Loan Manipulation In UAE: An Essay.

Is Loan Manipulation Illegal?

Question:

Discuss about the Loan Manipulation.

Manipulation is the process of deflating or inflating the prices of given securities artificially. Loan manipulation is thereby defined as the act of the loan value and its interest to suit the banks need. Manipulation is in many cases illegal (Abu Dhabi Commercial Bank, 2000). It is mostly done by the small banks or lenders due to their ability not to be closely watched and low visibility in the market.

How loans are calculated in Islamic Dubai Bank

The Holy Qur'an prohibits setting interest on the money loan. It is critical to recognize certain fundamental principles of Islamic banking  on which Islamic finance is based. The Sharí'ah  is based on  Quranic commandments as established in the Quran and in the terms and works of the Prophet Muhammad (pbuh).Islamic Dubai Bank management outlaws the riba and there is  consensus among economists who profess Islamic faith that the riba is not limited to usury which also includes interests. The Holy book  Quran is clear about the banning of riba, which is sometime termed as undue interest: "Believers: fear God and renounce the unpaid proceeds of usury, if you are believers" (Sacred Qur'an, 2 : 278).

Any default payment above the actual principal amount is prohibited.

Dubai Islamic Bank allows only one kind of loan, and this is known as qard-al-hásan (literally, good loan) in  which the bank charges no interest on the borrowed money. Traditional Muslim jurisconsults have built this principle so strictly that any  indirect  benefits are also prohibited.

Loan manipulations history and effects

United Arab Emirates financial institutions like Dubai Islamic Bank  are facing a new wave of demands that could leave in an anecdote the legal battle waged during the last years by the clauses soil in the interest rates of the mortgage loans.

More than a hundred citizens have initiated legal proceedings with several law firms to sue Dubai banks for the effect that would have had the manipulation of the loan processes - reference to which most of the mortgages in our country are linked - in the cost of its mortgages, explained to, lawyer who in 2011 prompted an investigation to determine if the indicator was being calculated according to bank and financial institutions legislation(Abu Dhabi in the UAE, n.d.).More than a hundred citizens have taken legal action against the bank for manipulating the loan processes and interest.

Many of the attorneys have succeeded in confirming for the first time that the manipulation of the index affects individuals and companies. Door to interest rebates, which have been mproperly collected according to (Alhosani, n.d.).

The ruling, however, does not set the amount of compensation, which has been appealed earlier this month by Dubai Banks, which inherited the mortgage loan from Barclays, after the acquisition of many retail business, and by the Own applicant. It requires the annulment or substitution of 0% of the variable interest portion of the loan, "as a result of an abusive practice (manipulation) and because it is impossible to determine what was the correct data, if extracted from the operation of a Real market, not based on simple estimates of banks (Bayraktar& Wang, 2006).In Dubai, 4 million mortgages were signed between 2005 and 2008, a period in which manipulation has been proven

Islamic Banking Principles and Loan Manipulation

Beyond the aforementioned lawsuit, in 2015 and 2016, justice has dismissed four similar lawsuits against several banks in united arab emirates for loan manipulation including the Dubai Islamic bank. They have been appealed by the applicants.Currently, more than 20 lawsuits have been lodged for abusive practices involving the manipulation of the loan processes in real terms (Brixi, Lust, &Woolcock, 2015). Euribor is a daily index that indicates the average interest rate at which banks lend money to the interbank market. It is calculated by crossing the data of the main entities operating in the country and internationally owned companies, which do not include popular rates given. This implies that if the claims against the medium-sized banks thrived, they could claim the big bank to assume its responsibility(Bayraktar& Wang, 2006).

To date, the United Arab Emirates  has fined eight financial institutions for manipulating the index between September 2005 and May 2008. In these four years, more than four million mortgages were signed in united Arab emirates, most linked to the evolution of the Dubai points out that any person affected is entitled to sue (Brixi, Lust, &Woolcock, 2015).

According to estimates of the bank manipulation, platform driven to inform the mortgaged on how to initiate legal action, if taken as a reference, exclusively to the rates given. If, as advocated by the lawyer, the loan interest is suppressed during the life of the loan, the owner of the house should receive between 50,000 and 60,000 (Faculty Loan Repayment Program, 2002).

