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What links ISIS, the al Nusra Front and genocide in Darfur to the Manchester property market?

The housing development boom in Manchester is gathering pace. Skyscrapers are rearing up across the city, with many more in the pipeline, while a housing crisis continues for many. An increasing number of these luxury high rise apartments are being snapped up by overseas companies, the ultimate owners of which are often shrouded in the secrecy inherent in the tax havens they are registered in.

The Meteor has identified one of these companies and it is no wonder they wanted to hide. This Kuwaiti based company invested in Sudan at a time of heavy UN, US, EU and UK sanctions brought about by the humanitarian atrocities occuring in the Darfur region, which the US Congress and many others described as genocide, while allegations of assisting Islamic extremist terrorists, such as Islamic State (aka ISIS) have been levelled at its parent company, which is partly owned by the Kuwaiti state.

In July The Meteor reported on the 8.6% rise in overseas ownership of property in Manchester in just eight months, with 1736 Land Registry titles registered to overseas companies, the seventh largest figure of all the districts in England and Wales. Emarati Holdings Limited, registered in Guernsey, was identified as an overseas company holding 102 land titles, the fourth largest overseas owner of titles in Manchester. Twenty two of those titles related to homes with a total estimated value of £4.3 million.

Meteor research shows that Emarati Holdings Limited is owned by an Islamic investment company called AREF Investment Group, registered in Kuwait. AREF’s annual reports, going back to 2013, list Emarati Holdings as being a Real Estate SPV (Special Purpose Vehicle) registered in Guernsey, which AREF controls due to holding 51% of the equity.

Dealings in Darfur

News of the mass murder, rape and burning of whole villages occurring in Darfur, a region in western Sudan bordering Chad and Libya, began to emerge in 2003. By 2004 a UN Humanitarian Coordinator, Mukesh Kapila, said Darfur was the “world’s greatest humanitarian disaster”. A Security Council Resolution was issued calling for an end to the atrocities and condemning the actions of the Sudanese government and its allies. An embargo on arms sales to Sudan was followed by a further UN Security Council Resolution (1591) including economic sanctions in 2005 which named specific individuals within the Sudanese government, military and militias, requesting that “no funds, financial assets or economic resources are made available by their nationals or by any persons within their territories to or for the benefit of such persons or entities”. The UN resolutions and embargo on Sudan were quickly adopted by the UK and EU.

The US already had an extensive arms embargo and economic sanctions against the Sudanese government, which they extended in 2006 in response to the UN resolution. Later that year the US also extended its economic sanctions to cover the oil industry.

In June 2007 the Sudanese government announced they were privatising Sudan Airways. The following day the privatisation deal was struck between AREF and the Sudanese government, with the transport minister and finance minister present, at a public ceremony in Khartoum. AREF and another company called Faiha Holding Company paid between $175 and $300 million dollars, giving AREF a 49% stake in the airline and Faiha Holdings 21%, leaving the government with 30%.

Confidential US diplomatic correspondence published by WikiLeaks shows that a Sudan Airways insider believed that AREF actually owned 70% of the airline and that Faiha was a façade constructed by AREF to get round a Sudanese law that no single company can have a greater than 50% stake in the airline. With the liberation of Kuwait by US forces from Saddam Hussein’s forces in 1991 probably on his mind, the US diplomat concludes:

“The privatization of Sudan Airways represents another example of foreign direct investment from the Arabian Gulf. With the Kuwaiti Ambassador’s presence at the signing ceremony, this event also signifies that a US ally has endorsed investment in Sudan, despite tightened US sanctions.”

US Holocaust Memorial Museum’s Genocide Prevention Mapping Initiative, which was hosted on Google, used satellite imagery to map burned out villages in Darfur. Red = Burnt to the ground, Yellow and Red = Partly burned. Source: Google

During the Darfur crisis over 300,000 were killed and 2.5 million people were forced to leave their homes in Western Sudan, leaving 1,600 villages that were damaged or completely destroyed by the forces of the Sudanese Government and those aligned with them. These aligned groups included the Janjaweed militia, a mainly Sudanese Arab militia responsible for mass murder and the violent, and often gang, rape of countless young women and children, mainly from the black African and non-Arab population. In 2010 the International Criminal Court issued an arrest warrant against the president of Sudan, Omar al-Bashir, for the crime of genocide.

