comprising over 23,000 properties allegedly owned by Pakistani nationals up to spring 2022, has surfaced. The data, obtained by the Center for Advanced Defense Studies (C4ADS) and shared with various media outlets worldwide, sheds light on hundreds of thousands of properties in Dubai and their ownership status.

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While the leaked data doesn’t inherently indicate financial misconduct, it presents a stark contrast: a developing country grappling with economic challenges is prominently featured among property owners in Dubai, a global hub of wealth. Estimates suggest that Pakistani owners may have properties worth over $10 billion, a figure likely higher due to property value increases.

Efforts to access information from Dubai’s authorities have yielded little, despite a tax treaty between the UAE and Pakistan. Pakistani officials, including the Federal Board of Revenue (FBR) chairman, have expressed frustration over Dubai’s silence on sharing relevant information, such as iqama details. Past attempts to obtain this information were met with resistance, indicating Dubai’s preference for opacity.

Tax laws dictate that Pakistani residents must declare their worldwide income, while non-residents are only taxed on income generated within Pakistan. However, there have been instances of officials misusing obtained property details for blackmail, highlighting the challenges in enforcing tax compliance.

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Furthermore, offshore financial wealth owned by Pakistan has dwindled over the years due to increased global banking transparency. Despite efforts to combat tax evasion, challenges persist in ensuring accountability and transparency in overseas asset ownership among Pakistani citizens.

Dubai is a global financial hub often described as a playground for the world’s rich. It prides itself on being an open economy for companies and individuals who want to make investments. But the glamorous emirate has a darker reputation as a tax haven, and top destination for murky sources of cash and money laundering — often through real estate transactions. In 2019, Transparency International dubbed the emirate a ‘money laundering paradise’, highlighting that individuals with questionable sources of income are able to invest in Dubai without restrictions.

A number of individuals that journalists with the OCCRP interviewed, including a former governor of a central bank in the region, spoke about parallel systems being in place.

Two Arab lawyers with representative offices in the UAE told a journalist with OCCRP that there are two economic, financial and security systems running in parallel at the same time. One is formal where all rules and guidelines apply and which conforms to international requirements. The other operates outside the formal system; it survives on cuts from criminals, sanctioned persons and entities — shady investors and millionaires who don’t like to be asked where they got their money. One of the lawyers said, “Private jets full of money are landing frequently in Dubai. No one can ask who the money is for. It’s taken out and deposited in special accounts…”

In early March, Diamant Salihu from Swedish Television did an in-person undercover interview for this project with a salesperson working with Damac, the property development company, at their sales office in Dubai. When discussing the options for payment, the Damac employee at one point told Mr Salihu they can accept crypto currency as well as “full cash payment”, explaining, “If you bring bags of cash we can accept that[…] . There is no limit on cash actually”. He added that “zero questions” would be asked about the cash.

In response to the OCCRP’s questions, Damac Properties denied that it was their policy to propose cash payments by customers. “If a customer wishes to settle by cash, such payment would trigger and be subject to an enhanced due diligence and local declaration and reporting actions. Had your undercover reporter proceeded further […] they would have witnessed the scrutiny and the heightened measures we apply to transactions that trigger red flags.” (excerpt)

The OCCRP reached out to UAE authorities for their response. An official from the UAE embassy in Norway issued the following statement: “The UAE takes its role in protecting the integrity of the global financial system extremely seriously. In February, the Financial Action Taskforce (FATF), the global standard-setter for measures to fight money laundering, praised the UAE’s significant progress. In its continuing pursuit of global criminals, the UAE works closely with international partners to disrupt and deter all forms of illicit finance. The UAE is committed to continuing these efforts and actions more than ever today and over the longer term.”

To support its contention, the embassy cited the following figures: “The UAE has issued fines of more than AED 115 million in relation to money laundering” and “seized assets of more than AED 925 million in relation to breaches of AML practices and procedures”.

Dubai was added to the FATF’s grey list in 2022 but was taken off in February 2024. Some experts, however, have expres­sed concerns that the move was premature and driven by geopolitical concerns.

According to the EU Tax Observatory’s Global Tax Evasion Report 2024: “Real estate is a particularly serious blind spot in international information exchange. Just like financial assets, there are many legitimate reasons for holding real estate abroad, but there are also concerns that offshore real estate, in some cases, may be used for money laundering, tax evasion, escaping international sanctions, or other financial crimes. The attractiveness of real estate as an asset class lies in its relatively stable value over time, the possibility to manipulate prices, and possibilities for anonymous ownership in countries with weak property registers.”