DFSA Latest Developments


  • DFSA Response to Public Comments on CP 97 – ‘Proposed Changes to the Client Classification Regime’
  • New Client Classification Regime
  • Regulatory Policy and Process Module February 2015 Edition
  • DFSA Outreach Session – 23rd February 2015
  • A Guide to the DIFC’s Fund Regime
DFSA Response to Public Comments on CP 97 – ‘Proposed Changes to the Client Classification Regime’

The DFSA has responded to the public comments made by 22 commentators including CCL and the Compliance Officers Networking Group. The key changes to the rules, driven by the concerns raised by the respondents are outlined below:

  • Allowing “deemed” Professional Clients the right to opt-in as Retail Clients, consistent with the EU regime.
  • Provided clarity to Large Undertakings by including definitions of the terms ‘balance sheet’, ‘own funds’ and ‘called up capital’.
  • Allowing a look-through entity to be eligible as a Professional Client if it can meet the “deemed” Professional Client criteria, thus removing the concerning restriction of it being the case only if an “assessed” Professional Client criteria is met.

A stand-alone definition was incorporated into the new regime to define exactly who would be ascertained as a Family member for Family Member joint accounts purposes.
The dual procedure for some “deemed” Professional Clients to be classified as Market Counterparties has been simplified, following concerns over the need of written confirmation by Clients. In all cases, for a “deemed” Professional Client to be classified as a Market Counterparty, a Firm is required to give written notification of intention, specify the Client’s right to object and allow the Firm to classify the Client as a Market Counterparty in the absence of any objection.
The DFSA have provided Guidance information about the type of arrangements which would be considered as a bundle of financial services, following concerns over uncertainty as to what would constitute a ‘bundle’.
A section on transitional arrangements has been added to remove any uncertainty on the position of Firms with existing client classifications, Client Agreements and Transactions.

New Client Classification Regime

Following the end of the consultation period for Consultation Paper No. 97, the DFSA Board, after due consideration of consultees' comments have made amendments to the DFSA Rulebook.

Chapter 2 of the COB Rulebook provides the changes to the Client Classification Regime and will be in force from 1st April 2015. Although most of the changes to the new rules were similar to what was proposed in CP97, there were slight changes in response to the comments made during the consultation period.
The new rules incorporate a great deal of guidance, in comparison with the old COB rules, which will help Firms to interpret the rule requirements with greater certainty. The new rules include Overview Guidance outlining the basis behind the risk-based approach that the DFSA has used in defining these rules, and therefore serve as a useful benchmark when applying these rules to your client classification judgments.

The key changes to the Client Classification rules in COB are as follows:

Types of Clients
There continue to be three types of Client, although these rules identify three sub-categories of professional Clients. The new rules state that firms should consider whether it is appropriate to classify their clients differently for different financial services, with additional guidance in place to outline in which circumstances this rule could impact on Firms and their Clients. The guidance also iterates the DFSA’s expectations of Firms to operate within the spirit of the rules, and not to cut corners where the opportunity arises. The purposes of the rules are to afford Clients adequate protection when dealing with Firms.

Professional Clients
The revised rules provide for three sub-categories of Professional Client – deemed, service-based, and assessed, as outlined in CP97.

“Deemed” Professional Clients do not need to be assessed using the net asset and experience tests, though the DFSA expects Firms to be able to evidence their rationale for applying the “deemed” Professional category to a Client. This can be done by obtaining constitutional documents or financial statements to back the basis of classification, which will also be obtained via the CDD process.

“Deemed” Professional Clients meet any of the following criteria:

  • a supranational organisation whose members are either countries, central banks or national monetary authorities;
  • a properly constituted government, government agency, central bank or other national monetary authority of any country or jurisdiction;
  • a public authority or state investment body;
  • an Authorised Market Institution, Regulated Exchange or regulated clearing house;
  • an Authorised Firm, a Regulated Financial Institution or the management company of a regulated pension fund;
  • a Collective Investment Fund or a regulated pension fund;
  • a Large Undertaking, which must meet at least two of the following criteria:
    o it has a balance sheet of at least $20 million;
    o it has a net annual turnover of at least $40 million; or
    o it has own funds or called up capital of at least $2 million.
  • a Body Corporate whose shares are listed or admitted to trading on any exchange of an IOSCO member country;
  • any other institutional investor whose main activity is to invest in financial instruments, including an entity dedicated to the securitisation of assets or other financial transactions;
  • a trustee of a trust which has, or had during the previous 12 months, assets of at least $10 million; or
  • a holder of a licence under the Single Family Office Regulations with respect to its activities carried on exclusively for the purposes of, and only in so far as it is, carrying out its duties as a Single Family Office.

