DFSA AND DIFC LATEST DEVELOPMENTS

The Dubai Financial Services Authority (DFSA) has issued a “Dear SEO Letter” which introduces the DFSA’s new e-Portal. This portal will host electronic forms and regulatory submissions to the DFSA. To start with, only the Annual AML Return will be accessible through this platform. The login details for the firm’s Electronic Prudential Reporting System (EPRS), should be used to gain access to the DFSA e-Portal. Those who do not use EPRS should have by now been issued usernames and password to access the e-Portal. 
Key features of the revised format of the Annual AML Return include, “its dynamic nature that recognises the type of Relevant Person completing the Form.” It should be noted that this is the first regulatory submission that will be on the DFSA e-Portal, therefore the DFSA will be requesting feedback and comments towards the end of the year, to further enhance the process.
Firms are reminded that the deadline for submission of the AML return is 30th September 2017.

Firms within the financial services community have been asked to stay alert to scammers who have been found using false DFSA documents to extort money from firms with references to ‘Notices for Tax Clearance’, documents to pay ‘Income Tax’ fees, the ‘Dubai Tax Authority’, as well as promising consumers access to ‘inherited funds’. The scammers claim that only on receipt of payment can firms access their funds. Please be advised that the DFSA does not register or release any contract award funds, does not collect Income Tax, or issue ‘Tax Receipts’, and that the ‘Dubai Tax Authority’ does not exist. The DFSA has stated that all firms and the public should stay alert to these scams.

Between July 2012 and April 2013, Chetan Parmar - a former employee of Deutsche Bank AG’s Dubai International Financial Centre (DIFC) branch - knowingly provided the DFSA with false information regarding the Firm’s wealth management activities. Consequently, Mr Parmar has been fined USD 25,000 (AED 91,750) for his gross misconduct.

Further information
If you would like to discuss these updates in more detail, please contact 
Clare Curtis (CCurtis@cclcompliance.com)

 

ADGM AND FSRA LATEST DEVELOPMENTS

The Abu Dhabi Global Market (ADGM) has recently partnered with PricewaterhouseCoopers (PwC) to create a hub to stimulate growth and innovation. While the initiative will focus on the growth of the ADGM as a central hub in the Middle East, there is also a specific focus on FinTech advances to combat financial crime. PwC UK has recently joined with Feature Space, a behavioural analytics risk prevention company, to provide client organisations with advanced technology to combat real-time financial crime attacks. PwC is hoping to use the new partnership with the ADGM to protect UAE clients from financial crimes and help combat criminals by understanding individual behaviours in real time.

The Capital Markets Authority (CMA) of Kenya the ADGM and the International Financial Centre in Abu Dhabi have signed an agreement which intends to facilitate financial innovation in Kenya and Abu Dhabi. A primary objective is to provide a framework that enables the sharing of information between both Kenya and Abu Dhabi. Another main objective is to support innovative FinTech businesses in understanding the regulatory regimes in both jurisdictions. Following the ADGM’s previous collaborations with the Monetary Authority of Singapore, the Australian Securities and Investments Commission and the Authority of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (Qianhai Authority), this is the fourth agreement with a global FinTech hub.

Further information
If you would like to discuss these updates in more detail, please contact
Clare Curtis (CCurtis@cclcompliance.com)

MIDDLE EAST REGULATORY UPDATES

The Central Bank of Bahrain (CBB) has released guidelines for its regulations on crowdfunding businesses. These guidelines are for commercial and Shari’a compliant financing-based businesses which will allow the financing for small and medium sized enterprises (SMEs) in the country.

  • The main regulations for businesses to crowdfund are as follows:
  • Minimum capital requirement for crowdfunding platform operators is BD 50,000.
  • Only Person to Business (P2B) lending/financing is permitted.
  • Small and medium sized businesses with paid up capital not exceeding BD 250,000 can raise funds through crowdfunding platforms.
  • These SMEs may be based in Bahrain or outside; however, in case of foreign SMEs the platform operators have to clearly mention the cross-border and jurisdictional risk financiers have to take.
  • Crowdfunding platform operators have to comply with the CBB rules on Anti-Money Laundering, Combating Financing of Terrorism (AML/CFT), consumer protection, etc.
  • Retail investors are not permitted to participate given the high-risk nature.
  • A borrower/fundraiser can raise a maximum of BD 100,000 through crowdfunding in a year; the financing tenor should not exceed 5 years.

