STA Law Firm https://www.stalawfirm.com/en.htmlSTA Law Firm - Court Uncourt (Blog) - Strata LawenCopyright 2024 STA Law Firm All Rights Reserved<![CDATA[Economic and Fraud Provisions in the Middle East]]> Economic and Fraud Provisions in the Middle East

"There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

- Milton Friedman

Economic fraud is a term that has been repeated over the years, so much so that the consequences it bears do not have any precedence or impact on the ones that hear it. For many companies and capitalist machinery, this term essentially triggers them to explore options to hide their fraudulent tracks and continue operating in the same manner. To have governments help them cover the tracks in certain jurisdictions ultimately defeats the purpose of the assignment.

Despite the incongruent activities of individuals, companies, and governments from the expected norm of justice in many jurisdictions, other countries are tenacious to implement a regulatory framework that will eradicate such fraudulent activities in the market. This article will discuss the economic and fraud provisions established in the Middle East, their effectiveness, and the scope of reach it possesses about financial crime.

What are the Economic and Fraud provisions in the Middle East?

If one area of the economy has seen a steady increase in the past years, it would be the economic fraud prevalent in society. Regardless of the number of provisions that jurisdictions and international organizations establish to combat financial fraud, none of them seems sufficient. The parties involved in economic fraud and other fraudulent practices are constantly evolving to cover their tracks efficiently.

Infamous scandals like Bernie Madoff and the Ponzi scheme leave one in absolute awe as it remains unclear, what is the culprit: the crime or the criminal? Many innocent parties, including employees and clients, were adversely affected by the ill-doings of these financial schemes. After the outburst of many scandals and its impact on many innocent individuals, jurisdictions are trying to fasten their pace to stay a step ahead of wrongdoers and hopefully eliminate the potential threats in the market.

The introduction of new anti-economic fraud regulations has paved the way for potential investors to feel a sense of security over their investments within the market, along with the ability of the regulations to enforce justice. Over time, people have understood that the formation and establishment of an anti-fraud legal framework are not sufficient to ensure peace and harmony in the market, an iron fist must be imposed on fraudulent parties and companies to deter them from doing such activities in the future and serving it as a lesson for other participants in the market who bear similar intentions.

The types of economic fraud can be quite varied and are spread across different industries and the scope of nature. These could include housing benefit fraud, tenancy fraud, council tax fraud, blue badge fraud, social care fraud, business rates fraud, insurance fraud, bribery, and money laundering. These are just a top layer of economic crimes prevalent in an ocean of fraudulent activities in the market. The crimes that are more coherent to the wrongdoings in the market include not declaring the business location, stating that a property is not in use while it is, dishonestly requesting for an exemption to pay for charges that are owed, or any unauthorized movement of money to make ill-gains.

Often, economic crime is caused not by companies but by customers towards companies. The highest reported crime boost in the Middle East is through customer fraud and procurement fraud, which have proved to be the most disruptive fraud within an economic crime. In a survey conducted on a global platform, the number of customer frauds was comparatively more in the Middle Eastern region.

In an ongoing effort to combat fraud together, many companies in the Middle East began investing in more stringent controls and implementation of the rules to avoid economic crime, while many others conducted a thorough examination into reasons after the occurrence of a crime in the company. Another issue that stands alongside customer fraud about its prominence is procurement fraud. This fraud entails the practice of favoring associates with vendor and supplier contracts.

All these efforts are measures taken to mitigate the risks involved and ensure that proper prevention is taken by instilling the right technology and talent to deviate from any fraudulent prone routes.

However, it is not easy to ensure that accountability will be maintained and transparent feedback is provided. Another limitation of this procedure is that advanced technologies to combat financial crime can be costly, which would further deplete if the company possesses insufficient resources to acquire and install the platform and is not equipped with properly trained employees to manage the technology. The lack of proper expertise to handle the in-place technology could attract various cyber threats, which allows a wrongdoer from any part of the world to infiltrate the company's system.