“Service-based” Professional Clients are defined as Persons that require the following financial services:

  • an Undertaking that requires the provision of credit for business purposes; or
  • a Person that requires Arranging or Advising services in relation to corporate structuring and financing.
  • In order for the Person to be classified as a “Service-based” Professional Client, the advice must relate to “an acquisition, disposal, structuring, restructuring, financing or refinancing of a corporation of other legal entity”, and for Arranging Credit for the aforementioned activities. Hence, pure Corporate Finance services.

“Assessed” Professional Clients that are Individuals must meet the following assessment requirements:

  • net assets of an individual being at least $1 million (although, remains at the current $500,000 until 1st April 2016, to allow a reasonable transition period for Firms); and
  • persons must demonstrate sufficient expertise, either by virtue of their employment in the previous 2 years in a professional position in an Authorised Firm or Regulated Financial Institution; or
  • demonstrates sufficient experience and understanding of the relevant financial markets and transactions.

If an “Assessed” Professional Client’s assets are held in a joint account, the Firm can only rely on the primary account holder’s sophistication, where the secondary account holder(s) are:

  • family members;
  • the account is used for managing investments for the joint account holders; and
  • there is a written declaration that states investment decisions are made on behalf of the account by the primary account holder.

A ‘family member’ of the primary account holder, in a joint account is explicitly described as being the spouse, children and step-children, parents and step-parents, brothers and sisters, step-brothers and step-sisters and the spouse of any of the above types of family members.

“Assessed” Professional Clients that are Undertakings are defined by:

  • the Undertaking having own funds or called up capital of at least $1 million; and
  • appear to have sufficient experience of relevant financial services and associated risks.

An Undertaking could be classified as a Professional Client if it has a:

  • Controller,
  • Holding Company,
  • Subsidiary, or
  • a joint venture partner,
    that meets the requirements of an “assessed” Professional Clients, as an Individual or an Undertaking, respectively, or if it would constitute being defined as a “‘deemed” Professional Client.

Assessment of Net Assets: Although the rules around assessing net assets have not changed, there are more detailed guidelines for this assessment. Clarity is given on how to treat mortgaged properties, and what counts as a primary residence, particularly for expatriates.

Market Counterparties

A “deemed” Professional Client or an “assessed” Professional Client, wholly owned by a Holding Company, can be classified as a Market Counterparty.
In order for Persons to be classified as Market Counterparties, they must be given prior written notification of the Market Counterparty classification and avoid requesting to be classified as anything else within the notice period.

Group Clients
If an Authorised Firm is a Branch or a member of a Group, the Firm can rely on the client classification made by the head office, any other branch of the same legal entity or a member of the Group, if there are reasonable grounds to believe that the client classification made is substantially similar to that which is required by the DFSA.

If there are identified gaps between the requirements imposed on the other entity and the requirements applicable to the Authorised Firm, then a gap analysis must be produced to effectively address those identified gaps.

When an Authorised Firm is providing a Client with one or more Financial Services as part of a ‘bundle’ of services provided to by the wider Group, the Authorised Firm can adopt the Group’s client classification standards, if they are compliant with the DFSA requirements. To do this, the Client must have a clear understanding of the financial services provided by the Authorised Firm in conjunction with the services provided by other members of the Group, and the risks must be clearly identified and addressed.

Where an Authorised Firm relies on classifications made elsewhere within the Group, the DFSA must have unrestricted access to all the records that demonstrate compliance with the applicable rules. This includes any records maintained by its head office, any other branch, or a member of its Group. If the Authorised Firm is no longer able to provide unrestricted access to records, it must notify the DFSA immediately.

If the Authorised Firm is aware of any restrictions that prevent it from being able to produce relevant records relating to a Client Classification made by its head office, any other branch of the same legal entity, or a member of its Group, then the Firm would need to undertake its own Client Classifications.

