UNITED ARAB EMIRATES – DFSA sanctions CEBD Ltd and its former head of treasury
THE Dubai Financial Services Authority (DFSA) has accepted Enforceable Undertakings (EU) from Credit Europe Bank (Dubai) Ltd and its former head of treasury. This is the 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 DIFC.
Earlier last year, CEBD’s former head of treasury, Ozkhan Demirkaya, executed a loss- making foreign exchange transaction on behalf of CEBD, says DFSA’s report. “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 effect of the fake forward transaction was that it concealed the full extent of the unrealised loss arising from the earlier transaction in the accounts of CEBD.
In October last year, after determining that his earlier position was unlikely to recover, Dermikaya disclosed his misconduct and the loss to CEBD. The matter was eventually reported to the DFSA by the firm.
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. DFSA further found that CEBD failed to notify DFSA of Dermikaya’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 AED 183,500 (USD 50,000).
In accepting the EU, the DFSA acknowledges that CEBD co-operated fully with the DFSA’s investigation and has taken steps to improve its systems and controls.
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 AED 73,400 (USD 20,000); of which AED 55,000 (USD 15,000) has been suspended indefinitely subject to Demirkaya’s compliance with the EU. The suspended penalty reflects Demirkaya’s acknowledgement of the DFSA’s concerns and his full co-operation with the DFSA’s investigation.
Ian Johnston, chief executive of the DFSA says, “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.”
