EU Court Strikes Down Swift's Blockade Against Iranian Banks

By Jon Matonis
Forbes
Friday, February 8, 2013

 http://www.forbes.com/sites/jonmatonis/2013/02/08/eu-court-strikes-down-swifts-blockade-against-iranian-banks/

Reuters is reporting that a European Union court has ruled against the EU banking sanctions imposed on one of Iran's largest banks, which extends to the payment sanctions imposed by Swift in March of last year. This represents the second such judgment against the banking sanctions and brings into question the legitimacy of using the Swift payments network as an economic weapon.

On Tuesday, the EU's General Court ruled that, in the case of Bank Saderat, there was insufficient evidence demonstrating that the bank was involved in Iran's nuclear program. Last week, the court issued a similar ruling in the case of Bank Mellat, the largest private sector lender in Iran. Boycotted by the EU since July 2010 and blocked out of Swift since March 2012, the two banks had filed suit with the European court to challenge those sanctions. EU governments now have two months to appeal the recent decisions.

The Society for Worldwide Interbank Financial Telecommunication, or Swift, is a worldwide financial messaging network to facilitate the interbank transfer of funds. Speaking after a news conference in Dubai, Swift's chief executive Gottfried Leibbrandt indicated that talks are continuing with European regulators about the appropriateness of requiring Swift to impose sanctions on countries such as Iran.

A global network for the transfer of funds loses some of its effectiveness once its neutrality becomes tarnished, because any member of the network could be similarly targeted without recourse.

Leibbrandt said, "There is a dialogue going on around the trade-off between using us as a sanctions tool for other countries and impeding our role as really serving as a global infrastructure mechanism." He added that "there are lots of alternatives to Swift" and international transactions can still be executed by sending instructions via telephone or email, but such alternatives are "not as secure as Swift and [lack] the convenience factor."

One such alternative is the gold bullion trade. Buyers of Iranian oil and gas must deposit payment in a local bank account and it cannot be transferred abroad. Iran sells natural gas to Turkey and receives payment in Turkish lira, which are then used to purchase gold bars in Turkey. Couriers using hand luggage carry the bullion to Dubai, where it is sold for foreign currency or shipped to Iran.

Turkish Economy Minister Zafer Caglayan said, "We will continue to make our gold exports this year to whoever seeks them. We have no restrictions and are not bound by restrictions imposed by others." Turkey was granted a six-month U.S. waiver that exempted it from financial sanctions against Iran but the waiver is due to expire in July. Also in December, the U.S. Senate passed expanded sanctions on trade with Iran which included restricting trade in precious metals.

Caglayan maintained that Turkey's state-owned Halkbank will continue its existing transactions with Iran but some other banks had pulled back in response to U.S. pressure since those private banks had activities in the U.S.

Also, Washington has warned Moscow on the implications for Russian banks and has sanctioned the parent company of Russia's Mir Business Bank, state-owned Bank Melli Iran, claiming that the Moscow-based bank has become a conduit for Iranian's seeking to keep trade flowing. "Only problem is Russians don't care what we think," according to Jim Rickards, author of Currency Wars: The Making of the Next Crisis.

In the meantime, over 30 cases are still pending at the EU General Court, including cases filed by the Central Bank of Iran and the National Iranian Oil Company.

DGC Magazine Interview with gBullion

Mark Herpel of Digital Gold Currency Magazine has completed his interview of gBullion, a new digital currency issuer that burst onto the scene in March 2010. Christine Thompson, PR and Marketing Communications Manager, answers the questions in this DGC exclusive and reveals important jurisdictional considerations and physical server locations of the gBullion system.


DGC Magazine Interview with gBullion

An Interview with Dr. Zeno Dahinden, CEO of e-dinar.com

Mark Herpel of Digital Gold Currency Magazine has just published a thorough and engaging interview with the CEO of e-dinar, Dr. Zeno Dahinden, in the April 2010 issue. Mark is a pioneer in getting the interviews with the various news-makers and the people that matter most in the world of digital currency.

