Dubai's financial regulator said on Wednesay that it has fined the DIFC branch of Deutsche Bank $8.4 million for "serious contraventions".
The Dubai Financial Services Authority (DFSA) said the contraventions include misleading the DFSA, failures in its internal governance and systems and controls and in its client take-on and anti-money laundering processes.
The DFSA's action follows an investigation into Deutsche Bank which focused on its activities from January 2011 to January 2014, the DFSA said in a statement.
The DFSA said it was initially concerned that Deutsche Bank had failed to properly classify some of its customers as clients under DFSA rules and, therefore, deprived them of certain protections under the DFSA's regulatory regime.
However, over the course of the investigation, it became clear that there were wider failings at the bank, the regulator said, adding that it then broadened the scope of its investigation.
"The DFSA uncovered that Deutsche Bank was aware that its Private Wealth Management business (PWM) was operating in breach of DFSA requirements, but did not take adequate steps to address the issue. In addition, certain staff provided false information to the DFSA on several occasions about the nature and scope of activities undertaken by PWM," the statement said.
Ian Johnston, chief executive of the DFSA said: "The provision of false information to the DFSA is a serious matter. One of the pillars of the DIFC regulatory framework is that authorised persons must deal with the DFSA in an open and co-operative manner and must disclose appropriately any information of which the DFSA would reasonably be expected to be notified.
"The DFSA expects firms to have governance structures and systems and controls in place which encourage compliance with our rules and which promptly identify and remedy any regulatory failings... The fine imposed in this case reflects the seriousness with which the DFSA views these failings."
The DFSA acknowledged that it was a small number of individuals in the firm who provided false information to the DFSA but believes that, with better governance within the Bank, this would have been identified and addressed earlier.
It added that since January 2014, Deutsche Bank has worked openly and cooperatively with the DFSA to remedy the failings, with the bank making a number of changes to its operating model and improved its internal governance arrangements.
In response, Deutsche
Bank said it is pleased to have reached an agreement with DFSA and to have resolved the matter.
"We have reviewed and
subsequently upgraded our client on-boarding processes, and we are pleased the
DFSA has acknowledged that Deutsche Bank has taken steps to remedy the matters
described in the decision notice," said a company spokesperson.
Bank acknowledges the DFSA’s findings related to differences between the
on-boarding standards applied in Deutsche Bank’s booking locations outside of
the DIFC and the requirements in the
DIFC. Clients were on-boarded according to Deutsche Bank’s high standards
in its overseas booking locations but without also complying with certain local
regulations in the DIFC.
its Decision Notice, the DFSA said that Deutsche Bank has taken steps to remedy
the shortcomings. The DFSA also noted that its investigation did not find any
evidence of financial detriment to customers.
Bank is respectful of the DFSA’s role in regulating the DIFC and enforcing
compliance with the regulatory framework in the DIFC," the spokesperson added.
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