FILE – General view of the Burj Khalifa and the downtown skyline in Dubai, United Arab Emirates, September 30, 2021. (REUTERS/Mohammed Salem//File Photo)
Rich Russians are trying to move some of their wealth from Europe to Dubai as a result of Western sanctions, financial and legal sources say.
The sanctions are a result of the Russian invasion of Ukraine.
Dubai, the Persian Gulf’s financial and business center, has long been a point of interest for the very rich. And the United Arab Emirates’ (UAE’s) refusal to take sides between Western allies and Moscow has suggested to Russians that their money is safe there.
The UAE, which over the years has deepened its ties with Russia, has not agreed to observe sanctions put in place by Western nations. Its central bank has so far not issued guidance regarding Western sanctions.
In many cases, wealthy Russians are seeking to move money that is now in Switzerland or London, a senior banker at a large Swiss private bank and a lawyer familiar with the matter said.
The lawyer, who is based in Dubai, said his firm had received questions about how quickly it could move large amounts of money – hundreds of millions of dollars – to the Gulf Arab state.
The Dubai Media Office, UAE foreign ministry and central bank did not immediately respond to a question about the amount of Russian funds going into Dubai.
The senior private banker said in some cases, Russian clients with accounts at private banks were opening accounts with that same bank’s UAE branch. Others were opening accounts with local banks, the banker added.
Russians are facing a weakened economy at home. They are also looking to put their money in investments, including real estate, and buying into funds that do not reveal ownership information, another financial source said.
Dubai has long been popular with Russians, who were among the top visitors to the emirate and purchasers of real estate even before the war.
Bankers said there was a risk of reputational harm to organizations receiving Russian funds as companies around the world cut ties with Moscow.
Some major UAE banks are taking a careful approach. Banks operating in the Gulf state have in the past been punished for not following rules about sanctions on countries including Iran and Sudan.
The Financial Action Task Force (FATF) is a worldwide organization that examines financial crimes. Last week, it put the UAE on a “grey list” of places subject to increased examination.
The Dubai Media Office, UAE foreign ministry and central bank did not immediately respond to questions about how banks and businesses should deal with sanctions on Russia.
Two sources familiar with the matter said businesses in the UAE would spend more time looking into the origins of their funds through a so-called Know-Your-Customer process.
A source at a Dubai bank said that funds from Russians are not being accepted for wealth management, though they could set up deposit accounts.
“They can do it,” but the bank has high compliance hurdles to clear to accept Russian money, including evidence of where it came from, the source said.
The UAE’s private wealth industry has not yet reached the size or complexity to fully take in wealth stored in Switzerland and other traditional money shelters, sources said.
“They might take some, but I find it hard to imagine that they would take it all,” an investment management professional said. “It’s not just the servicing element, but the investment management which most of these banks lack.”
I’m John Russell.
Yousef Saba, Sumeet Chatterjee, Hadeel Al Sayegh and Alexander Cornwell reported on this story for Reuters. John Russell adapted it for VOA Learning English.
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Words in This Story
sanction – n. an action that is taken to force a country to obey international laws by limiting or stopping trade with that country — usually plural
client – n. a person who pays a professional person or organization for services
reputation – n. the way in which people think of someone or something
approach – n. a way of dealing with something : a way of doing or thinking about something
deposit – n. an amount of money that is put in a bank account
compliance – n. the act or process of doing what you have been asked or ordered to do : the act or process of complying
hurdle –n. something that makes an achievement difficult
lack – v. to not have (something)