Interview with Dr. Zeno Dahinden, CEO of e-dinar.com, March, 2010

gBullion: New Digital Gold Currency

Press Release
gBullion DMCC
Wednesday, March 10, 2010

http://www.prweb.com/releases/2010/03/prweb3696304.htm

gBullion is a new payment system that enables any user to buy/sell gold and make safe, instant and free payments all over the world.

Dubai-- March 10 2010 is a start date for gBullion - new payment system that enables any user to buy/sell gold and make safe instant payments all over the world.

All transactions are made in system digital currency – gB, wherein 1 gB is equal to 1 gold gram. After the purchase gold bars (of 99, 5% or higher purity) are stored in the specialized secure Vault while corresponding quantity of gold grams (gB) is transferred to electronic gBullion client account.

At any time user can exchange digital gold (gB) for real gold and obtain gold bars from a Vault located in UAE, or take delivery to specified address. Besides gB holder can transfer his digital gold (gB) to another gBullion user. All transfers are instant and free.

“Our experts were to develop internet service based on three principles: minimum charges, easy use, and high degree of reliability. Their work resulted in the unique product of high quality that is coincident with all these demands. Today a growing number of investors become interested in gold, that is of no wonder for gold turns to be the most stable currency in the world, and gBullion is the most convenient instrument for operations with this metal” - Andrew Owen, CEO gBullion.

Features:
- possibility to buy gold in minimum quantity (from 0,0001 gram);
- gB currency is 100% gold backed;
- the best market prices for gold purchase and sale through internet;
- insurance of all gold bars;
- referral program and other variants of business with gBullion;

The system operator is GBULLION DMCC Company registered in Dubai, UAE, and licensed to sell gold.

GBULLION DMCC work is inspected by the CPA firm. An auditor’s report with the information about available assets and quantity of gold bars at vaults will be regularly announced in our site. At the moment the site gBullion operates in test mode and only in English. Other languages will be soon available.

Christine Thompson
Manager of PR & Marketing Communications
www.gbullion.com

Dubai's Dark Side Targeted by International Finance Police

By Nick Mathiason
The Observer
Sunday, January 24, 2010

http://www.guardian.co.uk/business/2010/jan/24/dubai-crime-money-laundering-terrorism

Fears are intensifying that the emirate has become a global centre for terror funding, money-laundering, drug money and mafia cash

Naresh Kumar Jain, an Indian multimillionaire suspected of being one of the world's biggest money launderers, ran from the law, but last month it became obvious that he couldn't hide.

Having skipped bail in Dubai – where much of his vast empire was based – 18 months ago, Jain was finally arrested in Delhi by India's Narcotic Controls Board for allegedly moving hundreds of millions of dollars for drug dealers. It had taken an international manhunt involving law enforcement agencies spanning three continents to catch him.

The 50-year-old is suspected by the UK's Serious Organised Crime Agency of being at the heart of a drug money-laundering network shifting up to £1.35bn a year across jurisdictions. Jain has reportedly admitted to Indian police that he has laundered cash, but denies being involved in the drugs trade.

However, investigators believe that his businesses are based on huge sums of cash originating in Africa and passed on to him by diamond smugglers and drug dealers – and that most of that illicit cash flows into Dubai. But the allegations against him do not make him unique in the emirate. "[Jain's arrest] was an important incident, but many wanted men reside in Dubai," says Dr Christopher Davidson, an expert on Gulf economics at the University of ­Durham.

To many, Jain is the latest, perhaps the biggest, example that proves the United Arab Emirates is not so much awash with vast oil wealth but built on a toxic tide of illicit cash: a place where Russian mafia and drug cartels clean their dirty cash and al‑Qaida finances terror atrocities. And at its heart is Dubai, a world financial centre that in the past 15 years has grown exponentially.

As Dubai's ruling elite pick through the wreckage of its bombed-out economy, which exploded under the weight of $60bn of debt last year, an equally pressing issue threatens to undermine not just Dubai but the UAE as a whole.

