Deutsche Bank AG agreed to hand over documents related to a probe into the operations of its Dubai-based wealth management division after being taken to court by the emirate’s financial free zone regulator.
The Dubai Financial Services Authority began proceedings against the Frankfurt-based lender at the Dubai International Financial Centre Courts on Oct. 31 in an attempt to force the bank to comply with its investigation. Deutsche Bank agreed to submit the documents within 28 days and pay the regulator’s costs, according to a DFSA statement yesterday.
The regulator began investigating the bank in Dec. 2012 for “suspected contraventions” of DFSA rules related to due diligence, risk assessment requirements, having adequate systems and controls, client classification and suitability and key information, according to the October filing made public on Nov. 17. Deutsche Bank said in the case documents that disclosing certain information would contravene Swiss law.
The legal case against Deutsche Bank is the first the DFSA has filed with Dubai courts since 2009 and only the fourth since 2007. The DFSA said it will continue the investigation into Deutsche Bank’s wealth management business, without giving more detail. Michael Lermer, a spokesman for Deutsche Bank in Dubai, declined to comment.
On July 31, the regulator set Deutsche Bank a deadline of August 18 to provide details about private wealth management clients including the customer’s risk assessment rating, the name of the bank employee assigned to the account and whether a client agreement had been executed.
DFSA personnel visited the bank on Aug. 27 and again asked for documents, according to the filing. A second notice was served on Oct. 1 after Deutsche Bank said “issues of Swiss law” prevented it from giving information on about 120 DIFC-related relationships booked to its Geneva office.
The DFSA then took Deutsche Bank to court in an attempt to force it to provide the documents, saying the bank had not “identified the precise basis” for how the Swiss criminal code prohibited it from disclosing information.
A city of about 2.1 million people, Dubai became a regional banking hub after opening the DIFC in 2004 to attract international banks, asset managers and insurers with promises of zero taxes for 50 years.
Last year the DFSA issued fines against a private banker at BNP Paribas, the chief executive officer of the Dubai unit of a Lebanese bank, and an accounting firm.
Deutsche Bank had 2.5 billion euros ($3.41 billion) of legal costs last year as it settled a European Union probe into banks colluding to manipulate benchmark interest rates and allegations by U.S. housing agencies that it didn’t provide adequate disclosure about mortgage-backed securities.