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Regulator wins against Deutsche Bank in Dubai court

Chris Hamblin, Clearview Publishing, Editor, London, 19 February 2014

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Deutsche Bank has been keeping information away from the Dubai Financial Services Authority, and the courts do not like it. The DFSA has scored a victory in its assault on Swiss banking secrecy.

The courts of the Dubai International Financial Centre have declared that the local branch of Deutsche Bank AG broke the law in refusing to produce information and documents when the Dubai Financial Services Authority asked for them. DB chose to hold onto its information while claiming that it would be breaking the law in Switzerland if it were to tell the regulator about some of its Swiss clients. Deutsche Bank admitted that it was not complying in 120 Swiss-related cases. The DFSA is not commenting further, making this stage in the long-running regulatory dispute a temporary one, but represents a significant victory since it went to court on 31 October to retrieve information that it needed in its investigation in defiance of two investigative notices it had served on the branch.
 
Deutsche Bank AG has consented to the court orders and has agreed to hand over the specified information and documents to the DFSA within 28 days and to ensure that "any consolidated response is verified by a statement of truth." It has also agreed to pay the costs the DFSA incurred in the proceedings.

In December 2012 the DFSA, suspecting various rule-breaches, notified the bank that it was about to begin an investigation. It suspected infractions against the bank's regulatory duty to act with due skill, care and diligence (rule GEN 4.2.2); to ensure that its affairs are managed effectively and responsibly to ensure that it obeys the law (GEN 4.2.3); to deal with regulators openly and co-operatively (GEN 4.2.10). The authority also alleges that the firm has broken AML 3.1.1, which obliges it to evolve effective anti-money-laundering policies, procedures, systems and controls. It is also investigating the firm for breaking rule AML 3.4.1(1), which obliges it to establish and verify the identity of any customer; AML 3.4.2(2), by which it must establish and verify the identity of anyone on whose behalf the customer is acting, including that of the beneficial owner of the relevant funds; AML 3.4.11(1)(c), regarding introductions and ‘reliance’, which states that the introducing member of the authorised firm’s group has to state in writing that the customer’s identity has been verified in line with Financial Action Task Force standards with no omissions and that the authorised firm – and presumably any visiting regulator – is always able to look at the identifying documents ‘without delay’; and AML 3.7.1(2), which states that the firm must have regard to the relevant provisions of Appendices 1 and 2 when assessing the money-laundering risks before it.

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