Next month, a meeting of the Financial Action Task Force (FATF), the powerful intergovernmental body responsible for combating money laundering and the financing of terrorist networks, will meet in Abu Dhabi. The meeting is expected to establish which countries to put on a high-risk jurisdiction list following a request by G20 finance ministers last year. It is thought likely that the UAE will feature on the list. Such a development would be a serious blow to the money men of Dubai, but would confirm many people's fears that it remains a port of choice for dirty cash.

The notion is causing renewed concerns among senior US officials. Last month an American ambassador to Afghanistan, E Anthony Wayne, said that every day $10m in cash was being smuggled from Kabul to Dubai in briefcases, much of it from the Afghan heroin trade, which has boomed since the US invasion. Wayne said a US investigation found that $190m in cash was smuggled in just 18 sample days.

Insiders say that obtaining a UAE passport, which allows the bearer to open a bank account, is still relatively easy. Experts suggest that airport customs in some of the UAE states provide easy routes to move goods and cash around. In addition, Dubai real estate has a notorious reputation as a front for laundering, where apartments are bought up by unknown entities who never live there. "After 9/11, there was a crackdown on corruption, but they're careful not to talk about money-laundering because it is part of the lifeblood," says Davidson at the University of Durham.

"The place is built on it," insists one seasoned Dubai businessman. "It's a commercial port. There's a free trade zone. That's what made its livelihood."

Expatriate UK financiers say that new rules have not had any appreciable effect: "Russians are still coming with suitcases of cash to buy flats which they never live in," says one. "It's easy to get resident permits. These sort of stories are rife. Russia is the biggest source. A lot of it is mafia."

"There are weak links in every country," says Bryan Stirewalt, director of supervision at the Dubai Financial Services Authority. "There are weak links in the US, but they are different types. Money launderers choose the US because of [its] size… they don't stick out. There's an inherent conflict between the ease of doing business and the potential for money laundering. Unfortunately, they work contrary to each other. The easier it is to open a business, the easier it is for money launderers."

So easy, in fact, that the latest FATF evaluation of the UAE's efforts to combat financial crime is a devastating critique of its laws and agencies. The report, ­published in November 2008, points to the low number of suspicious transaction reports (STRs) submitted in a region where so much wealth is banked.

The FATF also criticises the low number of staff in the UAE central bank's anti-money laundering unit, as well as an inadequate legal framework that places few obligations on the region's authorities to ensure customer due diligence checks are made and monitored.

The task force also points out that standards vary on the identification of the true owners and beneficiaries of companies in the UAE, and expresses concern about the region's securities and insurance sectors, which adopt less onerous regulations than even its banking sector.

Alarmingly, regulations on wire transfers still "fall well short" of FATF requirements, the report says – an observation that will shock many, since six-figure sums were wired from Dubai to bank accounts in America to finance the 9/11 suicide bombers. The FATF also states that lawyers and accountants face no specific due diligence requirements under UAE money-laundering law.

To be fair, the FATF spares the Dubai International Finance Centre – the 110- acre Middle East and North Africa capital markets hub – from some of its fire. In fact, the Dubai Financial Services Authority, which regulates the centre, says that last year it posted a 20% rise in STRs, though it admits the overall number recorded was still not as high as might be expected. Much of the increase, it says, came in the wake of the Lehman Brothers bank collapse, when huge amounts of money came looking for new safe havens.

Stirewalt, who has been in charge of fighting money laundering and terrorism finance in the Dubai International Finance Centre for more than a year, has set up systems that are going a long way to identify illicit flows. As well as turning up a "significant" increase in STRs, he is focusing on accountants and lawyers, and has stepped up inspections of banks as well as improving links with the UAE Central Bank, which has overall control of money laundering issues.

Stirewalt points out that Dubai, which is close to a number of conflict zones, is vulnerable to criminal penetration, made easier because of its role as a port. He has still not completely come to terms with the region's long-established informal money-transfer network known as hawala, suggesting that reform in this area still has "further to go".

