Much like Saxo being 'censured' by the Dubai FSA for similar procedural deficiencies DFSA just announced that it settled a case with E*TRADE which agreed to pay a $300k fine. It's odd that both cases, though seemingly identical at first glance, have resulted in completely different fashion - one broker paid fine while another didn't. DFSA seems determined to establish itself as a serious regional regulator in the Middle East. One way to do this is by hiring high profile ex-European regulatory professionals, another is to make waves by fining high profile foreign brokers legally operating in the country. DFSA seems to do both amid what can only be described as a Wild East - there are plenty of foreign brokers operating in the region without any licensing or oversight.
Interesting to note that it is not the first time E*Trade is fined for Money Laundering proceedings - back in 2009 E*Trade units were fined $1 million for failing to have proper anti-money laundering procedures to detect suspicious trades by FINRA.
The Dubai Financial Services Authority (“DFSA”) announced, today, that it has accepted an Enforceable Undertaking (“EU”) from E*TRADE Securities Ltd (Dubai International Financial Centre Branch) (“E*TRADE”). The written undertaking follows a periodic risk assessment in 2010 conducted by the DFSA of E*TRADE, which identified a number of deficiencies in E*TRADE’s anti-money laundering (“AML”) systems and controls. E*TRADE acknowledges these deficiencies which include failing to:
- Obtain sufficient documentary evidence of its clients’ origin of funds and/or sources of wealth;
- Obtain, for some of its clients, sufficient documentary evidence of address or appropriately certified copy documents;
- Have adequate polices in place to ensure that documentation concerning a client’s identity remains accurate and up-to-date, resulting in E*TRADE’s failure to request and obtain updated Know Your Customer documents;
- Have policies, procedures, systems and controls to adequately address the need to assess the money laundering risk of its clients; and
- Ensure that its Compliance resources were sufficient given the nature and scale of its business activities.
In the EU, E*TRADE has agreed to pay a financial penalty of AED 1,101,870 (USD $300,000), with AED 734,580 (USD $200,000) payable within 30 days and the remaining amount of AED 367,000 (USD $100,000) being suspended subject to E*TRADE fulfilling a number of undertakings including:
- Submitting to a further risk assessment by the DFSA;
- Taking all necessary steps to remediate the DFSA’s concerns arising from the risk assessment; and
- Making arrangements to ensure it has appropriately skilled compliance resources to conduct and manage its affairs in accordance with the DFSA’s Laws and Rules.
Mr Paul M Koster, Chief Executive of the DFSA said, “This is a new era for financial services, and Firms must be more vigilant in meeting today’s requirements. The action taken against E*TRADE shows that the DFSA considers the anti-money laundering and Know Your Client systems and controls of Firms in the DIFC to be of fundamental importance in this new era. In taking this action, the DFSA recognises that E*TRADE has co-operated fully in the investigation.” Enforceable Undertaking: A copy of the EU between the DFSA and E*TRADE is posted on the DFSA website here.