Transition Rules
An Authorised Firm may continue treating a Person as a Retail Client, Professional Client or Market Counterparty without having to re-classify the Person, if that Person was a Client for a specific Financial Service prior to 1st April 2015, and will continue to remain in force after 1st April 2015.

A grandfathered Client would need to be reclassified if such circumstances arise:
o if the grandfathered Client subsequently requests to opt-in as a Retail Client;
o if the grandfathered Client wishes to obtain a new Financial Service after the enforcement of
the new regime (1st April 2015); and
o if the grandfathered Client no longer fulfils Professional Client requirements, the Firm must
inform the Client and notify them on the measures available, to the Firm and to the Client.

The Net Asset threshold of $1 million for an “assessed” Professional Client will only apply after 1st April 2016.

The $500,000 threshold will apply on and before 31st March 2016 and will continue to apply after 1st April 2016, as long as it is for the same Financial Services that has been carried on with or for the Client before that date, and that the firm continues to ensure that all other applicable requirements under Chapter 2 of COB are being met by the Client.

Regulatory Policy and Process Module February 2015 Edition

The Chief Executive of the DFSA issued the "February 2015 Edition" of the Regulatory Policy and Process ("RPP") Module of the DFSA Sourcebook replacing Chapters 2, 3, 8 and 9 of the "November 2014 Edition" which is consequently no longer in effect.

The RPP Module provides an understanding on how the DFSA functions and operates and their expectations from the regulated community.

Chapter 2
The DFSA has hardened its stance on Resources, Systems and Controls. The previous use of the word “may” has now changed to “the DFSA will have regard to whether an Authorised Person has sufficient resources”. This includes resources such as financial, human, operational, and control systems.

Chapter 3
The RPP now outlines the DFSA’s risk-based approach to supervision, and describes what this involves, including the risk management cycle, need for relationship management, the notification regime, the use of supervisory tools, and consideration to consolidated supervision by other competent authorities.

The RPP makes it clear that the DFSA is not embodying a zero-failure regime, but rather more concerned with Firm behaviours that could impact on its own financial soundness, customer and market wellbeing. This approach is designed to reduce the probability of excessive risk taking or inappropriate conduct amongst Firms.

The DFSA have expanded on the Risk Management cycle from the previous RPP, which starts with a macro-prudential view of the DIFC as a whole, followed by using quarterly data produced by Firms providing the DFSA with an overview of regulated entities and the aggregate financial position. This data is used to set regularity of risk assessments for Firms and to drive thematic reviews across products, services or practices.

The Regulator’s impact and probability rating methodology is set out in the RPP. These two measures drive the overall risk rating for each Firm. For the impact rating, factors such as the amount of firm revenue generated by activity from the DIFC, the number of employees, the potential scale of damage to the firm’s customers based on the firm’s level of activity, whether the firm holds deposits or any client money, contagion risk and reputational damage to the DFSA, are considered. The probability rating has not changed, and continues to be based on Governance and strategy, financial and operational risk, conduct risk and AML risk. A Relationship Manager will be only be assigned to a firm with a higher level of risk resulting from the assessment of impact and probability risk, and firms with a lower level of risk will be supervised by a Thematic Supervision Team (TST). The difference between having a dedicated Relationship Manager and being supervised by a TST is the review cycle and the type of surveillance review conducted, TST reviews being conducted on an ad-hoc sample basis.

Chapter 8
This newly added chapter to the RPP describes how the DFSA protects, uses and discloses confidential information received through its role as a regulator. The DFSA adheres to international best practice standards set by organisations such as the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the International Organisation of Securities Commissions, the Financial Action Task Force and the Islamic Financial Services Board.

The DFSA must have in place internal procedures that monitor and manage the flow of information obtained during their regulatory activities to prevent a breach of any Confidentiality laws. Furthermore, there are statutory limitations on the way the DFSA uses and deals with such information, which is necessary to protect individual privacy and to assure that confidential information in the hands of the DFSA is dealt with in confidence and solely for lawful purposes.

Chapter 8 outlines the circumstances where and how the DFSA may disclose confidential information to local bodies or to other authorities and jurisdictions if the disclosure is for the purpose of assisting such persons in the performance of their regulatory functions.