When it comes to claims that Dubai is a destination of Afghan heroin cash, Stirewalt is candid: "I don't disagree with it. I can't say it's not true."

He is keen to stress that Dubai is just one place through which dirty cash flows. When the emirate was cited as being part of an international £60bn carousel fraud five years ago, it was among a host of other countries including Switzerland and the UK. "We have to think about the whole globe," he says. "No one is perfect; no one is bulletproof. The UAE is taking the issue seriously post-9/11 to strengthen the system."

But it is not just Dubai's reputation that is at stake if the authorities fail: the apprehension of international crime and terror gangs dep­ends on its ability to stem the tide of illicit cash washing through the emirates.

For further reading:
"Underground Banker", Little India, January 9, 2010
"'Hawala King' Naresh Jain arrested in India", The Telegraph, December 9, 2009

"Hawala Banking And Currency Controls Part I, Part II", Trace Mayer, November 18, 2009

"Suspected Hawala Kingpin Naresh Jain says he is being trapped", Thaindian News, September 25, 2009
"Anti-money laundering expert warns of dangers facing UAE financial services firms", AMEinfo.com, June 14, 2007
"Informal Value Transfer Systems Report", Nikos Passas, U.S. Department of Justice, January 2005

The Importance of Jurisdiction

By Jon Matonis

Today's digital gold currency issuers are the new Lydians. During the 6th century BC, the Aegean civilization of Lydia sparked a vibrant commercial revolution through the invention of coinage. The first gold coins were struck by King Alyattes and then by his son King Croesus of Lydia sometime around 600-560 BC, and the coins served as a primary currency which significantly increased trade and commerce in the region. Although the monarchy usurped the control of money and established the prerogative of issuance, it was the Lydian people and merchants that were not only responsible for the introduction of coinage but also the early formulation of a gold standard of value through private weights and measures.

It is not a stretch to imagine that the most successful non-political digital currencies also will have some type of precious metals backing. In a digital world where trust is craved, the currency issuers with the most reliable form of "auditable" backing will have a distinct advantage. However, the legal and territorial jurisdictions of the company's administrative offices, host computer servers, and physical bullion storage ultimately may play an even more important role.

To understand why this is true is to appreciate the nature of the attractiveness of digital currencies to the average account holder. It is much more than a desire to protect value that would otherwise be held in a depreciating government currency like the US Dollar or Euro, although that is important too. Not surprisingly, it extends equally into areas such as financial privacy, political stability, and protection from confiscation.

Economically and philosophically, the aim of pure digital cash is to replicate the transactional features of a $100 bill or a 500-euro note, which primarily means that it should be anonymous and untraceable. So, why do so many right-minded people object to these features in the online world? I am sure that they would not advocate mandatory photographs and audit trails for users of $100 bills. This is an extremely vital distinction because various commerce laws are being used by governments to violently suppress the online issuers of anything that is anonymous and untraceable. It would not be acceptable to eradicate $100 bills, or even $50s or $20s, so what becomes the difference in the online world?

The major difference is that online digital cash opens up a host of previously unavailable transaction types that will not require physical presence for the exchange of paper cash. It is this potential for customer-not-present transactions which strikes fear with the authorities, because of the "dire" consequences for tax evasion and money laundering, not to mention the darker side of blackmail, extortion, and ransom. Suitcases of cash will no longer be needed at predetermined drop-off points. There won't even be any drop-off points and therefore the frequency and value of all types of untraceable customer-not-present transactions will increase dramatically in an unregulated, "parallel" economy. The morally-positive transactions, such as political prisoner border crossings and tax-free exchanges, will coexist with the morally-negative transactions just as they do today. A parallel economy in the digital sphere has enormous implications for the world's taxation authorities.

We should not take for granted the privacy rights contained within a $100 bill -- they are a wonderful thing for freedom. Jurisdictions that embrace and permit these already-existing privacy features will attract digital currency issuers and therefore thrive in the online financial world. As to the associated morality of various transactions, it is no more the responsibility of the digital currency issuer than it is currently the responsibility of the manufacturer of $100 bills and 500-euro notes. Those types of arguments around judging and enforcing the morality of certain transactions only serve to muddle the true free-market argument for digital currency.

