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FinCEN and BIS To Prioritize Surveillance: Will the UAE toughen its stance toward Russian companies?

News TeamJuly 20, 2022406 Comments02.1k

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and the U.S. Commerce Department’s Bureau of Industry and Security (BIS) have identified a list of countries that could help Russia circumvent sanctions under the Western economic blockade. Among Moscow’s allies there are 18 states, including the United Arab Emirates (UAE). Some dubious firms with Russian involvement are operating there, but the combined efforts of the U.S. and international organizations to combat money laundering could complicate their work.

The U.S. and its allies are not imposing new sanctions against Russia, but are tightening the enforcement of those previously imposed. Armenia, Brazil, China, Georgia, Kazakhstan, India, Israel, Mexico, Nicaragua, Serbia, Singapore, South Africa, Taiwan, Tajikistan, Turkey, the UAE, and Uzbekistan are under U.S. scrutiny. The BIS emphasizes that these states can legally import “sanctioned goods” only as raw materials for the production of other manufactured goods. However, their further export to Russia or Belarus is prohibited.

The U.S. is also increasing control over capital flows from Russia. Turkey and the UAE are primarily the focus of attention, as they have become a “magnet” for wealthy Russians. Many of them use local schemes for investment immigration, such as applying for citizenship through buying real estate or “golden visas”.

According to the Savills agency, from January-June 2022, Turkey topped the list of the most popular “emergency airfields” for wealthy Russians – it took 23% of transactions. The second line in the ranking goes to the UAE, with a share of 17%. Turkey is popular among Russians with average incomes, and the Emirates have become a safe haven for large Russian capital, often of dubious origin.

Dubai is following the path of London during the 2000s, accepting the flow of Russian money without unnecessary questions. Thus, Russian billionaire Roman Abramovich moved into a house overlooking the Persian Gulf in one of Dubai’s most prestigious neighborhoods. He became the neighbor of another Russian oligarch, Andrei Melnichenko, who’s $300 million Motor Yacht A was recently discovered by The Financial Times in the port of Ras al-Khaimah. Recently, in an interview with the Swiss magazine, Die Weltwoche, Melnichenko confessed to obtaining UAE citizenship after the authorities offered him participation in a program designed to attract prominent specialists, scientists and intellectuals. Melnichenko gratefully accepted.

Because of their ties to the Kremlin, such people have become outcasts in the West, yet the Emirates willingly grant them asylum.

Dormant Kremlin financial agents had settled in the UAE even before the war in Ukraine. For example, Tim Dimchenko, head of the private equity department of the state-owned VTB Capital bank, repeatedly held his negotiations in Dubai. This bank was one of the first to fall under the harsh U.S. sanctions and is now trying to build secret schemes for the movement of Russian capital. For these purposes, they use small companies as a cover and legalization. Dimchenko is on the board of Micropolis Robotics, founded back in 2014 as a startup to develop drones for city services. However, since then, the company has only designed one prototype device and never set up mass production. It is unclear what Micropolis Robotics is actually doing.

A whole network of Russian financiers, who over the years have carried out delicate financial assignments for Putin’s elite, has formed in the Emirates. Now they can be actively involved in building sophisticated Kremlin schemes to circumvent Western sanctions. For example, Dimchenko’s team includes Russians Yegor Romaniuk and Alexander Rugaev, who, although not formally associated with state structures, were actively involved in tenders and events of the Russian government, also as experts. Romaniuk specialized in activist stock operations, and also owned two Cypriot companies, Barna Capital Group and Axima Funds Ltd. The latter had its license revoked in 2019. Rugaev has also long worked in Cyprus, the main offshore location for many wealthy Russians, through which they withdraw funds from Russia.

Another interesting person on Dimchenko and Romaniuk’s team is senior accountant at Micropolis Robotics, Mohammad Saeed. His older brother is a well-known developer in the UAE, CEO of Diamond Developers Faris Saeed. Arabic media call him one of the UAE’s 100 smartest people. His most famous project is the Sustainable City. Today, it includes 500 houses with solar panels and 100% recycled wastewater. According to media reports, the project has even attracted the attention famous Hollywood actor Leonardo DiCaprio.

Such businessmen have a lot of work in the UAE, as Russian billionaires are actively buying real estate and transferring here their expensive yachts, cars, and private art collections. In the West, these trappings of luxury life can be confiscated at any time, but the Emirates provide protection for assets acquired with funds from dubious sources. Russian billionaires use intermediaries such as Romaniuk to conduct financial transactions, as they have long been legalized in the Emirates under the guise of their shady companies.

However, since February, the pressure of international institutions on the UAE has been escalating. The Financial Action Task Force (FATF) placed the Emirates on a “gray list” back in March due to money laundering issues that were revealed. In June, U.S. Deputy Treasury Secretary Wally Adeyemo met with the heads of government agencies and financial companies of the UAE to discuss the issue.

Bloomberg reports that the UAE intends to fight dirty money to clean up the country’s image. A series of high-profile arrests already took place in Dubai in early June. Wally Adeyemo welcomed Abu Dhabi’s commitment to preventing money laundering and stressed the need for “vigilance and proactive action” in the fight against the evasion of sanctions on Russian. Only then will the country be able be removed from the “gray list,” so the Emirates will probably soon cease to be a safe haven for the Russian elite’s capital.

In the West, they are consistently working on this problem. The U.S. has even announced the creation of a new administrative structure with the participation of experts from the Ministry of Finance and the Ministry of Justice, the operation of which is designed to simplify the seizure and confiscation of assets of Russians. Washington is also stepping up its foreign policy efforts to consolidate and strengthen the anti-Russian coalition.

In the Middle East, U.S. President Joe Biden is expected to focus his meetings and negotiations on the Arab world’s support for Western economic sanctions against Russia.