A new report from Carnegie Endowment has found that the wealth underpinning “Dubai’s prosperity is a steady stream of illicit proceeds borne from corruption and crime.”

The report from the US-based think-tank will likely further cast a long shadow on its much-vaunted projected image as a haven for respectable investment.

Dubai is one of the seven emirates that make up the United Arab Emirates (UAE), and has built its reputation on becoming a regional business hub in the Middle East.

The city has acquired global fame by being the sort of place where supercars deliver mangoes, while islands have been built in the shape of palm trees.

Behind the facade of respectability that Dubai has carefully cultivated over the years, the flow of illicit funds “has helped to fuel the emirate’s booming real estate market; enrich its bankers, moneychangers, and business elites; and turn the city into a major gold trading hub,” the authors of the Carnegie report added.

Transparency International, an anti-corruption group, has in the past said that “Dubai has become an active global hub for money laundering … where the corrupt and other criminals can go to buy a luxurious property with no restrictions.”

The report, titled as “Dubai’s role in facilitating corruption and global illicit financial flows”, warns the international community against turning a “blind eye”.

“Corrupt and criminal actors from around the world operate through or from Dubai. Afghan warlords, Russian mobsters, Nigerian kleptocrats, European money launderers, Iranian sanctions-busters, and East African gold smugglers, all find Dubai a conducive place to operate,” warned the report.

“With approximately thirty free trade zones, Dubai is a haven for trade-based money laundering” the report went on to add.

More worryingly, the authors noted that UAE authorities have the tools and the technical knowledge to clamp down on illegal practices such as money laundering, but they choose to avoid doing this, a move that can threaten the city’s overall financial viability.

“Dubai is being used as a conduit for illicit financial transactions. This is a feature, not a bug, of Dubai’s political economy,” they said.

The city’s economy has faced significant troubles in recent years – its debt burden is at around $135 billion (125% of GDP).

A $10 billion loan from neighbouring Abu Dhabi that was provided at the height of financial crises in 2009, remains unpaid and it has now been rolled over a second time.

The global fallout from the coronavirus will also likely impact Dubai which increasingly relies on tourism and the services sector as it tries to diversify from oil.

Tourism earns the UAE $43.3 billion, and accounts for more than 12 percent of its GDP. Dubai is responsible for the vast majority of that income.

As the global economy has largely ground to a devastating halt around the world, Dubai has itself felt the full force of its impact.

Its airports have closed, international air travel has been halted, the price of oil has fallen, and lockdowns have kept people from spending – all of the city’s vulnerabilities have been exposed.

With such an economic outlook, the “secretive and standoffish” Dubai may become more dependent on illicit funds.

The Carnegie Endowment report noted that “Dubai often rebuffs outside attempts to discern whether kleptocrats and criminals are buying property or laundering money through the emirate.”

In a post coronavirus world, such state practices may well become central to the city’s survival.

The inter-governmental Financial Action Task Force (FATF) in April of this year, called out the UAE for its unwillingness to tackle money laundering and as a result, placed the country under a one-year-long observation to ensure that it is implementing recently adopted laws.

Countries that fall under the regime of the FATF could see a dampening effect on foreign direct investment because the financial system is seen as being under the influence of corrupt groups or individuals.

The report also warned that unless the world pressured elites in the UAE to tackle corruption and money laundering more seriously, “Dubai will remain a challenge to anti-corruption and anti crime efforts globally.”