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Deutsche Bank the target of Dubai regulator's largest ever fine

Dubai's financial regulator has fined Deutsche Bank AED 30.8 million (US$8.4 million), the largest fine it has ever imposed.16 Apr 2015

The Dubai Financial Services Authority (DFSA) said in a statement that it fined the Dubai International Finance Centre branch of Deutsche Bank (DBDIFC) for "serious contraventions" including misleading the DFSA, failures in its internal governance, systems and controls, and failures in its client take-on and money-laundering procedures.

The DFSA's initial investigation into Deutsche Bank's activities was prompted by concerns about the way the bank had classified customers. Some customers had not been classified as 'clients', and therefore missed out on protection under the DFSA. 

"However, over the course of the investigation, it became clear there were wider failings," the DFSA said.

The investigation found that DBDIFC "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 regulator said.

Deutsche Bank staff also provided "false information" about the nature of activities undertaken by its wealth management business, and the DFSA found "material failings in DBDIFC's governance".

Ian Johnston, chief executive of the DFSA said: "The provision of false information to the DFSA is a serious matter. One of the pillars of the DIFC regulatory framework is that Authorised Persons must deal with the DFSA in an open and co-operative manner and must disclose appropriately any information of which the DFSA would reasonably be expected to be notified."  

The DFSA also expects firms to have systems in place to encourage compliance with its rules, and to identify any failings, Johnston said.

"The DFSA will take a robust stance where firms or individuals have breached these obligations. Had DBDIFC 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," he said.

The DFSA acknowledged that only a small number of individuals gave false information, but said better governance would have prevented this. The bank has now improved its procedures, the regulator said.

Deutsche Bank agreed to settle with the DFSA after the investigation, and the fine was therefore reduced by 20% from the original AED 38.6mn.

Editor's note 07/05/2015: The reference to US$8.4 billion has been corrected to US$8.4 million. We apologise for the error.