From Grey-List To Gold-Standard
2024 was always likely to be a year of geopolitical volatility. Confronted with the hangovers of 2023’s conflicts, high inflation and civil unrest, 2024’s convergence of 64 global elections, uncertainty over the future of trade, natural resources, sovereign debt, environment and population provided an ethically divisive opportunity for the media to double down on partisan opinion, stoking further fear and polarity. From the coverage of Britain’s recent riots through to the U.S.’s 180-degree treatment of its Democratic presidential candidate, Vice President Kamala Harris, the word ‘gaslighting’ has emerged from the fringes of our lexicon to become a key descriptor of the mainstream news cycle.
As a regular subject for this type of coverage, Dubai’s popularity and success as a business, trade and tourism destination has made itself an easy target, no part in thanks to its gold industry, which has risen to become one the world’s largest physical markets.
In a recent piece published in June, The Times’ “Cocaine Inc: how British drugs cash is turned into solid gold in Dubai” highlights the emirate’s position as a target for U.K’s drug gangs in the form of cash mules, as well as some unfounded accusations about undeclared gold imports. As an investigative piece, where at least some of the perpetrators have already been tried and found guilty, the report also highlighted that criminality is rarely restricted by national borders, but instead passported. With the Dubai authorities having worked closely with organizations such as the World Gold Council, the UAE’s National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) and INTERPOL, the evidence has become abundantly clear that if we want to fully remove illicit activity and money laundering, there must be a concerted effort to address the root causes and not the symptoms.
In credit to The Times, its Cocaine Inc series does address the extent of the UK’s drug abuse culture, which ranges from blue collar workers all the way up to the highest echelons of power. According to The Guardian, as covered by The Times, “traces of a class-A drug, said to be a white powder, were found at Chevening, the grace-and-favor mansion of Liz Truss, then the foreign secretary. Separate sources told the paper that they had found similar deposits in the offices at No. 10 after two lockdown parties held when Johnson was prime minister.”
Depending on your source, the value of Britain’s illicit drug trade is around GBP 10bn (USD 13.2bn) with an ultimate cost to the economy of around GBP 37bn (USD 49.10bn) and while there are no doubt some gangs that have tried to launder money through Dubai, doing so domestically remains by far the path of least resistance. According to Transparency International UK, GBP 6.7bn ($8.89bn) of laundered money was invested in UK property in the six years between 2016 – 2022, and while GBP 1.5bn ($1.99bn) of that is tied to Russians accused of corruption or links to the Kremlin, that still leaves a sizeable sum. Meanwhile, on the high street, Britain’s money service businesses (MSBs) have also helped to facilitate considerable volume, with just one money service shop in London laundering GBP 310mn ($411mn) in just one year, before being closed in 2019. Other businesses targeted include barber shops. According to Former Metropolitan Police Officer Ali Hassan Ali, “Right across High Streets we have seen a boom in barbers opening up since the pandemic. A lot of these shops have thousands of pounds of equipment but no customers.” According to figures published by the Home Office, HM Treasury and Serious Fraud Office, Britain launders GBP 150bn (USD 199.bn) each year, making it the second largest money laundering economy in the world after the United States.
What The Times, and many newspapers like it won’t do is address the elephant in the room – that Britain has been consistently let down by a series of inept administrations who fail to acknowledge a simple, fundamental fact – that allowing a narcotics trade with a value close to the GDP of the Bahamas to not only operate but flourish within its borders will not lead to positive outcomes.
According to one source over 50 per cent of all suicides, the leading cause of death for men aged 20 – 34 in England and Wales, are associated with alcohol and drug dependence and despite 4,907 drug- related deaths in 2022, the highest number since records began, the penalties for possession of a class A drug are a maximum of seven years in prison and an unlimited fine - neither of which are truly ever enforced.
Comparatively, there are several reasons why the UAE doesn’t have an illicit drug trade; one of which is its zero-tolerance towards trafficking, which in some cases can result in the death penalty, and while its laws and punishments may be considered harsh by some, the net positive means law abiding citizens can live in what is recognized as one of the world’s safest countries.
In the wake of the UK riots, sparked by the horrific murder of three young girls in Southport, more attention seemed to be spent on rounding up those who, in many cases, protested peacefully or commented on social media, before even considering addressing the public’s clear and obvious concerns. Similar to the ever growing drugs trade, the mass migration of illegal, mostly fighting-age men at the cost of the British taxpayer to the tune of GBP 14bn (USD 18.57bn) per year will also not lead to peaceful outcomes, particularly while its beleaguered National Health Service has a wait list of 7.62 million cases as of July 2024, and approximately 4.3 million of its children are estimated to live in poverty. In the government’s most recent catastrophe, Keir Starmer’s plan to issue the early release to some 1,700 inmates, has also appeared to have backfired, with at least one man already back in the dock, likely to return to prison for allegedly committing a sexual assault within hours of release. In Scotland, an estimated one in ten of some 477 early release prisoners were back behind bars within weeks, including 12 who were out for 10 days or less. And all this from a G7 nation.