Chapter 9
This new chapter covers the DFSA’s approach to handling applications for waivers and modifications from one or more Rules of the DFSA Rulebook or Articles of the Markets Law 2012. The RPP outlines the two key criteria by which the DSFA assess a waiver or modification request: Is there net regulatory benefit; and is the regulatory detriment minimal, and does the requested waiver conflict with the intent of the rule?

Unless the applicant makes it clear in its application, the DFSA is required to publish all notices concerning waivers and modifications on the DFSA website. This is to promote transparency for the applicants’ clients and competitors. It is the responsibility of the Firm to notify the DFSA two weeks in advance of the expiry on the notice of relief in order for it to be extended.

DFSA Outreach Session – 23rd February 2015

The session was hosted by the Policy and Legal Services Division of the DFSA and addressed the following:

  • the revamp of the client classification regime
  • changes to the DFSA decision-making process
  • a general policy update

The revamp of the client classification regime
Ms. Dhammika Amukotuwa, Director – Policy, opened the session by explaining the reasons behind the recent amendments to legislation in relation to client classification. The changes were driven by the evolution of firms business practices, client needs and objectives, the requirement for flexibility, certainty and clarity as well as alignment with the UK/EU while still catering to DIFC specific factors and international standards.

The key proposals of Consultation Paper No. 97 (“CP 97”) remain intact. However, following a review of the feedback received, the DFSA have fine-tuned aspects of the new regulation, some of which include the following:

  • Even deemed professionals can opt in to Retail, which is consistent with MiFID
  • Large Undertaking is now defined as per international standards
  • Net assets test for Assessed Professional Clients increases to $1m from 1st April 2016
  • All categories of Market Counterparties require only one way notification
  • Additional guidance given on bundled services offered by a Group

The definition of family member has been further clarified
Ms. Amukotuwa went on to explain the transitional arrangements and clarified that the introduction of the new client classification regime does not trigger the need to reclassify existing Clients. However, with regard to an existing Client who has been grandfathered, the need for a re-classification may subsequently arise in a number of circumstances such as those set out in the guidance of COB 2.6.

The DFSA encourage firms to undertake a comparison of the old and new client classification regimes in order to ensure smooth and complete transition. Practical considerations should also be carefully considered before the drafting and implementation of new internal policies.
Some questions were later asked by members of the audience and the DFSA provided some useful responses as follows:

  • When assessing the net assets of an individual, family assets should not be considered. The net asset test should be applied only to the individual client and no other person.
  • When notifying a client of their categorisation, there is not a need to define and explain the sub-category classification. A broad classification of either Retail, Professional or Market Counterparty can be communicated.

DFSA has since published a feedback statement on its website of the key themes arising from the public comments on CP97.

Changes to the DFSA decision-making process
James Lake, Associate Director - Legal, discussed the recent changes relating to the DFSA’s decision making process. The new decision making processes can be found in Chapter 7 of the Regulatory Policy and Process (“RPP”) Sourcebook which was updated as of February 2015.
The decision making process was designed to protect the rights, interests and legitimate expectations of persons subject to DFSA decisions and to ensure timely, consistent decisions are made, using simple, proportionate & fair procedures.

Chapter 7 of the RPP now outlines who can exercise a DFSA power, the key elements of the process and the principles of procedural fairness which includes:

  • Acting without bias or conflict
  • Giving the person an opportunity to present their case
  • Taking into account only relevant considerations

When exercising its powers, the decisions which are made by the DFSA fall into three categories:

(a) decisions which are subject to the procedures in Schedule 3 of the Regulatory Law (“Schedule 3 Decisions”) e.g. a decision to withdraw the Licence of an Authorised Person;

(b) decisions which are subject to a bespoke process instead of the procedures in Schedule 3 (“Bespoke Decisions”) e.g. the rejection of new Controller of an Authorised Firm; and

(c) routine operational decisions (“Operational Decisions”) e.g. a DFSA decision to start an investigation against a Person. These decisions are not subject to the procedures in Schedule 3 and are not referable to the Financial Markets Tribunal (“FMT”), but may be reviewed by way of judicial review in the Court.

As Schedule 3 Decisions can have a significant adverse impact on an affected person, the mandatory procedures set out in Schedule 3 are designed to provide procedural fairness.

