Foreign direct investment and money laundering in the UAE: implications for research and practice

Tareq Na’el Al-Tawil and Nayel AlOmran

Journal of Money Laundering Control, 2025, vol. 28, issue 4-5, 609-625

Abstract: PurposeThe purpose of this paper is to assess how foreign direct investment (FDI) inflows may lead to money laundering in the United Arab Emirates (UAE) and examine how well the nation’s regulations protect against money laundering risks.Design/methodology/approachA systematic literature review is used as the primary research methodology to analyze existing scholarly and practitioner works related to the relationship between FDI and money laundering in the UAE from a legislative perspective.FindingsThe UAE has established national legislation targeting money laundering and terrorist financing (anti-money laundering [AML]/counter-terrorism financing [CFT]) through comprehensive laws such as Federal Law No. 20 of 2018, which serves as the foundation for the country’s regulatory regime. However, the review found that having multiple regulatory systems, including those in Dubai International Financial Centre and Abu Dhabi Global Market, could lead to gaps where FDI-driven money laundering might take place. Often, free zones try to attract foreign companies by putting fewer AML/CFT rules in place than the federal government requires.Research limitations/implicationsThe UAE’s AML structure has improved, yet there is not much data to assess how well it works. Studies in the future should examine whether the decline in FDI-related laundering is linked to these reforms. Moreover, examining how the UAE’s regulatory model compares with those of other hubs such as Singapore, Switzerland or Hong Kong could identify strengths and weaknesses. A comparative study of compliance strategies and enforcement mechanisms would help highlight international best practices that the UAE could adapt to enhance its financial integrity and global competitiveness.Practical implicationsBy offering recommendations, this paper provides practical insights for policymakers and regulators to strengthen the country’s AML/CFT framework and better manage the risks posed by foreign investments. The implementation of these recommendations will enhance the UAE’s reputation as a transparent and secure investment destination, attracting further legitimate FDI while protecting against illicit financial flows.Originality/valueThis study gives current and timely insights into the harms created by gaps between regulations, as well as practical recommendations for policymakers. The results of the research will be used to update current AML/CFT practices and handle the issues caused by a divided approach to oversight. A key takeaway is the need for a harmonized approach to AML/CFT regulations across all regions of the UAE to ensure consistency and reduce vulnerabilities to illicit financial activities.

Keywords: United Arab Emirates; Foreign direct investment; Money laundering; Financial crimes; Legislative frameworks (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jmlcpp:jmlc-05-2025-0081

DOI: 10.1108/JMLC-05-2025-0081

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