In keeping with focusing on anything but the foundational issue, The Times’ coverage of Dubai’s tangential role in a problem that originates in Britain, for which its government shows very little interest in solving, is yet another reason why the mainstream news is dying. It also coincides at a time when a “gaslit” general public is waking up and tuning to journalists who shine a light on those who’ve actually operated with complete impunity at the cost of others – a great example being Ezra Levant and Avi Yemini confronting Pfizer CEO, Albert Bourla while attending Davos in 2023.
This isn’t to diminish the severity of any laundering activity that occurs in Dubai courtesy of Britain’s narcotics trade; however, it is easy to see why at best, it represents the tip of a far larger, often unaddressed iceberg.
Since being placed on the Financial Action Task Force’s (FATF), ‘grey list’ in March 2022, the UAE has significantly enhanced its protocols for monitoring and identifying illicit activity at each stage, resulting in its removal from the list in February 2024. As a result, it has maintained a strict approach to monitoring, resulting in significant clamp downs on sectors including finance, property, and precious metals. A recent example of this enhanced domestic monitoring can be found in the UAE Ministry of Economy’s recent suspension for 32 gold refineries, which were found to be in violation of rules such as Know Your Client protocols and suspicious transaction reporting. As clearly stated by Abdullah Ahmed Al Saleh, Undersecretary of the Ministry of Economy, “The UAE affirms its firm commitment to developing an integrated legislative and regulatory system to combat money laundering,” and to achieve “the highest levels of compliance” within its gold sector’s due diligence regulations “by keeping pace with the best global practices in this regard.”
Similarly, the LBMA’s decision to drop its jurisdictional challenge in its Tanzania labeling case is another example of an institution acknowledging due process and taking responsibility for its role as a global certification body - and while this will test, for the first time, whether a certification body can be held legally responsible for a flawed certification process, it is better for a system to be tested and found at fault, rather to be untested at all.
Proactively speaking, the UAE has also made considerable efforts to align with organizations such as the World Gold Council in order to promote greater transparency, while building investor confidence. By addressing the wider lack of trust held by consumers, the World Gold Council, in collaboration with UAE authorities, is in the process of exploring the introduction of best practices for online gold trading. Mirroring initiatives in markets like Germany and the UK, the strategy aims to establish clear guidelines and ethical standards for digital gold platforms. Partially driven by the UAE’s expanding high-net-worth investor base, who increasingly favor gold bars and coins, the support of the WGC is a clear illustration of its commitment to collaborate with authorities to shape a more transparent and robust gold market.
According to recent findings, the UAE continues to be the world’s top wealth magnet for a third year running and is expected to attract a record net inflow of 6,700 millionaires by the end of 2024. Conversely, the UK is expected to lose approximately 17 per cent of its millionaire population by 2028 according to Swiss bank, UBS.
Commenting on the initiative, Andrew Naylor, Head of Middle East and Public Policy at World Gold Council said, “A new base of investors in the UAE and family offices are placing greater allocations on the metal. The UAE gold market is not just about gold jewellery alone, with bars and coin demand taking on higher volumes. If there is increased transparency in the transactions, it will benefit the whole precious metals market in the UAE. Because this market is already globally known for the purity of the gold sold via retail and other channels.”
Other areas of collaboration with the WGC include an initiative to formalize artisanal gold mining. Conducted in a three-stage approach, the WGC aims to work in coordination with central banks to encourage them to purchase domestically produced artisanal gold, thereby boosting local economies and improving mining practices. Secondly, to explore technologies that can enhance transparency in the artisanal gold trade and help verify the origin of the gold, and finally commissioning a report on artisanal gold production to raise awareness about the issue and promote responsible sourcing practices.
Today, the UAE is estimated to trade between 20 – 30 per cent of the world’s gold each year, meaning its monitoring processes are not only important for its domestic reputation, but for those economies that trade with it.
While no nation is perfect, the current era of western political discourse and its alliance with the media, which evolves around denying obvious problems in the face of empirical fact needs to stop, if for no other reason than the sanity of its constituents and its relationship with the rest of the world.
As with overcoming any toxic habit, acknowledging the underlying problem is always the first step.