Sudan, Oil and AREF

AREF’s interests in Sudan didn’t just lie in the air: they were also deeply embedded in the blood stained and charred ground, and the massive oil reserves found there. This black gold helped fuel the atrocities in Darfur; a Sudanese finance minister estimated that 70% of Sudan’s oil revenue was funnelled to Sudan’s military.

The Sudan Divestment Task Force (SDTF) was a project created by the Genocide Intervention Network aimed at getting companies and financial investors to pull out of business sectors in Sudan that supported the Sudanese government, such as oil and mineral extraction, power production or the military. A report released in 2006 by SDTF compiled a “worst offenders” list for companies operating in Sudan. These included AREF, which warranted scrutiny due to its oil interests. The report detailed a September 2006 ceremony, attended by a Sudanese government Vice President, where AREF announced it was to buy a 51% stake in Sudan’s Higleig Petroleum Services and Investment Company (HSPIC), which had part ownership of oil fields lying in South Darfur.

The Genocide Intervention Network became the Conflict Risk Network in 2010, and released a report which called on corporate actors to “fulfil their responsibility to respect human rights and to take steps that support peace and stability in areas affected by genocide and mass atrocities.” The report also stated that oil company activities in Sudan, often supported by government forces:

“…have been associated with human rights abuses against populations living in [oil] concession areas, and there is a risk such abuses may be repeated, especially in the context of renewed conflict in Sudan… security forces associated with certain oil consortia were linked with numerous human rights violations, including forced displacement and violence against communities.”

Also documented was AREF’s increase in its stake in HPSIC to 64% (via a subsidiary) and that if the oil fields in the Darfur region became productive, a revenue stream could be provided that “facilitates the Sudanese government’s capacity for violence”.

Video above illustrates the growth of overseas ownership from January 1998 to June 2018. Land Registry data from July 2018 on overseas ownership of property in Manchester was used and only land registry titles with a postcode (1180 of 1736) were used to make the video.

Middle Eastern money in Manchester

AREF Investment Group is just one more example of a Middle Eastern company cashing in on the property investment boom in Manchester, but before we continue looking into the background to AREF, lets consider some of the other companies that have been identified. AREF are by no means the only investor from that region whose ethical behaviours are open to question.

The  huge scale of offshore finance pouring into the city became readily apparent to Dr Jonathan Silver from the University of Sheffield’s Urban Institute while researching  his report ‘From Homes to Assets: Housing Financialisation in Greater Manchester’, which covered high rise housing development sites in the centre of Manchester & Salford. The report also raised concerns over the large number of leasehold flats in the city centre owned by companies in overseas tax havens, and the lack of accountability of these company owners due to the secrecy of these jurisdictions.

Silver highlighted the controversial deal between Manchester City Council (MCC) and the Abu Dhabi United Group (ADUG), part of the United Arab Emirates (UAE) sovereign wealth fund. ADUG is owned by Sheik Mansour bin Zayed Al Nahyan, deputy Prime Minister, board member of the Supreme Petroleum Council and brother of Abu Dhabi’s Crown Prince. The Al Nahyan family has an extremely unpleasant history when it comes to camel racing, where the abuse of children used as jockeys was rife. Sheik Mansour is better known for being the owner of Manchester City FC, which he bought for £265 million in 2009.

The partnership between ADUG (via an offshore company in tax haven Jersey) and MCC comes in the form of a property development company called Manchester Life, which has around 10,000 apartments in the pipeline for the next decade to be built in Manchester, mainly for the private rented sector market. Silver speculates that financing of the company is likely to come from Abu Dhabi, meaning a large amount of the profits will also end up there. We may never know how much profit, or what the cost is to Manchester, as MCC refuses to answer most questions on partnerships with overseas firms, claiming commercial confidentiality prevents them.

Abu Dhabi, the largest of the seven UAE emirates, has an appalling human rights record. Campaigners in Manchester recently unofficially named a street after Ahmed Mansoor, an Emirati human rights defender jailed for publishing legitimate criticism of the UAE’s human rights record. When asked to raise Mansoor’s case and the abuse occurring in the UAE, MCC replied “our position is that ultimately alleged internal issues within the country of origin of private investors are beyond the remit of Manchester City Council.”

