Strategy Note /
Global

UAE's arrest of South Africa's Gupta brothers, the FATF, and property prices

  • Arrests of Sanjay Shah (dividend tax fraud suspect in Denmark) and Gupta brothers (corruption suspects in South Africa)

  • UAE may be addressing FATF concern on its engagement in 'international cooperation' – the UAE was grey-listed in March

  • Unquantifiable impact of tighter regulation of illicit financial flows on Dubai property prices – up 15% since 2020

UAE's arrest of South Africa's Gupta brothers, the FATF, and property prices
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
7 June 2022
Published by

This week in the UAE has seen the arrests of Sanjay Shah – the dividend tax fraud suspect in Denmark – and Rajesh and Atul Gupta – corruption suspects in South Africa.

This may reflect efforts by the UAE to demonstrate its capability and willingness to cooperate with international law enforcement agencies in combatting illicit financial flows.

Actions that improve the UAE's prospects of being removed from the Financial Action Task Force (FATF) grey list are likely positive for the overall investment case but they may also bring risk to the highest end of the real estate market.

Extradition agreements increasing

The UAE has, according to the Ministry of Foreign Affairs and International Cooperation, recently signed 37 extradition treaties. The agreement with South Africa was signed in April 2021 and with Denmark in March 2022.

UAE extradition agreement examples

FATF added UAE this year

The UAE was placed on the 'grey list' of jurisdictions, with strategic deficiencies in its anti-money laundering and counter-terrorist financing policies and action, by the multilateral FATF in March 2022.

UAE placed on FATF 'Grey List' in February 2022

Property price recovery in Dubai

The high end matters in real estate markets, with price action in this segment often trickling down to others. Although the impact on property prices of tighter regulation of illicit financial financial flows is unquantifiable, it is worth noting that Dubai average residential property prices have continued their recovery this year and are now up c15% (on REIDIN data) since the end of 2020, with another 33% upside should they revisit the end-2014 peak.

A slew of reforms to residency visas and free zones, continued management of Covid without overly restricting social movement, elevated oil prices, regional civil, economic, and social disruption (eg Russia, Ukraine, Kazakhstan, India, Pakistan and Sri Lanka), and improving foreign relations (eg with Israel, Turkey and Yemen), and a hint of casino liberalisation have all played their part.

Dubai property prices up substantially post-Covid