The institution said in a statement the difficulty of quantifying the volume of profits obtained by banks for this practice, as well as the economic damage of individuals and companies with loans linked to this index.

In 2013, being part of a cartel agreed to modify the Euribor. An agreement was reached with the top five banks, who paid 825 million. In total, the bank has had to face 1.310 million for this malpractice(Hull, 2015).

The Commission acknowledged in the note in which it issued the latest fine that any person or company affected by this type of anticompetitive behavior is entitled to bring the corresponding complaint to the courts of any Member State to compensate for possible damages.

Data collection and methodology

There are cases where programs for collecting data on banks cannot be implemented on a regular basis due to operational limitations. Under these circumstances, different alternative approaches can be taken to assess loans (Garci?aMarti?nez, Santos, Toure?, & Flores, n.d.).

Capture: at the level at which loans are manipulated.

Market: any situation in which loan is transferred commercially. It may include the fish auction at the port, the product transaction (secondary market) between distributors, processing plants and the consumer market (Low, 2002).

Consumers: level at which products are finally consumed.

More than a hundred citizens have initiated legal proceedings with several law firms to sue Dubai banks for the effect that would have had the manipulation of the loan processes - reference to which most of the mortgages in our country are linked - in the cost of its mortgages, explained to, lawyer who in 2011 prompted an investigation to determine if the indicator was being calculated according to bank and financial institutions legislation (Salinger, n.d.).

Lawsuits Against Financial Institutions

The problem of fiscal planning - in which the design of the transfer pricing policy is framed - is that its objective is to create artificially elaborated products that aim at tax evasion and avoidance, providing a tax haven to taxpayers, and Thus achieving the minimization of the tax through the manipulation of their business activities. The collection of data for management purposes should be done with sufficient frequency. For example, data for population monitoring should be collected constantly, while household data can be collected at much longer intervals.

These mechanisms completely distort the economic motivations, to the point that ends up paying, not so much to who produces each thing, or to the value added by each entity of the group - something difficult to calculate when prices have suffered distortions -, but to the company of the group Which registers assets, functions and risks in its name (Terterov, 2006).

Questionnares on loan manupilation in Dubai( UAE)

1. What type of a loan is this?
2. Long term or short term
3. Interest free of marginal interest
4. How is the loan process beneficial to the loanee?
5. Do you yhink there is loan manipulation on the loan facility given?
6. How long does it take to repay the loan and would you be willing to reduce the duration or increase it?
7. Does Islamic banking benefit you with its facilities?
8. What are the benefits of the loan?
9. Does the bank in question benefit from this loan facility?
10. Who should reign in on loan manupilators?
11. Central banks of Dubai? or
12. The court systems?
13. What is the maximum or minimum punishment on loan manipulators?
14. Is it prudent to manipulate a loan facility for the benefit of the loanee?

As a consequence, multinational groups are able to pay a lower effective rate than other firms in the same sector pay. Also, economic groups that exploit public concessions may also be using these mechanisms.

Although the manipulation of transfer prices usually has as its main purpose fiscal avoidance; It also has implications for the diversion of profits and illicit financial flows to other jurisdictions, as it is possible to transfer assets abroad as if they were part of normal business activities, sometimes circumventing exchange restrictions through legal mechanisms that Make possible the payments abroad in the form of remuneration for intra-group transactions(Terterov, 2006).

Therefore, the use of these mechanisms not only ends up increasing inequalities in countries like United Arab Emirates, but also between developed and developing countries in general.

For these reasons, in this work we will make a brief review of the normative and conceptual framework linked to transfer prices; A presentation of the problems involved in the valuation of intra-group transactions in the current regulatory framework; And a schematization of transfer pricing structures used for tax evasion and avoidance and profit diversion.

Normative and Conceptual Framework

The question of the valuation of intra-group transactions was already worrying the members of the United Arab Emirates business league. From this, in 1943 the first rule to solve cases of transfer prices, which exclusively affected commodity issues, arose, and remained more or less standing until the year 2003.