Mansoor’s case was included by Silver in his report. highlighting the ethical implications behind accepting finance through overseas companies. He believes we need to think more about the future of housing in the city as more of it is bought up by off-shore companies, saying:

“This type of investment is part of a larger wave of international finance and big capital that is now squarely aligned to the current model of regeneration in Manchester. From the 10,000 unit housing deals involving public land with Abu Dhabi United Group and Far Eastern Consortium, through to buildings such as One Smithfield being over 50 percent owned by companies in the tax haven of the British Virgin Islands, the future is being configured with little public debate and we will likely have to live with these transformations for decades.”

Another large property development investor identified by Silver was the Olayan Group of Saudi Arabia. Olayan owns 25 % of the Peel Group, which own land around the Manchester Ship Canal and Media City; they are currently building the Lightbox development at Media City consisting of 238 high end apartments.

Saudi Arabia, UAE, Kuwait and Sudan are all currently members of a coalition of countries attacking Yemen.  Many of the attacks on Yemen have been labelled as war crimes due to the high number of civilians killed. Recent coalition airstrikes killed 26 Yemeni children on the same day, while an airstrike two weeks earlier on a school bus in a crowded marketplace killed 29 children. Often the weapons used by the Arab coalition are made in the UK, but the attack against the bus was a bomb supplied by the US.

Kuwait Finance House

It appears the Islamic Investment world has not been kind to AREF Investment Group: in their last annual report in November 2016 they reported a loss of income of 18.3 million Kuwaiti Dinar (KD) (£47.1 million) and declared “these conditions indicate the existence of material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern”.

In 2017 AREF’s financial report was rolled into the consolidated annual report of its parent company, Kuwait Finance House (KFH), an Islamic bank listed on the Kuwait stock exchange which owns 53% of AREF. KFH has put AREF up for sale, listing its assets as KD 185,319, which is considerably less than the assets listed for AREF in its last full annual report of KD 434,612,573.

Whether the assets of Emarati Holdings are included in this fire sale are unknown, but as an SPV the company is likely to have been hived off from the assets being sold. SPVs allow a parent company to isolate or securitise assets in a financial instrument which protects the asset even when the parent company goes bamkrupt. They are used in financial shenanigans such as hiding losses and fabricating earnings, and their use was instrumental in the Enron scandal of 2001. Whether Emarati Holdings turns up in another company’s annual report remains to be seen: the assets could well be moved to another offshore company whose owner may be completely untraceable.

Kuwait Finance House, however, is unlikely to disappear: in 1977 it was the first Islamic Sharia bank to set up in Kuwait and in 2017 it had total assets of KD 17.4 billion and deposits amounting to KD 11.6 billion. It has also been the subject of numerous allegations linking cash flows through KFH and its subsidiaries to Islamic fundamentalist terrorist organisations.

Terror connections

During a US Senate Hearing on Counterterrorism Initiatives in 2003, Richard Clarke, a former national counterterrorism coordinator for the National Security Council, claimed KFH was an investor in an Islamic bank in the US that itself had investors from Al-Qaeda, Hamas and the Muslim Brotherhood. “Kuwait Finance House is reported to be the financial arm of the Muslim Brotherhood in Kuwait” Clarke said, although he failed to provide evidence to prove the connection and was publicly called a liar by some US government officials.

Allegations of terrorist connections emerged again in 2016, when a complaint for damages was filed in California against KFH and one of its subsidiaries in Turkey, the Kuveyt-Turk Participation Bank (KTPB), for allegedly financially facilitating the al Nusrah Front and Islamic State in their terrorist activities in Syria. The complaint concerned a Hajjaj bin Fahd al Ajmi, who had been identified by the US treasury as a supporter of terrorism, and added to the sanctions list in 2014. The complaint alleged that al Ajmi, who was extremely adept at raising funds on social media, had funnelled the proceeds through the banks, primarily KTPB, to the terrorist organisations in Syria and Iraq. However, a US District Judge dismissed the lawsuit due to the lawyer pursuing the case failing to identify any of the US plaintiffs who had actually been harmed.

Just this July in Germany, the Islamic KT bank in Frankfurt, a subsidiary of KTPB, was identified as having a member of Al Qaeda on a list of suspected money launderers using the bank. Unfortunately, due to a huge backlog of work in the Financial Intelligence Unit set up to identify and flag any suspicions of money-laundering linked to terrorists or criminals, this identification happened six months after the suspected money laundering activities.