The CBB’s Executive Director, Khalid Hamas emphasised the current high demand in Bahrain for Shari’s compliant financing and the expectation that crowdfunding would experience similar demand.

Further information
If you would like to discuss these updates in more detail, please contact:
Clare Curtis (CCurtis@cclcompliance.com)

INTERNATIONAL DEVELOPMENTS

European Securities and Markets Authority (ESMA) has issued an update on its Markets in Financial Instruments Directive (MiFID II) guidelines on Transaction Reporting, Order Record Keeping and Clock Synchronisation under MiFID II. Originally there were factual mistakes, typos and inconsistencies within the technical part of the Guidelines. Areas changed include hyperlinks, references to the Commission Delegated Regulation (EU), there have also been wording changes throughout the new document. ESMA has provided a full tracked changes update on their website.

Further information
If you would like to discuss these updates in more detail, please contact:
Nigel Pasea (NPasea@cclcompliance.com)

ENFORCEMENT ACTION

KPMG and PwC have both received multi-million-pound fines for auditing failures in the USA. KPMG issued an unqualified audit of oil and gas company Miller Energy Resources in 2011, even though the company had overvalued various assets bought in Alaska by 100 times their real worth. The facts presented to auditors ‘should have raised serious doubt.’ As a result, the Securities Exchange and Commission (SEC) has fined KPMG more than $6.4 million.

PwC has been hit with a £5.1 million fine and ‘severely reprimanded’ by the Financial Reporting Council; they have admitted misconduct when auditing professional services company RSM Tenon Group in 2011.

Soceiete Generale’s former Global Head of Treasury Danielle Sindzingre and Muriel Bescond, the former Head of Treasury in Paris have been accused of taking part in a scheme that manipulated the global US dollar Libor benchmark interest rate. The U.S authorities have filed an indictment in a federal court. Sindzingre and Bescond intended to shore up the bank’s reputation after receiving information that analysts were drawing attention to Societe Generale’s high interest rates. The alleged scheme however affected millions of transactions and caused over $170 million in damage to the financial market across the world. The charges by prosecuters for Sindzingre and Bescond are conspiracy and transmitting false reports. Societe Generale is cooperating fully with investigating authorities and it is understood that Sindzingre and Bescond will be extradited to the US.

The Commonwealth Bank of Australia is being accused of breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act. Following an investigation, the financial intelligence agency, Australian Transaction Reports and Analysis Centre (AUSTRAC) concluded, that the bank failed to spot 53,700 money laundering and counter-terrorism financing breaches. Therefore, the financial intelligence agency has filed a suit suing the bank. Specifically, the case related to ATM machines launched in 2012 that allowed customers to anonymously deposit and transfer cash, even when the banks were closed. Commonwealth Bank is accused of failing to flag up to $77m worth of suspicious transactions to AUSTRAC and even when it became aware its machines were being used for suspected money laundering, the bank allegedly failed to take steps to ‘mitigate and manage’ the risk. The regulator will take the case to the federal court, seeking a civil penalty.

Further information
If you would like a more detailed discussion on these or other enforcement actions, please contact:
Clare Curtis (CCurtis@cclcompliance.com)

FINANCIAL CRIME UPDATES

The former Honduras investment minister, Yankel Rosenthal has pleaded guilty to involvement in a money-laundering deal for known drug traffickers which was part of a corruption scandal that came to light two years ago in Honduras. Rosenthal tried to help a friend buy real estate in Florida, USA while knowing that the friend was involved in providing services to drug trafficking. Funds gained from illicit sources were used to try and purchase real estate, were also used as political donations in Honduras, as well as being used as investment in a professional football team. Other charges, including bribery, mean the Honduras national faces ten years in prison. Rosenthal will be sentenced in New York on 13th October 2017.

The Securities and Exchange Commission (SEC) charged seven individuals with insider trading in what is viewed as a wide-ranging scheme that generated millions in profits by trading on confidential information about dozens of impending mergers and acquisitions. The SEC says that Daniel Rivas, a former IT employee of a large bank, allegedly misused his access to his former employer’s computer system to tip four individuals who then traded on confidential information about upcoming transactions, as well as others who also traded and passed along the tips. The traders profited on market-moving news related to thirty impending corporate deals from October 2014 to April 2017. The SEC’s investigation is continuing and the U.S. Attorney’s Office for the Southern District of New York also filed criminal charges against the same individuals.

Further information
If you would like a more detailed discussion on these or other enforcement actions, please contact:
Clare Curtis (CCurtis@cclcompliance.com)

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