All of these political and moral sensitivities taken together demonstrate why jurisdiction is so vitally important to the emergence and survival of non-political digital currency. Authoritative forces are lined up against its emergence from the beginning, and there will be an ongoing high-stakes battle for survival, as recently observed in the U.S. federal case against e-gold being prosecuted as an unlicensed money transmission service. International governments and police forces will all cooperate with each other in a desperate attempt to retain monetary supremacy, so old laws will be tweaked to make them applicable, and new direct legislation will be enacted to fill any voids. This scenario will play out across the globe where the larger and stronger nations exert diplomatic, economic, and possibly military pressures on the non-compliant nations.

Not surprisingly, even the U.S. government recognizes that restricting digital currencies on the Internet will require unprecedented international coordination. As stated in a 2008 U.S. Department of Justice study on Money Laundering in Digital Currencies:

"U.S. regulatory action alone will not be sufficient to suppress the money laundering threat posed by digital currencies. Even if clear and consistent regulatory measures are imposed, digital currency services established in foreign and offshore jurisdictions—which are not subject to the Bank Secrecy Act (BSA)—can be used to conduct transactions in the United States. Limited international oversight of this expanding financial service is possible through a recommendation of the Financial Action Task Force on Money Laundering (FATF)."

To be sure, jurisdictional risk is but one of many risks in the digital currency business, with the others being technological risk, encryption/security risk, audit risk, fraud risk, and business default risk. But it is jurisdictional risk that has the most profound impact on long-term viability because it is the least correctable once launched. In addressing jurisdictional risk, the digital currency issuer must consider multiple jurisdictions for each of the functional areas and perhaps even two or more jurisdictions within each functional area for redundancy. For example, both a Central American country and an Asian country for location of hosting servers would provide load-balancing and continued reliability in the event of a changing political climate against anonymous digital cash server farms in one country.

Administrative offices may be part of a legal entity in a faraway, remote jurisdiction and have physical staff and buildings in a large, populated city, thereby placing them in a different territorial jurisdiction. Both jurisdictions are important to consider because both will have differing legal statutes related to the issuance and management of anonymous, untraceable digital currency. It is not the objective of this analysis to promote one jurisdiction over another, primarily because ideal jurisdictions will be in a constant state of change due to their political nature. However, it is possible to look at some selected jurisdictions of existing digital currency issuers.

One such issuer established a Panamanian international business corporation (IBC) as a holding company with a subsidiary Haitian company as the administrative general contractor and a subsidiary Burmese corporation as the payment system operator. In addition to distributing legal jurisdiction risk, this structure served to insulate the administrator from the business risks associated with default of the operator. Another issuer established the administrative body in the Seychelles with operations and customer support outsourced to a Malaysian company.

For administrative legal jurisdiction, Panama, Belize, Costa Rica, Nevis, and Seychelles have been popular because of their banking secrecy heritage, minimal tax structure, and/or their distance from the reach of the U.S. legal system. They are decidedly not one of the 32 member countries of the FATF international body. Establishing in non-FATF member jurisdictions can be a double-edged sword for the digital currency customers because untrustworthy issuers may be insulated from judgments related to fraud, so issuer reputation will be of paramount importance to overcome that concern.

In the case of territorial jurisdiction, it is not always clear where issuers maintain their physical presence because they have mostly been small, movable organizations capable of operating virtually. Diligence should be observed if loosely guiding or operating a digital gold currency entity from a shareholder's home country, such as the United States, because territorial jurisdiction will prevail regardless of where the corporate entity was formed. Since legal and territorial jurisdictions are different from an enforcement perspective, the issuer ideally should establish separate legal entities for each location.