Examples of Schedule 3 Decisions include:

  • Refusal to grant a Licence
  • Impose a prohibition or restriction on a firm’s business
  • Impose a financial penalty
  • Direct an AMI to suspend securities

The Decision Making Committee (“DMC”) is a committee whose members are DFSA officers who act under powers delegated by the DFSA Chief Executive. The DMC may be constituted with one member sitting alone or with three sitting together to consider the relevant matter.

The DMC is often the decision maker for Schedule 3 Decisions. However, on occasion, for Schedule 3 Decisions which are not ordinarily made by the DMC, the DFSA officer acting as a decision maker may refer the decision to the DMC to be made where he considers it appropriate, for example, where he feels that the matter deserves a greater degree of independence and objectivity (taking into account factors such as impact and complexity).

The procedures are designed to ensure procedural fairness by giving, advance notice of the DFSA’s proposed decision, a suitable opportunity to make representations relating to the proposed decision, the DFSA’s final decision (referred to as the Decision Notice) and the reasons for that decision and notice of the affected person’s right to have the DFSA decision reviewed by the FMT and the period within which that right can be exercised.

With regards to settlements, the DFSA has provided guidance in 5-15 of the RPP Sourcebook. Settlement is possible at any stage of the enforcement process. The DFSA recognises the benefit of early settlement and it can result in a reduction in financial penalty and a disapplication of any “disgorgement”.
The DFSA’s policy around making decisions publically available is set out in RPP Sourcebook 5-17. The DFSA will generally publish outcomes relating to enforcement actions and decisions made by the DMC. This approach is consistent with DFSA’s objectives and commitment to open and transparent processes.

General policy update
Peter Smith, Head of Policy, was the final speaker at the Outreach session and began by reminding firms that the recent amendments to legislation in relation to Code of Market Conduct and Liquidity Coverage and Leverage Ratios were effective as of 1st January 2015. Mr. Smith then gave some insight into what we can expect to see coming out of the DFSA throughout 2015/2016. The forthcoming focus from the DFSA will be as follows:

  • Further enhancements to the DIFC/DFSA funds regime
  • Improving the DFSA’s rules for insurance related activities
  • Exploring issues arising from:
    o The difficulties experienced by ES Bankers (The DFSA called for the winding-up of the local unit
    of the troubled Portuguese bank Espirito Santo after its manager attested that it was unable to
    continue as a going concern).
    o The Al Khorafi vs. Sarasin case (This case focused mainly around the perimeters of providing a
    financial service from within the DIFC as well considerations towards treating customers fairly and
    the application of suitability processes.)

Looking at international standards on recovery & resolution and reform of OTC derivatives markets.

A Guide to the DIFC’s Fund Regime

During 2014, the DIFC reviewed and enhanced its Fund regime, with the aim to make the DIFC an attractive market to domicile collective investment Funds. Notably, the DIFC introduced the Qualified Investor Fund (“QIF”), which has an expeditious establishment process, designed to attract more sophisticated, big ticket investors.

In order to help navigate the DIFC Fund regime, the associated DFSA regulations and processes, and to understand the sometimes confusing terminology, CCL has developed a helpful guide, written in plain English. The guide covers:

  • DFSA terminology, and their meaning;
  • Process, timelines and cost in setting up a DIFC fund;
  • Different types of Funds;
  • Ongoing requirements for DIFC Funds;
  • Marketing Funds, including wider UAE regulations; and
  • Arranging Custody for Funds.

The guide is a useful resource for Fund Managers and Asset Managers looking to set up an Asset Management business in the DIFC, and is available on request by emailing mena@cclcompliance.com

Further information
If you would like to discuss these latest developments in more detail, please contact:
Clare Curtis (CCurtis@cclcompliance.com)


Middle East Regulatory Updates


  • UAE Banks to Comply with FATCA Before Deadline
  • New Regulations to Strengthen Asset Quality and Solvency of UAE Insurance Sector
  • Oman CMA Hold IOSCO Meeting
  • Saudi Arabia Plan to Open Stock Market to Foreign Investors
UAE Banks to Comply with FATCA Before Deadline

The UAE Central Bank have issued notices to financial institutions in the UAE, obliging them to comply with the US’s Foreign Account Tax Compliance Act (FATCA) by the end of May 2015.

