Raphael Lilla and Kapparath Muraleedharan were both licensed directors and members of the board of Hinduja Bank, a Switzerland-headquartered private bank.
In August 2014, Lilla and Muraleedharan instructed the bank’s senior executive officer and the compliance and money laundering (CML) reporting officer to open three accounts for clients who had been assessed as “high risk”.
Enhanced due diligence
Under the DFSA’s AML rules, Hinduja Bank was required to carry out enhanced customer due diligence on these clients before opening the accounts.
However, Lilla and Muraleedharan ignored advice from the senior executive officer and CML reporting officer that such action would contravene the rules.
The directors then used their senior positions as board members to instruct staff to open the accounts.
Investigation outcome
The DFSA’s investigation found that both men:
- received confirmation from external legal counsel shortly after the accounts were opened that the advice of the senior executive officer and the CML reporting officer was correct;
- were aware that opening the accounts in such circumstances did not comply with the bank’s account-opening policies; and
- attempted to control the senior executive officer and the CML reporting officer from reporting the opening of two of the accounts to the DFSA.
Early settlement
Lilla and Muraleedharan accepted responsibility for their actions and agreed to settle the matter at an early stage following the conclusion of the investigation.
The DFSA therefore reduced the fines by 20% under the DFSA’s policy for early settlement, meaning each man was fined $56,000 (£38,800, €49,097).
Were it not for discount, Lilla and Muraleedharan would have each been fined $70,000.
Both men resigned from the bank in August 2015.
No action against Hinduja Bank
The DFSA decided not to take any action against the bank. After the accounts were opened, it promptly notified the DFSA and other relevant authorities in the UAE that the accounts had been opened and also took steps to prevent the accounts from being used to receive funds.
Ian Johnston, chief executive of the DFSA, said: “Mr Lilla and Mr Muraleedharan were given clear advice that opening the accounts without completing the required due diligence would contravene the DFSA’s rules.
“They ignored this advice and caused the accounts to be opened, which put the firm in breach of its regulatory obligations. The DFSA considers their actions to be serious and expects a higher standard of behaviour from persons in such senior positions.
“The DFSA also commends the senior executive officer and the compliance and money laundering reporting officer for taking action to mitigate the risks to which the firm was exposed, and for notifying the DFSA.”
