A Dubai regulator has fined two former directors of a Middle Eastern private bank $56,000 each for causing a breach of anti-money-laundering rules.
Raphael Lilla and Kapparath Muraleedharan were licensed directors and members of the board at Hinduja Bank (Middle East), a Dubai-based subsidiary of a Swiss private bank owned by Hinduja Group, the Indian conglomerate.
In August 2014, Lilla and Muraleedharan instructed the senior executive officer and an officer in charge of compliance at the Dubai-based firm to open three accounts for clients that had been assessed as “high risk”.
The clients were two individuals, and an associated company, belonging to a South American family, and a company ultimately owned by a member of an Asian family, according to the regulator’s decision notice.
Lilla and Muraleedharan were advised it would be a breach of anti-money-laundering rules to open the accounts without an enhanced due diligence procedure on the clients. Initial enquiries had found that persons and entities associated with the South American family had been accused of receiving proceeds of a Ponzi Scheme while the Asian family member was the subject of criminal charges.
The directors chose to ignore the advice, which was later confirmed by the firm’s external legal counsel.
“I am expecting from you cooperation, support and loyalty. If it is not possible, I will escalate to the appropriate level,” reads an email sent from Lilla to the senior executive officer on July 21, 2014.
After opening the accounts, the senior executive officer and compliance officer of the company blew the whistle to the chairman of the board in late August, after which the accounts were blocked and the breach was reported to the Dubai Financial Services Authority.
The authority, which regulates the Dubai International Financial Centre, reduced the fines for Lilla and Muraleedharan because the men accepted responsibility and agreed to settle the matter at an early stage. Both men resigned in August 2015.
The authority chose not to penalise the firm because it notified the authority soon after the breach.
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