With this in mind, companies must equip themselves from the arsenal of defenses to protect themself and the financial and reputational facets of the company. The extent of damage that infiltration of the company's system can cause to the operations is quite unfathomable. It would be better for companies to leave their vault of secrets wide open than installing an IT platform that is managed poorly. The necessity of combating such insecurities is proliferating and must be countered at the earliest. One would like to believe that the efforts of the legal jurisdictions in the Middle East to battle economic crime are practical and promptly applied. However, many of the jurisdictions still fail to provide a proper implementation of the provisions established against economic crime.

The readiness of companies in the Middle East to confront the indecisive nature of economic crime and report any issues as they arise is still moving at a stagnant rate. The stark increase in cyberattacks and its potential threats is not a mystery to the companies in these regions. Nevertheless, they decide against preparing themselves in defense of such risks and attacks. The firms in the region and the governmental organizations must understand the types of threats that could arise in the economy and the nature of such economic crimes. Although this would seem like an insignificant step, this particular action could help achieve a more profound revelation of the gaps and vulnerabilities of the economy and its protective framework.

Many would argue that the relationship of the Middle East with economic crime and fraud dates back ages. All the glitz and glamour and the boom of economies are incongruent with the fraudulent activities occurring within the firms and regions. A region's legal systems cannot enforce the regulatory frameworks established to fight against economic crime if the country's government does not implement the rulings.

To know more about Economic and Fraud Provisions in the Middle East in Singapore Click here 

 

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Mon, 27 Dec 2021 03:22:00 GMT
<![CDATA[Dubai Property Law - Strata Law Explained]]> If I purchase an apartment in a communal building, what exactly do I own? Am I entitled to a section of the pool, a corner of the gym and rights over a particular elevator? Or do I only have rights over anything within the boundaries of my specific plot? Read further on Dubai Property Law in this article which discusses Dubai Strata Law

Dennis Pavlich in his book 'The Strata Titles Act, Condominium Law in British Columbia' suggests that disposition of parts of residential buildings first took place during the Babylonian, Egyptian, Greek and Venetian times.  In 'History of Condominiums', Rudd and Gardener emphasize that condominiums were introduced by Romans as early as the 6th century B.C. and the concept has been prevalent in South America for at least two centuries.  The concept of 'flat ownership' or 'apartment ownership' has gained and continues to gain prominence. Many jurisdictions across the world refer to condominiums today as 'strata title' while some nations term it as 'flat ownership' (for instance, United Kingdom and India). In the present article, we discuss one of the key elements of Dubai Property Laws - the Strata Law

The concept of strata law in simplest terms means a subdivision of a developed building property or gated community into layers. Each such layer then gets subdivided into one or more units along with common areas forming part of such property. The law regulating division of property into privately owned units as well as common areas was introduced in the Emirate of Dubai pursuant to law number 27 of 2007 concerning Ownership of Jointly Owned Property Laws (the Strata Law) to be effective from 1 April 2008. Prior to the issuance of Strata Law, the Federal Law No.5 of 1985 (as amended) in respect of Civil Transactions for the United Arab Emirates (the UAE Civil Code) recognized and provided for some rights in relation to co-ownership of buildings and units but the provisions contained in the UAE Civil Code cannot effectively address technical matters one faces in Dubai's ever-evolving property sector. Article 32 of the Strata Law conferred powers upon the Chairman of Dubai Land Department to issue further regulations and decisions required to enforce the provisions contained therein.
 

The law passed in 2007 laid out the basic scheme of subdivision and covered clauses dealing with formation and recognition of owners' association. This law was however silent on several key issues such as i) method of sub-division of buildings or gated communities with multiple ownership; ii) compliance and procedural matters associated with operation of owners association; iii) type of documentation required for formation of association; iv) implication of the Strata Law on hotel apartments and serviced hotel units; v) provisions in regard to the powers, duties and licensing of association's manager; vi) the tacit role of owners in managing their properties, to name a few. Accordingly, there was a clear need for further regulations to fully serve the operational requirements of the owners' association. Consequently, in April 2010, the Dubai Land Department issued directions on Strata Law providing more clarity for both property developers and owners in complying with the provisions of the Strata Law (the Directions). The Directions required developers to register their jointly owned property declaration within six months.

