Dubai: A financial regulatory body has slapped a Dh30 million fine against a branch of an international bank at the Dubai International Financial Centre (DIFC) for serious violations.
The Dubai Financial Services Authority (DFSA) has fined the DIFC branch of German banking giant Deutsche Bank AG a total of $8,400,000, the biggest fine issued in years, for “serious contraventions.”
The bank has been found to have breached the DFSA rules regarding its private wealth management business.
“Those contraventions include misleading the DFSA, failures in [the bank’s] internal governance and systems and controls and in its client take-on and anti-money laundering processes,” DFSA said in a statement issued on Wednesday.
This is not the first regulatory issue faced by the largest lender in Germany.
The bank is also expected to pay a much larger fine worth $1.5 billion to regulators outside the UAE over allegations that it manipulated the London interbank offered rate, a global financial benchmark.
Its representatives have been in talks with regulators in the United States and United Kingdom regarding the case and a settlement is expected to come soon.
The regulatory authority in Dubai had earlier conducted an investigation into the bank’s activities from January 2011 to January 2014 based on information that Deutsche Bank failed to properly classify some of its customers as clients under DFSA rules, depriving them of certain protections.
Investigators later found that there were “wider failings” at the bank, prompting the authority to expand the scope of the inquiry.
“In particular, the DFSA uncovered [the bank] was aware that its Private Wealth Management business was operating in breach of DFSA requirements, but did not take adequate steps to address the issue,” the DFSA said.
“In addition, certain staff of [Deutsche bank] provided false information to the DFSA on several occasions about the nature and scope of activities undertaken by [its private wealth management business].”
“The DFSA also found material failings in [the bank’s] governance and has made directions to [the bank] to remediate the DFSA’s concerns.”
Ian Johnston, chief executive of DFSA, said that the provision of false information is a “serious matter.”
“One of the pillars of the DIFC regulatory framework is that authorized persons must deal with the DFSA in an open and cooperative 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. As demonstrated by the action against [the bank], the DFSA will take a robust stance where firms or individuals have breached these obligations.”
"Had [the bank] cooperated at an early stage of the investigation, the matter would have been resolved far sooner and at significantly less costs to both the DFSA and the firm. The fine imposed in this case reflects the seriousness with which the DFSA views these failings."
The regulatory body also noted that it was a small number of individuals in the firm who provided DFSA with false information. However, it believes that, "with better governance within the bank, this would have been identified and addressed earlier."
"Since January 2014, [the bank] has worked openly and cooperatively with the DFSA to remedy the failings. The bank has also made a number of changes to its operating model and improved its internal governance arrangements."
