DFSA unsure of ability to impose $314m fine on Abraaj firms

The Dubai Financial Services Authority believes the record fine will serve as a deterrent
DFSA unsure of ability to impose $314m fine on Abraaj firms
DFSA said it was aware that the imposition of the fine might negatively impact investors as they try to recover their funds from Abraaj entities.
By Bernd Debusmann Jr
Thu 01 Aug 2019 12:09 PM

The Dubai Financial Services Authority is unsure whether it will be able to enforce a record $314 million fine it imposed on two Abraaj Group companies for deceiving investors and the regulator.

Earlier this week, the DFSA said it had handed out fines of $299.3 million and $15.2 million on Abraaj Investment Management Limited (AIML) and Abraaj Capital Limited (ACLD), respectively, the largest imposed by the regulator.

According to a report in Arab News, however, the DFSA said it wasn’t sure about when or how the fines could actually be imposed on the entities.

“Abraaj Capital and Abraaj Investment Management (AIM) are still in provisional liquidation so the question of whether the DFSA will ever recover any of the fines imposed on them is not clear, for the time being,” a DFSA statement said.

The DFSA added that the fines are designed to help prevent future scandals similar to that of Abraaj.

“The purpose of imposing a fine is not only to punish the offenders but also to deter others by indicating the seriousness of the misconduct and the consequences if other commit similar wrongdoing,” the statement said.

Additionally, the DFSA said it was aware that the imposition of the fine might negatively impact investors as they try to recover their funds from Abraaj entities.

“The DFSA is conscious of its duty to protect the direct and indirect users of DIFC financial services, which includes investors in the Abraaj funds,” the DFSA said. “We would not take any action that conflicted with that duty.”

“We do not wish to dilute the interests of unsecured creditors in the liquidation of the companies, particularly the interests of the investors in Abraaj funds,” it added.

In a statement earlier this week, DFSA chief executive Bryan Stirewalt said that the size of the fines “reflects the seriousness 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 added. “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.”

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