The Dubai Financial Services Authority (DFSA) has surpassed its target of increasing site visits in 2009 as it finished the year with 135 on-site risk assessments, 40 per cent higher than the 97 visits it did in 2008.
DFSA Chief Executive Paul M Koster told Emirates Business in August last year that the regulatory body will be on a heightened alert mode and would aim at increasing their visits by 20 per cent.
The "vast majority" of inspections reflect satisfactory practices and condition, while matters of supervisory concern are generally minor and correctable in the ordinary course of business, said the DFSA annual report.
On-site activity includes a review of firm records, interviews with firm management and staff, and transaction testing. It reviews and assesses the overall level of risk, adequacy of capital, corporate governance, quality of executive management, internal audit controls, proper conduct of business and compliance with applicable laws and regulations.
Particular focus is placed on ensuring compliance with the rules and controls related to the prevention of money laundering and terrorist financing, it said.
"The DFSA conducted 135 full-scope and 72 special purpose on-site inspections in 2009," Koster said. "This high level of coverage, supplemented by off-site surveillance, provide a strong risk control framework. However, there is no room for complacency given the challenging operating environment."
The regulator has also commenced nine investigations - five of them are completed while the other four are ongoing.
This ranges from alleged misconduct including insider trading, market manipulation, breaches by directors of their duties to companies and shareholders, breaches of licence conditions, providing unlicensed financial services in the DIFC and providing false to misleading information to the DFSA.
One of its most recent investigations found that the Abdullah Brothers withdrew Dh365 million and about two kilograms of gold from Damas funds for their own personal use.
The founders were thus fined and banned from directorships with any company in the Dubai International Financial Centre.
The DFSA fined Dubai-based Damas, and its founders and majority shareholders, Tawhid, Tawfiq and Tamjid Abdullah, $3.72m (Dh13.66m) and ordered the brothers to repay Dh365m plus the value of about 1.9 million grams of gold after it found they had withdrawn Damas funds for their own personal use without disclosing it to the board.
Under the enforceable undertaking signed in March, all Damas directors - including Emaar's Mohamed Alabbar, Amwal AlKhalewj's Ammar Alkhudairy and Al Fahim Group's Aamer Abdul Jalil Al Fahim - were told to resign. The DFSA's action in respect of the GFS Investments investigation continued into 2009. The regulator initiated proceedings in the DIFC Courts to enforce compliance with a condition of an enforceable undertaking. Those proceedings are ongoing.
The DFSA has last year received and assessed 83 allegations of misconduct and responded to 28 misconduct referrals from the supervisory and markets divisions. Most referrals were resolved without enforcement action.
By Karen Remo-Listana
© Emirates Business 24/7 2010
