Special to USAfricaonline.com, first African-owned. US-based news network on the Internet
Summary Report by Matthew T. Page
For politically exposed persons (PEPs) with ill-gotten wealth, Dubai in the United Arab Emirates (UAE) is an alluring destination for investing their gains. Although certainly not the only place to stash money, Dubai—dubbed the commercial capital of the Middle East—exercises minimal oversight and has few legal or logistical obstacles to transferring large amounts of cash or purchasing property.
PEPs, defined as individuals who are or have been entrusted with a prominent public function, are at higher risk of involvement in unlawful activity due to their positions of influence and access to assets.
1 In some cases, government officials and associates who succumb to the temptation become front-page news, but in many other cases, their activities go undetected or uncorroborated, despite the efforts of local authorities and intergovernmental bodies such as the Financial Action Task Force. As a result, billions of dollars are siphoned away to the detriment of both prosperous and struggling economies and societies.
The case of Nigeria—home to Africa’s largest economy and the world’s seventh most populous country—offers valuable insights into this phenomenon.2 For Nigerian PEPs in particular, Dubai is an accessible oasis far away from the political drama in their capital, Abuja, or the hustle and bustle of their biggest city, Lagos. But a dearth of specific information about Nigerian PEPs’ property in Dubai has long precluded a deeper analysis of the share of illicit financial outflows from Nigeria; that is, until 2016, when the Center for Advanced Defense Studies (now known as C4ADS) acquired the data of a private database of Dubai real estate information (dubbed the “Sandcastles” data).
At least 800 properties were found to have links to Nigerian PEPs or their family members, associates, and suspected proxies. With such information and continued monitoring, Nigerian and Emirati authorities and national and international actors could ramp up their scrutiny on high-end property transactions involving Nigerian elites to ensure that these purchases are not being made with pilfered public funds.
The two countries could also deepen bilateral law enforcement cooperation by sharing information and assisting investigations more responsively and routinely. For their part, Western governments, the United Nations, and other international organizations could press the UAE to make its property and corporate records more transparent.
THE SCALE AND SIGNIFICANCE OF NIGERIAN PEPS’ DUBAI PROPERTY HOLDINGS
- The 800 Dubai properties linked to Nigerian PEPs are estimated to be worth well over 146 billion naira (N) ($400 million).3 This equals roughly two-thirds of the Nigerian Army’s annual budget and over three times the annual budget of the country’s Independent National Electoral Commission.4
- Dubai property ownership is an indicator—not definitive proof—that a particular politically exposed Nigerian possesses unexplained wealth. Although many PEPs’ property purchases exceed what their official salaries should permit, some politically exposed Nigerians have complicated personal financial portfolios combining marital and family assets, business holdings, charitable foundations, and other offshore wealth. Only Nigerian law enforcement agencies, working with their Emirati and international counterparts, can determine conclusively whether an individual’s property was purchased with the proceeds of corruption. Except where reference is made to factual matters concerning specific identified individuals, this paper should not be read as making any general allegations of unexplained wealth or ill-gotten gains concerning any of the individuals or corporate entities it discusses.
- Nigerian elites face few obstacles transferring large quantities of cash to Dubai. Banks or other money transfer agents in both Nigeria and the UAE do not appear to be reporting large or otherwise suspicious transactions by PEPs to national authorities. Unless Emirati and international authorities strengthen checks on such activities, questionable financial outflows from Nigeria to Dubai will continue to grow.
- Dubai property ownership cuts across all of Nigeria’s elite political, ethnic, and religious groups. The city hosts politically exposed Nigerians from across the country, not just its northern Muslim elites. The Sandcastles data are broadly representative of Nigeria’s geographically and ethnically diverse political class.
- In contrast to their Nigerian peers, Kenyan PEPs are linked to just a handful of Dubai properties. Given that Kenya also suffers from high levels of official corruption, it is unclear why the Dubai property market has not absorbed more of the country’s illicit financial outflows. An explanation might be that Kenyan elites use proxies and shell companies more effectively and systematically or that the country’s law enforcement and regulatory agencies are more effective than those in Nigeria.
POLICY IMPLICATIONS, CONSTRAINTS, AND PROSPECTS
- Nigerian PEPs’ purchase of Dubai property—if carried out using ill-gotten gains—is a serious political and socioeconomic concern rather than a nuisance or victimless activity. Dubai’s receptivity to dubiously acquired funds fuels and incentivizes the looting of Nigeria by its kleptocratic elites. An unknown proportion, perhaps substantial, of the over $400 million they have used to buy Dubai property could be part of a river of illicit financial flows out of Nigeria, which the think tank Global Financial Integrity conservatively estimated to total $178 billion from 2004 to 2013.5
- Any Western governmental efforts to stem illicit financial outflows from Nigeria to Dubai will be constrained by strategic considerations. The United States, United Kingdom, and many European governments enjoy close diplomatic, military, financial, and institutional ties to the UAE. They therefore lack leverage over Emirati decisions, making it difficult to apply coordinated and sustained pressure on the country’s officials on sensitive issues like this one.
- Nigerian law enforcement agencies could seize upon some underexploited opportunities to deter PEPs’ illicit acquisition of Dubai property. The Nigerian government could launch an interagency investigative panel to scrutinize the last ten years’ worth of financial transfers between Nigeria and Dubai, flagging suspicious transactions that may have been ignored or previously overlooked.
- Emirati authorities arguably have the greatest responsibility and strong incentives for preventing Nigerian PEPs from laundering money through the Dubai real estate market. If Dubai becomes a central port for spoils and a haven for kleptocrats, its attractiveness to mainstream investors could fade over the long term. Unlikely to embrace one-sided reforms that hurt their global competitiveness, Emirati authorities may be willing to buy into broader international fixes—such as increased transparency of company ownership records—that impact all jurisdictions equally. Page, a public policy analyst, is a non-resident scholar at the Carnegie Endowment for International Peace in Washington DC.