UAE | General
Central Bank will punish UAE investment firms promising abnormal returns
The Central Bank on Tuesday reassured members of the Federal National Council (FNC) of its strong stance against illegal investment companies seeking to collect funds from the public.
- By Ahmed A. Elewa, Senior Reporter
- Published: 23:53 June 17, 2008
Abu Dhabi: The Central Bank on Tuesday reassured members of the Federal National Council (FNC) of its strong stance against illegal investment companies seeking to collect funds from the public.
The issue was raised by the member Mohammad Abdullah Al Zoabi, who posed a question to the government in relation to the recent cases where some investment companies lured the public to deposit funds in return of unjustified high returns that do not match with the normal course of economic activities.
"Any natural or legal person that collects funds from the public for investment and management without an appropriate licensing issued by the central bank is a federal crime punishable by law," Sultan Bin Nasser Al Suwaidi, governor of the central bank, told FNC's members in a memorandum.
"This usually occurs through tempting the public by unreasonably high monthly returns that does not conform to the prevailing rates yielded by normal financial activities," the governor explained.
The central bank provided the council with a list clarifying all the similar cases, whether ongoing or closed, dating back to 1997.
The recent episodes include the current controversial case against Abed Ramadan Abdullah Al Boum, in which the central bank failed to acquire permission from Dubai's public prosecutor to impose a ban on travel, and trace and freeze all the defendant's assets, as well as the members of his family, and the institutions and companies he owns.
Al Boum admitted on October 2, 2007 that he carried out activities related to receiving funds from the public in exchange for a monthly return of 7 per cent (84 per cent annually), and that this was in violation of the prevailing laws by exceeding the scope of his licence in Dubai, according to the memo.
The case was raised after the company failed to deliver the promised monthly returns to the investors. "Dubai's public prosecutor's letter dated October 29, 2007 stated that it was not possible to meet the central bank's demands on the grounds of absence of sufficient incriminating evidence," the memorandum revealed.
Accordingly, the concerned authorities in Dubai resorted to the establishment of a temporary committee headed by the representative of the emirate's General Department of National Security, including a representative from the central bank. The committee, so far, did not respond to the requests made by the central bank to public prosecutor.
Other cases outlined to the FNC include Ahmad Abdul Qadir Nadim Qablan, and United Investors for Property Management, where Abu Dhabi's public prosecutor ordered the tracing and freezing of all the related assets.
The central bank maintains that it has issued sufficient warnings, and that its pursuit against such companies goes bank to 1997.
"The central bank has issued several public announcements and bans circulars warning the public and the financial institutions of these practices," the memo stated.
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