The notice requires the financial statements of American account holders to be submitted to the US’s Internal Revenue Service (IRS) in September 2015.

The UAE’s Ministry of Foreign Affairs will be coordinating with the IRS to ensure all statements are sent.
FATCA requires American citizens that are living abroad and holding at least $50,000 in their bank accounts, or hold more than 10 % shares in a company, be subjected to US income tax. It also mandates financial institutions around the world to submit annual reports on their customers who are required to comply.

Financial institutions that fail to submit such data will be faced with a penalty of having 30% of total financial returns of operations in the US market cut.

New Regulations to Strengthen Asset Quality and Solvency of UAE Insurance Sector

New regulations by the UAE Insurance Authority for conventional and Islamic insurance firms have been developing for the last three years and are expected to increase profitability and solvency, eventually leading to consolidation in the sector. The new rules will be closely aligned to the EU’s Solvency II Directive.

The regulation has set investment limits for the sector with a maximum limit of 30 per cent for overall exposure to real estate assets. For equity assets including units in mutual funds in listed and unlisted companies within the UAE, the overall maximum limit is set at 30% and for equities outside the UAE the limit is 20%. The authority has also set a limit for exposure to cash and deposits at 5%.

Companies with asset allocations that exceed these limits are given a transitional period of three years from February 2015 to adjust their positions in accordance with the new regulations.

The new financial regulations aim to ensure the stability and sustainability of the insurance industry by improving the solvency of the 60 insurance companies operating in the country, 26 of which are foreign insurers.

Oman CMA Hold IOSCO Meeting

A two-day meeting of the Africa/Middle East Regional Committee (AMERC) of the International Organisation of Securities Commissions (IOSCO) was being held in Muscat, Oman.

The conference was hosted by the Omani Capital Market Authority (CMA) and over 25 security commissions from Africa and the Middle East attended with the aim of discussing various ways to develop capital markets. Mounir Gwarzo from Nigeria was also elected as the new Chairman of the AMERC.

The CEO of the CMA, Abdullah Bin Salim Al Salmi, opened the meeting by highlighting the significant impact that the decline in oil prices is having on the economies of countries in the region, as well as the financial markets, as listed companies heavily rely on government spending.

Member states of the AMERC discussed mechanisms that could be adopted to further develop risk systems, to advance the efficiency of the legislation regulating the securities markets and to progress the effective protection of investor rights by avoiding legislation that could affect the growth of listed companies. The mechanism to achieve effective cooperation between neighbouring markets and other technical and administrative topics was also discussed at this conference.

Saudi Arabia Plan to Open Stock Market to Foreign Investors

Saudi Arabia have reached advanced stages in their plan to open the Tadawul to large foreign investors. There has been substantial interest from overseas investors that are interested in investing in the Saudi Market, and if the move is finalised and confirmed, up to US$50 billion could be introduced to the market.

Although a final date has not been announced, the extension of the Tadawul entry requirements were initially reported by the Saudi authorities to take place during the first half of this year.

Further information
If you would like to discuss these updates in more detail, please contact:
Christopher Hobbs (CHobbs@cclcompliance.com)

International Developments


  • JPMorgan to Pay $500 Million in Mortgage Settlement
  • UBS Investigated For Assisting Clients to Avoid Tax
  • HSBC Swiss Leaks Case
JPMorgan to Pay $500 Million in Mortgage Settlement

JPMorgan Chase have agreed to pay $500 million to end the litigation over Bear Stearns' sale of $17.58 billion of defective mortgage securities during the 2008 financial crisis.

This settlement resolves the claims that Bear, owned by JP Morgan, have misled investors by making false and misleading statements in their offering documents when they sold certificates backed by subprime mortgages from May 2006 to April 2007.

Although Bear were not accused of fraud, investors sought to hold them strictly liable and negligent for their losses as the certificates, previously AAA-rated, fell to “junk” status.

UBS Investigated For Assisting Clients to Avoid Tax

UBS is being investigated for possibly helping clients evade US taxes, six years after being fined $780 million for similar allegations.

The US attorney’s office in New York, as well as the FBI, are considering whether UBS used bearer securities to help clients evade US taxes.

