Abraaj penalties show there is no place in Dubai for rogue financial operators

Arif Naqvi, founder and chief executive officer of Abraaj, was sentenced to three years in prison by a UAE court. Bloomberg
Arif Naqvi, founder and chief executive officer of Abraaj, was sentenced to three years in prison by a UAE court. Bloomberg

If the collapse last year of the Abraaj Group shook the confidence of investors, the decisive response of the Dubai Financial Services Authority sends a message that the emirate is a financial centre underpinned by the highest standards of corporate governance.

There is no doubt that the unravelling of the Middle East’s biggest private equity company is a cautionary tale for investors everywhere. Alarm bells began to ring early last year, when global investors in the company’s $1 billion emerging-markets healthcare fund accused Abraaj of misusing funds. In June last year, the company went into voluntary liquidation in the Cayman Islands.

Today founder Arif Naqvi and several senior executives face charges in the US of defrauding investors. Mr Naqvi denies accusations that he misappropriated $230 million. An investigation by the Dubai Financial Services Authority, the independent regulator of financial services conducted in or from the Dubai International Financial Centre, has led to record fines being imposed on two Abraaj companies found guilty of deceiving the regulator and misusing investors’ money. The total of $315 million in fines handed to Abraaj Investment Management Limited and Abraaj Capital Limited amounts to the largest penalty imposed by the DFSA since it was founded in 2004.

Inward investment is the lifeblood of dynamic, rapidly evolving economies such as Dubai’s, and investor confidence is a priceless asset to be protected at all costs. The complex, multiple-jurisdiction investigation carried out by the DFSA is a testament to the skills of the regulator’s world-class compliance team. Moreover, it signals to investors that the emirate is a safe place to put their money, and a place in which no company is above the law.

Since its establishment in 2004, Dubai International Financial Centre has emerged as the leading financial hub for the Middle East, Africa and South Asia, its success built in no small part on the vigilance of its regulator. It is the declared intention of the DFSA “to develop, administer and enforce world-class regulation of financial services within the DIFC”. Mission accomplished.

Published: July 31, 2019 06:15 PM