AREF – KFH – State of Kuwait

Kuwait Finance House is listed on the Kuwait Stock Exchange and the four largest shareholders, which are all Kuwaiti public bodies, own 48% between them. The State of Kuwait sits at the tip of the Persian Gulf, has a population of 4.2 million, and is extremely rich due to having the sixth largest oil reserves in the world. It is a constitutional monarchy, and a picture of its Emir Sabah Ahmad al-Sabah is prominent in the KFH annual report. The prime minister of Kuwait, Sheik Jaber al-Mubarak al-Hamad al-Sabah, is another member of the royal family.

Despite being a major non-NATO ally of the US, Kuwait came under fire in April 2014 from David Cohen, the US Under Secretary for Terrorism and Financial Intelligence, who said: “Our ally Kuwait has become the epicentre of fundraising for terrorist groups in Syria…we urge the Kuwaitis to do more to effectively stem the flow of money to terrorists”. During the same speech Cohen accused Nayef al-Ajmi, the Kuwait Minister of Justice, of having a “history of promoting jihad in Syria, in fact his image has been featured on fundraising posters for a prominent al-Nusrah Front financier”. In response, al-Ajmi called the accusations “baseless and groundless” but resigned his position in parliament shortly after – without publicly stating why.

Although generally regarded as one of the more progressive Middle Eastern countries, human rights are often abused in Kuwait. It is a member of the coalition attacking Yemen which Human Rights Watch have documented as carrying out 87 unlawful attacks in that country. Freedom of speech is restricted, with laws allowing the prosecution of political dissidents. Women’s rights are very limited: they can be prohibited from working and there is no law against marital rape or domestic violence. Same-sex relationships between men can lead to seven years in prison. Two thirds of Kuwait’s population is composed of migrant workers, who are vulnerable to abuse, forced labour and deportations due to minor infractions.

What next for Manchester?

A little research and some luck has revealed the background to one company, Emarati Holdings Ltd, registered in the tax haven of Guernsey, which owns property in Manchester. This is just one of  465 overseas companies owning property in Manchester in July 2018; for the majority of these the ultimate beneficial owner will be untraceable, meaning any human rights abuses, criminality, corruption or terrorist financing that could be underpinning that company are also unknown. The amount of tax being dodged by these companies registered in tax havens also remains a mystery.

According to Silver, the time is ripe to challenge the distorting involvement of shady and disreputable finance through tax havens into Manchester’s property market:

“Do we want to live in a city in which whole parts of it have been sold off, off-shored and operate for the benefit of big capital?.  If the answer is no then communities, planners and most of all our politicians need to quickly get to grips with the scale and pace of this finance transforming the built environment. Housing and land more generally are being sold or given away with minimal public benefit whilst the global and regional elite use Manchester as a safety deposit box without contributing back to the city.

“In London the Mayor has launched an inquiry, in Vancouver new taxes are aimed at controlling and gaining local revenue from overseas investment and the Barcelona en Comú, a citizen platform running the municipality in the Catalan city, show us how municipal and social movement commitment to confronting big capital can create opportunities for social justice. We have a small window of opportunity to resist and articulate alternative visions of the city yet to come.”

As the neo-liberal agenda has risen to dominate politics and global economics there has been a corresponding decline in the willingness of western governments to promote and support human rights both at home and abroad. Theresa May, with Brexit looming, was praised by the Chinese press for not bringing up the issue of human rights in China during her trade talks with President Xi Jinping. Boris Johnson, while Foreign Secretary in 2017, was criticised for not raising the still extensive human rights issues in Sudan, a country still on the US list of state sponsors of terror, during a UK-Sudan trade and investment forum in London. In the same year as the UK-Sudan forum, May threatened to rip up human rights law that impedes new terror legislation.

The freeing up of finance allowing capital to be transported across the globe anonymously through the spider’s web of offshore tax havens, aids this divorce of human rights from the wealth generated by business, trade or corruption. If national government prefers to prioritise business over championing the cause of human rights, then it falls to us at a local level to reinforce the connection between ethics and the economy.

 

Conrad Bower

Feature Image: The Meteor

Second article in the series called ‘Selling Manchester by the Offshore Pound

For more information on the murky offshore world visit the Tax Justice Network website – click here

 

 

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