DFSA Fines Swiss Bank Mirabaud USD3m for Anti-money Laundering Control Failure

 

Mirabaud (Middle East), a Swiss private bank, has been fined 3.02 million dollars by the Dubai Financial Services Authority, the regulatory body overseeing the Dubai International Financial Centre. The fine was imposed due to insufficient AML systems and controls in place from June 2018 to October 2021.

According to a statement released by the regulator on Tuesday, the fine imposed on Mirabaud (Middle East) includes disgorgement of 975,000 dollars. This sum represents the economic advantage that Mirabaud acquired through fees and commissions.

Disgorgement is considered as a remedy that requires a person who benefits from improper or illegal actions to forfeit any gains they obtained from those actions.

The DFSA stated that Mirabaud has agreed to resolve the issue, leading to a reduction in the fine from 3.9 million dollars.

“According to the chief executive of the DFSA, Ian Johnston, the DFSA is dedicated to advancing a strong framework for anti-money laundering controls among the firms under its regulation.”

“Mirabaud failed to acknowledge conspicuous signs of possible money laundering or apply suitable measures when it had concerns about customers’ actions because it did not guarantee the efficacy of its anti-money laundering systems and controls.”

“The severity of the fine imposed on Mirabaud underscores the importance of maintaining anti-money laundering compliance to uphold confidence in the credibility of DIFC.”

In recent years, the UAE has achieved significant progress in its endeavors to counteract terrorism financing, money laundering, and proliferation of weapons by implementing laws relating to anti money laundering in UAE . As part of its intensified campaign against money laundering and terrorism financing, UAE confiscated assets valued at over 4.73 billion dirhams (1.29 billion dollars) in the period from August 2021 to July 2022.

The country made an announcement on Sunday regarding its plans to establish dedicated federal prosecution offices to address a range of economic crimes, including money laundering. These offices will handle various offenses, such as bankruptcy, corporate crimes, financial markets, competition regulation, intellectual property (IP) and trademarks, and evasion of customs regulations.

According to the statement, the DFSA identified deficiencies in Mirabaud’s AML systems and controls that resulted in the processing of transactions for a group of nine interconnected client accounts, all managed by a sole relationship manager. This raised significant concerns and triggered several indicators associated with suspicions of money laundering.

According to the regulator, the behaviors displayed by the relevant customer accounts shared similarities with the typical attributes observed during the layering stage of a money-laundering process.

Some of the factors observed were the opening and operation of accounts by seemingly unrelated entities but controlled by a connected group of individuals, the depositing of funds from third-party accounts, and the execution of transactions that were unnecessarily intricate and did not align with the nature of the accounts or the available information regarding the customers.

The DFSA reported that substantial amounts of money were being transferred across borders to third-party entities with unclear ownership structures and bank accounts located in foreign jurisdictions. Additionally, the DFSA identified repetitive fund flows between interconnected entities.

“The DFSA did not come to a conclusion that any of the transactions constituted money laundering. Regardless, it exposed notable weaknesses in Mirabaud’s systems and controls, as well as key signs of potential money laundering that Mirabaud should have identified and taken action on,” stated the authority.

“Despite implementing AML procedures and policies, Mirabaud’s efforts proved to be ineffective.”

According to the watchdog, Mirabaud disregarded the information it possessed concerning the cluster of interconnected customers when handling their transactions. This included pertinent data obtained through the bank’s customer due diligence process. Consequently, the bank handled a substantial number of transactions for these customers, both in terms of value and quantity, spanning nearly three and a half years.

According to the DFSA, the transactions conducted by the customers were in violation of Mirabaud’s policies, as they involved prohibited purposes and deviated from the expected account activity. Furthermore, these transactions were inconsistent with the clients’ profiles and were supported by information that contradicted the existing data held by the bank. Mirabaud’s failure to detect and report suspicious transactions, including those stopped by its compliance department due to inadequate responses to inquiries, was a direct result of these vulnerabilities.

“When doubts were raised about the adequacy and accuracy of the customer due diligence information it possessed, Mirabaud was found to have neglected to re-evaluate the information regarding interconnected customers.”

As per the findings of the DFSA, the bank was unable to gather appropriate evidence regarding customers’ financial market experience, which was a crucial requirement for classifying them as professional clients. The regulator discovered instances where clients’ supposed experience in financial markets was solely determined by an unrecorded assessment conducted by the relationship manager who aimed to onboard the client.

“According to the DFSA, the repeated usage of similar explanations as to why customers were unable to present evidence of their experience raised doubts about the credibility of those explanations.”

“The relationship manager who was accountable for these customers has since departed Mirabaud, along with the individuals who held the positions of senior executive officer and chief compliance officer during the period when these shortcomings occurred.”