DFSA sanctions Credit Europe Bank

The Dubai Financial Services Authority (DFSA) announced yesterday that it has accepted Enforceable Undertakings (EU) from Credit Europe Bank (Dubai) Limited (CEBD) and its former Head of Treasury. The undertakings result from a DFSA investigation into trading conducted by the former Head of Treasury on behalf of CEBD. CEBD is a firm authorised to conduct financial services in the Dubai International Financial Centre (DIFC). In May 2011, CEBD’s former Head of Treasury,Ozkan Demirkaya, executed a loss-making foreign exchange transaction on behalf of CEBD. To hide the unrealised loss resulting from that transaction, Demirkaya created a fake forward transaction and caused it to be entered into the accounts of CEBD. The forward transaction concealed the full extent of the unrealised loss arising from the earlier transaction in the accounts of CEBD. In October 2011, after determining that his earlier position was unlikely to recover, Demirkaya disclosed his misconduct and the loss to CEBD. The matter was later reported to the DFSA by CEBD. The DFSA’s investigation found that the fake forward transaction was not prevented or detected by CEBD because CEBD did not have appropriate systems and controls in place to effectively manage its trading functions and activities. The DFSA further found that CEBD failed to notify the DFSA of Mr Demirkaya’s misconduct within an appropriate time. As a consequence of the DFSA’s findings, CEBD has undertaken not to conduct proprietary trading activities until all of the internal control weaknesses identified by the DFSA have been addressed to the DFSA’s satisfaction, and to pay a financial penalty of Dh183,500. “In accepting the undertakings, the DFSA acknowledges that CEBD co-operated fully with the DFSA’s investigation and has taken steps to improve its systems and controls,” said in a statement. Demirkaya has undertaken to the DFSA not to perform any functions in or in connection with the provision of Financial Services or Ancillary Services in the DIFC for a period of three years. He has also undertaken to pay a financial penalty of Dh73,400; of which Dh55,000 has been suspended indefinitely subject to Demirkaya’s compliance with the EU. “The suspended penalty reflects Mr Demirkaya’s acknowledgement of the DFSA’s concerns and his full co-operation with the DFSA’s investigation,” DFSA statement said. “The action taken by the DFSA highlights the importance of firms having robust systems and controls in place to mitigate the risks associated with their activities. Importantly, when firms detect conduct that contravenes DFSA administered laws and rules then there is an obligation on them to promptly disclose that activity to the DFSA A failure to notify the DFSA is likely to result in regulatory action,” said Ian Johnston, Chief Executive of the DFSA. From : Gulfnews