DFSA imposes largest-ever fine for regulatory failings

The fines are the largest ever imposed by the DFSA, which is the regulator for the Dubai International Financial Centre (DIFC) free zone. Abraaj Investment Management Limited (AIML), a Cayman Islands company now in provisional liquidation, was fined $299.3m (65-page / 428KB PDF); while Abraaj Capital Limited (ACLD), a DIFC company also in provisional liquidation, was fined just under $15.3m (59-page / 384KB PDF).

DFSA chief executive Bryan Stirewalt said that the size of the fines "reflects the seriousness with which the DFSA views AIML's and ACLD's contraventions".

"Senior management rode roughshod over their compliance function and the misconduct and deceit were pervasive and persistent," he said. "We will pursue the persons or entities who perpetrated this activity, including those who allowed this to happen through major corporate governance breaches, to the full extent of our powers."

Dubai-based commercial litigation and compliance expert Damian Crosse of Pinsent Masons, the law firm behind Out-Law, said that the size of the fine "demonstrates the recent trend of regulators imposing pretty hefty fines on firms for non-compliance, and demonstrates the DFSA in the DIFC is not messing around".

The DFSA's investigation into the companies, which began in January 2018, was "complex and spanned multiple jurisdictions", according to the regulator. Its investigation into individuals and entities connected with the case is continuing "to the full extent of [the DFSA's] powers".

AIML was found to be carrying out unauthorised financial services activities, including fund management, both within and from the DIFC, of actively misleading and deceiving its investors and misusing their money to meet its own cash shortfalls and other operating expenses. The company also concealed its activities by providing misleading financial information to investors, and making false statements about its use of investors' money.

ACLD was knowingly involved in AIML's unauthorised activity, while also failing to maintain adequate capital resources and deceiving the regulator about its compliance with the capital adequacy rules. The company also breached the DIFC's Regulatory Law by failing to observe minimum standards of integrity and fair dealing; failing to ensure its affairs were managed effectively and responsibly; and failing to deal with the DFSA in an open and cooperative manner.

Two funds managed by AIML had a combined shortfall of at least $180m by the time the company was put into provisional liquidation, according to the DFSA.