According to estimates of the bank manipulation, platform driven to inform the mortgaged on how to initiate legal action, if taken as a reference, exclusively to the rates given. If, as advocated by the lawyer, the loan interest is suppressed during the life of the loan, the owner of the house should receive between 50,000 and 60,000. The institution said in a statement the difficulty of quantifying the volume of profits obtained by banks for this practice, as well as the economic damage of individuals and companies with loans linked to this index.

In a research study, the validity of the results depends, among other aspects, on the quality of the data collected. This in turn depends on A good definition of the variables, as well as their measurement scales. k
Sources of information and measuring instruments.
The sources of information must be reliable and complete, so that, although it will be more expensive and require more effort, we must collect whenever we can the data directly (primary data), although sometimes we will not be more remedied or more profitable, Even at the risk of possible bias, than using secondary data sources.
As for the instruments of measurement, we must use known instruments that are known to generate valid and reliable (precise) measures. If information is collected through questionnaires, it is necessary to take measures to obtain good statements, order of questions, etc. Whenever possible, use previously validated questionnaires. Whether the validation of a questionnaire constitutes a research project of enormous complexity: validation of the construct, content and criteria (The SBA's loan management and accounting system, n.d.).
We will also have to define the quality control systems that will be performed, before, during and after the data collection. To emphasize the importance of this aspect, often forgotten or considered secondary, has been coined a term like GIGO, initials of Garbage In, Garbage Out, to refer to the fact that if the computer is put trash , Do not expect the results of any analysis, however sophisticated, to be anything but rubbish.

The protocol of the research project should include:
 List of variables
Operational definition of the variables and their measurement scales.

Impact and Legal Implications

Source of data and Ways to Collect Data

Data will be from gotten from Instruments of measurement, calibration, sensitivity, specificity, precision, etc. Description of the field work of collection of data, instruction of the people who collect them, how to ensure the homogeneity of data collection, etc. Description of the methods we will use to ensure the quality of the data: before, during and after.The size of a population is given by the number of elements that compose it.

Unit of analysis: this is the object for which information is sought. Many times we refer to units of analysis with the name of elements. In statistics, an element or unit of analysis may be something with real existence, such as a car or house, or something more abstract like temperature or a time interval. Given this definition, population can be redefined as the set of units of analysis.

Sample: is a subset of units of analysis of a given population, intended to provide information about the population. For this subset of units of analysis to be of statistical utility, certain requirements must meet in the selection of the elements.

The choice among the many methods of collecting data on this area  depends on the variables to be measured, the source and the resources available. In many cases, there is a natural way of collecting concrete variables. There are cases where programs for collecting data on the industry can not be implemented on a regular basis due to operational limitations.

Links between Variables, Sources and Methods

The links between variables, sources and methods are collected in three tables. These tables are intended to provide guidance in selecting methods and sources of collection and designing a data collection system. The tables also provide some insight into what types of data can be collected simultaneously from the same source using the same method.

methods for summarizing measured or observed data.
When it comes to qualitative variables where the categories are determined, the only thing to do is to count the number of cases belonging to each category and normalize in relation to the total number of cases, calculating a proportion, a percentage or a ratio.

However, when it comes to quantitative variables, the summary of the data consists of organizing tables that synthesize the original data and are called frequency distributions.Frequency: is the number of times that each value of the variable is presented(Bayraktar& Wang, 2006).

1.The researcher may have less control of the session, compared to the one he would have with a single interviewee. It needs to stimulate the conversation process in all the participants and that they hear each other, a task that is not easy.
2. The data obtained are difficult to analyze. The results have to be interpreted within the context in which they occur. Sometimes participants often modify their individual postures after interacting with others.
3. The technique requires carefully trained interviewers.
4. Groups can vary considerably. Each focus group may have unique characteristics; Some may become apathetic, other stimulants, others show resistance, etc. To avoid as much as possible, it is recommended that participants be selected with a diversity of experience and personal characteristics.

Questions have to be stimulating for people to respond. They agree on semi-open questions, because without suggesting answers, the interviewer retains the purpose of the focus group. Some examples are: What do you think about ? How did they feel before ? What do you suggest to improve ?;

1. When the environment is emotionally charged and the search for information can generate or intensify conflicts
   2. When the researcher has no group control or has lost it over the group
   3. When statistical projections are needed
   4. When other methodologies can produce higher quality of information.

loan Manipulation Graph in Commercial Banks in Dubai

An everyday issue that tends to be problematic for many is the proper handling of bank accounts. To handle them intelligently is not required to be an expert in finance, but simply pay attention to all the basics.