The main benefit of bearer securities is that ownership is not registered so the holder can be anonymous. As there is an increased risk that they could be used for illicit dealing, such securities are rare in the US financial system.

As UBS have already settled allegations for helping clients avoid US taxes, the penalty would likely be much stricter if the bank is found to have engaged in wrongdoing.

HSBC Swiss Leaks Case

HSBC’s Swiss Banking division is being investigated for helping wealthy customers avoid tax payments and for providing accounts to international criminals, corrupt businessmen, politicians and celebrities.
Documents, stolen by an IT worker in 2007 and passed onto the French authorities detail over 100,000 clients from 200 countries and territories, with assets worth more than $100 billion being held, led to criminal investigations in several countries as well as attempts to retrieve the money. This has been reported by the French newspaper Le Monde and analysed and investigated by the International Consortium of Investigative Journalists (ICIJ).

The secret documents reportedly reveal that HSBC, which is headquartered in London and has offices in 74 countries including GCC states, profited from doing business with arms dealers, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws, as well as many high profile public figures.

The account holders named in the files include individuals sanctioned by the US, such as Turkish businessman Selim Alguadis and Gennady Timchenko, an associate of Russian President Vladimir Putin. As well as, former and current politicians from Britain, Russia, India and numerous African countries.

Furthermore, the secret files also show that HSBC have helped convicted blood diamond trader, Emmanuel Shallop, in opening a bank account in Dubai to avoid paying taxes in Belgium. The documents show that HSBC was aware that Shallop was under investigation by Belgian authorities at the time it was helping him.

Geneva's public prosecutor consequently searched two of HSBC's Swiss offices and said its investigation could target individuals, who would be liable to a fine and up to five years in prison if found guilty of serious money laundering offences.

Further information
If you would like to discuss this update in more detail, please contact:
Nigel Pasea (NPasea@cclcompliance.com)

Financial Crime Update


  • Kuwait Central Bank Chief Denies Illicit Share Trading
  • CMA (Saudi Arabia) Suspect Violations of the Capital Market Law and Market Conduct Rules
Kuwait Central Bank Chief Denies Illicit Share Trading

The governor of the Central Bank of Kuwait, Mohammed Al Hashel, has been suspected of conducting illicit share trading, by the securities regulator, and has been referred to public prosecutors.

The case, reported by Kuwaiti Al Jarida newspaper, relates to an investment by Al Hashel in an undisclosed Kuwaiti bank.

It reported that Al Hashel was suspected of violating Capital Markets Authority rules because of his ability, as a senior official, to see private confidential financial details of the bank that were not available to other investors.

Al Hashel denies any wrongdoing in personal account trading during his senior posts at the Central Bank.

CMA (Saudi Arabia) Suspect Violations of the Capital Market Law and Market Conduct Rules

The CMA have issued a Board resolution regarding the suspicion of a violation to the Bureau of Investigation and Public Prosecution. It was reported that 17 investors may have violated Article (49) of the Capital Market Law and Article (2) of the Market Conduct rules whilst trading the shares of various listed companies.

Further information
If you would like a more detailed discussion on this update, please contact:
Clare Curtis (CCurtis@cclcompliance.com)

Enforcement Action


  • CMA (Saudi Arabia) to Convict Violators of the Capital Market Law and its Implementing Regulations
CMA (Saudi Arabia) to Convict Violators of the Capital Market Law and its Implementing Regulations

The Saudi Capital Market Authority (CMA) have announced decisions against four individuals, Khalid Alharbi, Bader Alrogi, Ahmad Zoubi, Sultan Altamimi and Nouh bin Abdu Hakami in separate lawsuits filed, for violating Article 31 of the Capital Market Law and Articles 5 and 17 of the Securities Business Regulations, by conducting a securities business without proper authorisation. Twitter accounts and websites were used to recommend and advise on the stocks of listed companies in the Saudi Stock Exchange in return for a fee, while some defendants went further by offering to manage investment portfolios in return for a share in the profits.

The committee has imposed penalties on each of these violators ranging from SR20,000 up to SR200,000.

Further information
If you would like a more detailed discussion on these or other enforcement actions, please contact:
Clare Curtis (CCurtis@cclcompliance.com)

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