The Dubai Financial Services Authority (DFSA) recently imposed a fine of $370,000 on a private wealth and asset management bank in Dubai.
The fine was handed out as a result of the bank's inadequate systems and controls for identifying, assessing, and reporting trading activities exhibiting signs of market abuse.
The bank was scrutinized for its inability to report multiple instances of suspicious trading to the DFSA from 2018 to 2021. Despite identifying trading activities that exhibited characteristics of market abuse, the bank did not promptly report these incidents as required by regulatory guidelines.
The bank had outsourced the responsibility for monitoring and assessing client trading activities. However, the DFSA found that FFA had failed to effectively supervise these outsourced activities. This situation highlights that outsourcing compliance functions do not absolve the bank of its ultimate responsibility to ensure that the systems and controls being used are adequate and compliant with regulatory requirements.
It is important to note the bank cooperated fully with the DFSA's investigation and promptly rectified the identified weaknesses in its systems and controls. This cooperation reflects the bank's commitment to addressing its compliance deficiencies.
Speaking about the recent fine, the DFSA's Chief Executive, Ian Johnston, was clear to make the reminder that the firms themselves are responsible for ensuring that their processes are operating effectively. He said, “Steps must be taken to ensure processes are operating effectively as it is ultimately the Authorised Firm that will be accountable if things go wrong.”
In summary, this case underscores the significance of robust systems and controls in financial institutions for the detection and reporting of market abuse, the importance of cooperation during regulatory investigations, and the ultimate responsibility of authorized firms for ensuring compliance with regulatory obligations.
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