Here are a few steps that can help you manage your accounts in the best way possible. To apply these tips with the greatest effectiveness, you can buy a notebook in which these data are noted and always kept close at hand.
recommendations and conclusion
Know the accounts. The first thing to do is to know how many accounts we have, what banks they are, what kind they are (credit, debit, checking account, savings, investment, etc.) and how much money we have in them.
At this point it is convenient to review the contract for each of the accounts. It specifies the conditions of the services and clauses that indicate what is entitled, and what is required.
Review the statements(Brixi, Lust, &Woolcock, 2015). Whether you receive your printed statement or you check it via the internet, it is essential to be aware of the operations and write down and keep receipts of what we spend or pay. If you have access to your online statement, we recommend checking it more than once a month, to better control your expenses. If we do this, we will know exactly what we are paying for and there will be no surprises.

Be cautious. Security is one of the fundamental points in the good management of bank accounts. Customers  must take good care of their  passwords, do not share them or carry them with you in the wallet or purse. When you make a payment do not lose sight of your card and try to keep them well to avoid misplacement.

Using Internet banking. At present, banks offer a lot of online services for their account-holders. You can perform operations such as "balance inquiry", "cash transfer", "statement of account" and miscellaneous payments. Take advantage of these services, they will help you to make transactions easier and more efficiently.

Once we know our accounts well and know what they offer us and what they ask for in return, we can have a bigger picture that will allow us to know if they are convenient or not(Brixi, Lust, &Woolcock, 2015). We will know how well we are tapping our resources and where our money is.At this point it is advisable to have a savings account with liquid funds available for any eventuality, as well as (if possible) an investment account that allows us to mobilize the assets and make them grow.Having everything in order we will understand better the operations month by month and in case of a wrong charge, we will be easier to detect it to make the opportune clarification.

References

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Alhosani, W. Anti-money laundering (1st ed.).

Asia Dept, I. (2013).United Arab Emirates (1st ed.). Washington: International Monetary Fund.

Bayraktar, N. & Wang, Y. (2006).Banking sector openness and economic growth (1st ed.). [Washington, D.C.]: World Bank, World Bank Institute, Poverty Reduction and Economic Management Division.

Brixi, H., Lust, E., &Woolcock, M. (2015).Trust, voice, and incentives (1st ed.). Washington, DC: World Bank Group.

Dept, I. (2016). United Arab Emirates (1st ed.). Washington, D.C.: International Monetary Fund.

Dept, I. (2016). United Arab Emirates (1st ed.). Washington, D.C.: International Monetary Fund.

Faculty Loan Repayment Program. (2002) (1st ed.). [Washington, D.C.].

Garci?aMarti?nez, P., Santos, A., Toure?, A., & Flores, J. United Arab Emirates (1st ed.).

Huang, H. &Xu, C. Financial institutions, financial contagion, and financial crises (1st ed.).

Hull, J. (2015). Risk management and financial institutions (1st ed.). Hoboken: Wiley.

Jasim, M. (2000).Role of Small and Medium Sized Enterprises (SMEs) in Developing the National Economy UAE Experience Economic Horizons .- 2013, Vol 33, No. 124, pp. 9-36 (1st ed.). Abu Dhabi: The Federation of U.A.E. Chambers of Commerce and Industry.

Low, K. (2002). Coping with identified budgetary time constraints (1st ed.).

McNett, J. (2005). The Blackwell encyclopedia of management (1st ed.). Malden, Mass.: Blackwell Pub.

Salinger, L. Encyclopedia of white-collar and corporate crime (1st ed.).

Schiantarelli, F., Stacchini, M., &Strahan, P. Bank quality, judicial efficiency and borrower runs (1st ed.).

Terterov, M. (2006).Doing business with the United Arab Emirates (1st ed.). London: GMB.

Terterov, M. (2006).Doing Business with the United Arab Emirates (1st ed.). London: Blue Ibex Ltd.

The SBA's loan management and accounting system (1st ed.).