Dubai financial regulator has fined FFA Private Bank (FFA) $373,842 (Dhs1.4m) for having inadequate systems and controls to identify, assess and report trading, which exhibited suspicions of market abuse between February 2018 and March 2021.
The Dubai Financial Services Authority (DFSA) said the weaknesses in FFA’s systems and controls meant that the company failed to identify or properly assess a significant number of instances of suspicious trading.
“Authorised Firms are the first line of defence in protecting the integrity of financial markets,” said Ian Johnston, the chief executive of the DFSA.
“By failing to ensure that it had effective arrangements in place to identify instances of suspicious trading by its clients, FFA facilitated trading which had the characteristics of market abuse for a long time.”
DFSA said that based on the information available, the suspicious trading should have been reported to the regulator.
“This led to an unacceptable risk that FFA may have indirectly facilitated market abuse,” the Dubai regulator said in a statement.
DFSA identified instances of trading by two specific clients during the period under review. The trading activities had the characteristics of market abuse and should have resulted in a report being made to the regulator.
Though FFA’s systems flagged the majority of this trading as potentially suspicious, DFSA noted that the private bank’s approach to assessing such trading activity was flawed.
FFA provides services across private wealth management, online trading and capital markets from its Dubai base.
DFSA’s prohibition on FAA
The Dubai financial watchdog said the fine on FFA follows and is connected to, the prohibition that was imposed on the lender in May 2021, banning it from receiving, arranging or executing orders from or on behalf of specific clients.
The prohibition was lifted two months later after the bank demonstrated to the DFSA that it had addressed the weaknesses in its systems and controls, an action that concluded the regulator’s investigation into these failings.
However, the weaknesses in FFA’s systems and controls meant that the lender failed to identify or properly assess a significant number of instances of suspicious trading.
FFA outsourced responsibility for the monitoring and assessment of client trading, however, it failed to effectively supervise these activities. The regulator highlighted that the outsourcing of these activities did not absolve FFA of its responsibility for ensuring that the systems and controls being used were adequate and met regulatory obligations.
The Dubai regulator said the case serves as a reminder that firms cannot rely blindly on those to whom they delegate responsibility for the performance of key compliance activities.