For the location of international bullion storage, issuers have selected domiciles that have a longstanding reputation of storing precious metals, such as Zurich, London, and Vienna. Now, Dubai is an up-and-coming storage center for precious metals in that it is already one of the largest centers for trading gold managing one-fifth of global annual gold production. Geographic diversification in vault selection makes sense in a world where established financial centers have experienced increased pressure to eliminate financial privacy, and the threat of asset confiscation persists.

The complete jurisdictional framework for digital currency issuers is a multinational structure of various corporate entities that have either subsidiary relationships within the framework or pure outsourcing arrangements to separately-owned entities. They will function best when they have considerations for distributed risk and redundancy built in and when they utilize best-of-breed locations for the particular functional areas.

This article was also published in Digital Gold Currency Magazine (August 2009).

For further reading:
"Fab Four: The 4 Best Asset Havens in the World", The Sovereign Society, June 2008

Gold Currency System Proposed for Gulf Countries

By Robert Blumen
Mises Economics Blog
Sunday, March 13, 2005

http://blog.mises.org/archives/003309.asp

An eclectic document published by the Gulf Research Center of Dubai discusses "The Role of Gold in the unified GCC Currency". The point of the paper is to examine an increased monetary role for gold in the Persian Gulf national banking and monetary systems.

The author, Eckart Woertz, a bond analyst in Dubai, cites Mises, Rothbard, Skousen, Sennholz and other Austrian economists, although in some cases critically. His discussion of the current monetary system, dating from the Bretton Woods agreement, though present dollar buying cartel follow lines that are familiar to readers of this site. The gulf countries, in his view, have tied their economies unwisely to the value of the US dollar.

Austrians will be disappointed to read that author believes that the growth of government is necessary for economic growth. Woertz also recognizes that a gold-based monetary system would bring about the end of the current welfare state, regrettably in his view.

There is some discussion of the "Islamic Dinar", a proposal by Prime Minister Mahathir of Malaysia to set up a gold-exchange standard for trade among Islamic nations, with the intention of protecting the regions from currency crisis. Woertz explains that the proposal failed for various reasons, not the least of which that some gulf countries have sold off most or all of their central bank gold reserves.

Quoting from the conclusion:

The paper dollar standard is a dead man walking. Its debt, accumulated over the recent decades, is too high to be effectively repaid. It will either default or be inflated to such an extent that it will not hurt to “pay"? it back. Therefore, the accrued imbalances in global finance and the inherent weakness of worldwide growth models that rely on a continuance of US deficit spending are likely to usher in a serious crisis of currency systems during the course of the coming years. As the dollar is not only the currency of the US but the most important reserve, trade and debt currency on which all the other nations rely, it will not be a regionally confined currency crisis as happened in Mexico, Asia or Russia in the nineties; but will affect all other currencies and economies as well. That is also true for the Euro. Although it is less weak than the dollar, it will be affected and eventually engage in competitive devaluations with other currencies rather than emerge as a new world currency.

Gold will be a suitable means of asset protection and ultimate payment in such a scenario. It will preserve the wealth of individuals and central banks alike and will ensure important manoeuvrability for the latter. At the same time, the need for Gold accumulation could lead to serious conflicts between citizens and government agencies, should the latter try to get a hold of the accumulated gold of its citizens by declaring it illegal like in the SA in 1933, or by pressing for an exchange into local paper currency like in Korea and Thailand in 1997/ 98.

While individuals in the GCC countries highly value gold as a means of asset protection, GCC central banks are particularly ill prepared for such a crisis scenario. With currencies pegged to the dollar, oil factored in dollars and most of its currency reserves and investments in dollars, they are highly affected by the woes of the paper dollar standard. At the same time, they only have tiny gold reserves or none at all. In contrast to other central banks that have cautiously started to anticipate a post paper dollar standard environment (e.g. Euroland, Russia, China), the GCC monetary authorities indulge in official oaths of allegiance. During the recent GCC monetary union conference in Bahrain, the IMF asked the GCC countries to peg their common currency in 2010 to the dollar.

