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DFSA: Two Abraaj Group firms face $315 million in fines for deceiving investors

These fines represent the largest financial penalties ever imposed by the DFSA.

The two companies in question are Abraaj Investment Management Limited (AIML) and Abraaj Capital Limited (ACLD) They face fines of $299,300,000 (AED 1,098,431,000) and $15,275,925 (AED 56,062,645) respectively Bryan Stirewalt, Chief Executive of the DFSA, said: "The size of these fines reflects the seriousness with which the DFSA views AIML’s and ACLD’s contraventions"

The embattled Abraaj Group today faces the largest fines ever imposed by the Dubai Financial Services Authority (DFSA).

In a press release published today, the regulator revealed that it will be reprimanding two Abraaj Group companies for financial misconduct. The two companies, Abraaj Investment Management Limited (AIML) and Abraaj Capital Limited (ACLD), face fines of $299,300,000 (AED 1,098,431,000) and $15,275,925 (AED 56,062,645) respectively. 

The DFSA investigation, which commenced in January 2018, was complex and spanned multiple jurisdictions, and found that AIML, a Cayman Islands company now in provisional liquidation:

• carried out unauthorised financial services, including fund management, within and from the DIFC;

• actively misled and deceived investors in Abraaj funds over an extended period;

• misused investors’ monies in various funds to meet its own operating and other expenses, which included payments to entities connected to some members of AIML staff, and to meet ever-increasing cash shortfalls; and

• concealed this by providing misleading financial information to investors and making false statements about the use of money drawn down from investors and distributions.

With regard to ACLD, a DIFC company also in provisional liquidation, the DFSA investigation found that it:

• failed to maintain adequate capital resources;

• deceived the DFSA about its compliance with various rules, including capital adequacy requirements; and

• was knowingly concerned in AIML’s unauthorised financial services activities.

"Internal correspondence showed that Abraaj group’s compliance function raised concerns about the group carrying on unauthorised financial services within the DIFC as early as 2009, but ACLD’s senior management ignored this," the DFSA said. "The DFSA has taken this action to penalise ACLD and AIML, deter others and protect investors. Before taking any further action to enforce payment of the fines, the DFSA will consider the firms’ circumstances at that time and the corresponding implications of enforcing the fines for fund investors."

Bryan Stirewalt, Chief Executive of the DFSA, said: "The size of these fines reflects the seriousness with which the DFSA views AIML’s and ACLD’s contraventions. Senior management rode roughshod over their compliance function and the misconduct and deceit were pervasive and persistent. We will pursue the persons or entities who perpetrated this activity, including those who allowed this to happen through major corporate governance breaches, to the full extent of our powers.”

Chris Skipper, Partner, Winston & Strawn Middle East, commented: “DFSA’s decision to impose fines on entities that have violated the fundamental principles of financial integrity and compliance reinforces DFSA’s and the wider Dubai Government’s commitment to strengthen investor confidence by protecting their interests through a sound, transparent and secure regulatory environment. This approach is clearly reflective of the maturing financial environment in Dubai and the UAE, positioning Dubai on par with other leading financial and investment hubs such as the Cayman Islands and Channel Islands. Protecting the interests of investors is of paramount importance to securing their confidence and attracting foreign direct investment (FDI) to Dubai. DFSA’s due diligence highlights that Dubai has zero tolerance to financial malpractice and that the Emirate is committed to upholding the highest standards of corporate governance and transparency – an essential step in Dubai’s evolution as a global financial destination.”

"Abraaj, which once managed about $14 billion, was forced into liquidation last year after being accused of mismanaging investor funds," Bloomberg explains. "Abraaj backers included the Bill & Melinda Gates Foundation and the World Bank’s International Finance Corp. Its investments included stakes in health care, clean energy, lending and real estate across Africa, Asia, Latin America and Turkey."