The Dubai Financial Services Authority, DFSA, has fined two individuals US$56,000 (AED205,520) each for failing to act with due skill, care and diligence, which caused an Authorised Firm to breach the DFSA’s Anti-Money Laundering, AML, Rules.
Raphael Lilla and Kapparath Muraleedharan were both Licensed Directors and members of the Board of Directors at a DFSA Authorised Firm.
In August 2014, Mr. Lilla and Mr. Muraleedharan instructed the firm’s Senior Executive Officer and the Compliance and Money Laundering Reporting Officer to open three accounts for clients which had been assessed as "high risk". Under the DFSA’s AML Rules, the firm was required to carry out Enhanced Customer Due Diligence on these clients before opening the accounts. However, Mr. Lilla and Mr. Muraleedharan dismissed the advice from the Senior Executive Officer and the Compliance and Money Laundering Reporting Officer that opening the accounts without the completion of Enhanced Customer Due Diligence would contravene the DFSA’s AML Rules. In their senior positions as Board members of the firm, Mr. Lilla and Mr. Muraleedharan told the staff to follow their instructions.
The DFSA’s investigation also found that the men received confirmation from external legal counsel shortly after the accounts were opened that the advice of the Senior Executive Officer and the Compliance and Money Laundering Reporting Officer was correct, that they were aware that opening the accounts in such circumstances did not comply with the firm’s account-opening policies, and they attempted to control the Senior Executive Officer and the Compliance and Money Laundering Reporting Officer from reporting the opening of two of the accounts to the DFSA.
Lilla and Muraleedharan accepted responsibility for their actions and agreed to settle the matter at an early stage following the conclusion of the investigation. The DFSA therefore reduced the fines by 20% under the DFSA's policy for early settlement. Were it not for discount for early settlement, Lilla and Muraleedharan would have each been fined US$70,000 (AED 256,900).
The DFSA decided not to take any action against the firm. After the accounts were opened, the firm promptly notified the DFSA and other relevant authorities in the UAE that the accounts had been opened and also took steps to prevent the accounts from being used to receive funds.
Ian Johnston, Chief Executive of the DFSA, said, "Mr. Lilla and Mr. Muraleedharan were given clear advice that opening the accounts without completing the required due diligence would contravene the DFSA’s Rules. They ignored this advice and caused the accounts to be opened, which put the firm in breach of its regulatory obligations. The DFSA considers their actions to be serious and expects a higher standard of behaviour from persons in such senior positions.
The DFSA also commends the Senior Executive Officer and the Compliance and Money Laundering Reporting Officer for taking action to mitigate the risks to which the firm was exposed, and for notifying the DFSA."