The justification given rested solely on the successful maintenance of the paper dollar standard. As stated: “Since most exports and external assets have been dollar-denominated, the peg assured external stability. It also provided a credible nominal anchor for monetary policy, ensuring price stability." Yet while may be true for the past, once the paper dollar standard is tumbling the whole argument takes the opposite direction - to instability of external trade, prices and monetary policy. Thus, apart from further diversification of their economies and gradual diversification into “second worst"-currencies like the Euro, GCC countries would need to reclaim their leased out gold and build up a substantial gold reserve, as long there is still the time to buy it. Once the crisis scenario unfolds and the attempts of central and commercial banks at gold price suppression fail, the gold price will more than rise – it will explode to the upside.

Robert Blumen is an independent enterprise software consultant based in San Francisco. Some comments to this post discuss the emerging role of digital gold currencies.

Dubai Vault May Store Region's Gold Reserves

By

Shashank Shekhar
Emirates Business
Wednesday, May 13, 2009

http://business24-7.ae/articles/2009/5/pages/12052009/05132009_4d115a2aa5da4d69b8e7350a8875bd9d.aspx#

Much of the region's gold that has so far been held in London may soon return.

The new vaults of Dubai Multi Commodities Centre (DMCC) will be a home to the gold allocated to the Dubai Gold Securities (DGS) Exchange Traded Funds (ETFs). The vault may also become a natural choice for storage of gold reserves by central banks in the regional market, analysts said.

While the gold allocated to DGS is kept at HSBC's vaults in London, the gold reserves held by GCC's central banks are held by various other vaults in London, market sources said. Gold vaults have existed in London for more than 150 years.

DMCC's new vault became operational on April 26 this year. "We want to bring the gold held under DGS ETFs at the HSBC vaults in London to Dubai. What has been holding us back is the difference in gold specification between London and Dubai," a DMCC official told Emirates Business. Until May 11, the total number of DGS traded stood at 15,200. Each security approximately amounts to one-tenth of an ounce of gold.

Though DMCC officials have declined a direct comment on the matter, a spokesperson with the centre said that ample care has been taken to make the vault "better than the others".

Another DMCC official said that the vault will also be used to store precious metals associated with the ETFs that may be launched in Dubai later this year. At a press conference organised recently, senior DMCC officials had disclosed that they plan to launch new "precious metal ETFs" in Dubai. The ETFs will be traded at Nasdaq Dubai, the Dubai-based regional security exchange where the DGS trades.

Prominent gold dealers in Dubai say that it's "only natural" for the central banks in the region to store their gold in DMCC instead of London, where they have typically held their bullion reserves so far.

"It's a natural home for the central banks in the region to store their gold in Dubai rather than in London where they have typically held their gold. Particularly when DMCC has a state-of-the-art facility to store such precious metals," said Jeffrey Rhodes the CEO of INTL Commodities DMCC, a Dubai-based gold dealer.

In a statement released recently, the DMCC had claimed that its vault combines the advantages of a "unique" location together with the "highest" security standards.

"The vault is intended for both short and long term storage of precious metals and other high-value products. The vault will be open to local and international banks, corporates, HNWIs and DMCC members and uses the latest security equipment and inventory management systems," the statement said.

"With the DMCC vault commencing operations, we can now further support this tradition by offering state-of- the-art infrastructure and storage facilities that are an essential feature of a successful commodities hub," David Rutledge, CEO of DMCC was quoted as saying. Gold imports into Dubai jumped 15 per cent in the first quarter of 2009, the Dubai Multi Commodities Centre announced recently.

The emirate imported a total of 140 tonnes of gold in the first quarter of 2009 up 15 per cent as compared to 122 tonnes imported during the January-March 2008 period, DMCC said.

For further reading:
"Global players in talks with DMCC to set up gold refineries in Dubai", Emirates Business, May 28, 2009
"DMCC in talks with China, Canada firms to double gold trade", Emirates Business, May 27, 2009
"Dubai to get back gold reserves from London banks", Commodity Online, May 26, 2009
"DMCC's state-of-the-art vault begins operations from Sunday", Emirates Business, April 23, 2009