These directions are intended to serve as guidance notes and till date, it is unclear as to whether these directions constitute regulations as intended under Article 32 of the Strata Law or will be part of regulations to be issued in the future.The Directions broadly encompass the following: i) Directions for jointly owned property declarations, ii) general regulations; and iii) directions for association constitution.These directions are closely related to the content of the principal documents that outline all operational and management relating to a development, what are the licensing obligations of the surveyors, consumer protection, role and obligations of the Owners Association Board- its procedures such as meetings, appointments of Board Members and other administrative directions.
Although significant steps and measures have been implemented by Dubai Land Department in regulating strata titles in Dubai, there are yet few hurdles that call for detailed and in-depth regulations that will help and resolve ambiguities surrounding implantation of Strata Law. These ambiguities have resulted in failure on part of several owners' associations to function fully, freely and effectively in the interest of its members. High service charges and maintenance costs continue to be the prime concern of members whilst disputing the association's control and autonomy.  Whilst the Strata Law was introduced in 2007, it is pertinent to state that most of these associations have been granted preliminary registration status which makes them bereft of legal powers to act fairly and independently.


Article 18 (1) of the Strata Law sets out that the owners' association is a not for the profit legal entity, has a separate legal existence from its members, and has the right to sue in its capacity and to own movable assets. Article 10 of RERA circular number 1 of 2010 and dated 5 September 2010 (the Circular)with regards to Service Charge for Jointly Owned Property provides that Owners Association has the sole right and privilege to take action against Unit Owners in respect of unpaid service charges, and this right remains in force even if an owner attempts to transfer ownership of the unit to another person.

Although the legal status of such associations is clarified under the Strata Law and the Circular confers rights in favor of owners' association, such status and rights cannot be optimally exercised. For instance, homeowners' association cannot set up bank accounts, enter in to contracts with third parties, bring an action against defaulting members, enter into contracts for insurance, obtain court orders or appoint auditors and/or attorneys to carry out affairs of association's management given that homeowners' associations have not yet been fully licensed   For better and efficient coverage of property developers are required to maintain an emergency fund also known as the sinking fund. Investors have long complained of discrepancies in maintaining such fund. Developers are under the legal obligation to remedy material defects in the property prior to passing over the property to owners' association. It is expected that Dubai Land Department and/or RERA will issue further regulations in this regard and provide for a detailed audit of each property (to ascertain latent defects in property) prior to same being handed over by the developer to owners' association.


The Directions provide that an entitlement for each owner's lot determined as under:-
 

1–  Calculating the common areas of the building that can be attributable to owner's unit based on area and the extent that the unit draws on the resources of the Association: From a practical standpoint, mutual agreement as to creating borderlines for a mixed-use development comprising of commercial, retail and residential units often raises concerns as to sharing of service fees and maintenance charges as clear delineations may not necessarily always result in clear cost sharing. To illustrate, if a mixed-use development comprises eighty percent residential units and twenty percent retail units, the retail unit owners are likely to dispute the inclusion of the cost of service or services that are not in fact consumed or utilized by them.

2– On just and equitable basis wherein entitlement for each lot is derived by calculating total liabilities created by the specific unit.
Whilst Dubai awaits further regulations in regards to strata law, property developers in Abu Dhabi have started implementing strata style governance structures in place. The Emirate is likely to introduce strata law to ensure transparent and fair arrangements for property owners and developers.

In matters involving small claims and disputes, the dust might settle and both developers and owners today realize their long-term objectives, but it seems reasonable to conclude that there remains a need for clear and detailed strata regulations.

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Tue, 24 Mar 2015 12:00:00 GMT