Managing investigations becomes more complex in Dubai following DFSA feedback

Various individuals from the enforcement division of the Dubai Financial Services Authority (DFSA) recently shared views on how internal investigations should be conducted, including the DFSA’s stance on when companies registered in the Dubai International Finance Centre (DIFC) should self-disclose matters and who should conduct witness interviews in the first instance. The views highlight the need for legal advice before self-reporting and on how to conduct internal investigations.

According to an article in the Global Investigations Review, Patrick Meaney, enforcement head of the Dubai Financial Services Authority (DFSA) has said that whenever there is a "reasonable level of suspicion" of misconduct within a DIFC company, the DFSA wants to be notified and given the first opportunity to interview the employees suspected to be involved in the wrongdoing. He highlighted that the businesses should hold back and wait with internal investigation interviews until the authorities have given them the green light.

Meaney said the DFSA wants businesses to report suspected wrongdoing at an early stage in order to avoid trampling "all over the evidence". Also, businesses should not interview "main suspects" before the regulator has spoken to them.

Edward James, an anti-corruption and bribery expert at Pinsent Masons, commented: "Deciding whether to self-report to a regulator is not a decision that should be taken lightly given the potential serious consequences and costs for a company. Investigations are dynamic and the findings evolve as the process unfolds. It may not be easy to determine when a 'reasonable level of suspicion' has been formed. Companies should consider getting expert advice before deciding to self-report."

The DFSA indicated that the regulator sometimes sees "very poor quality" internal investigations. A particular criticism was that some internal investigations conclude that the issues are not that serious when the reality is that the issues have not been properly investigated.

"The reluctance to have suspects interviewed is not unique to the DFSA," James said. "In the UK, the Serious Fraud Office previously communicated a similar view in its Corporate Co-operation Guidance. It may be difficult to meet this expectation in practice. Many companies have dozens, and sometimes hundreds, of whistleblowing reports, and they must progress investigations on an ongoing basis. It is not always apparent where an investigation may lead, and it is not practical to involve regulators in every investigation. A sensible balance needs to be struck. What is important is for companies to ensure they are able to filter out sufficiently serious matters that need more careful consideration on how to proceed. Expert advice may again be valuable."

James also said that regulators "obviously don’t want lawyers involved because this may mean that legal privilege can be claimed to protect the company. The interests of the company and regulator are obviously at odds”.

Seema Bono, also of Pinsent Masons and based in Dubai, said: "Best practice guidance on how to run an internal investigation will depend on the particular circumstances and issues being investigated. At times, employees have left the business and in that case interviews are less likely to take place at an early stage. In other situations, it can be helpful to speak to concerned individuals in order to shed light on documents and provide valuable context.”

“The DFSA’s guidance and views ought to be taken into account when planning and scoping out an investigation and external legal input can be very helpful in understanding how best to map out and conduct the investigation. The approach to privilege will need to be considered carefully, particularly where different jurisdictions are concerned. While companies we work with are keen to uncover any underlying issues, they will also need to be mindful of the impact on employees which could be unsettling and disruptive to ongoing business operations," she said.

James added: “Internal investigations remain a complex thing to manage and will undoubtedly be top of mind for many in-house counsel. Striking the right balance between being open and cooperative with regulators and protecting the interests of the company and its people will continue to be difficult. Having proper protocols in place to triage whistleblowing reports and risk rank them is important. It is also important to have protocols in place to determine when to consider self-reporting and what processes are followed before doing so.”