Wednesday, October 28, 2020

Former EY Partner sues firm over money laundering for drug gang

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Rihan, a former partner at EY Dubai, is bringing an employment case against the firm on the grounds that he was effectively forced to resign after blowing the whistle on money laundering at Kaloti.

Rihan was the audit partner with overall responsibility for Kaloti in 2013, when he raised the issues. He claims that EY failed to report suspicious activity, altering a compliance report to hide the wrongdoing that Rihan flagged.

An investigation by BBC Panorama, shown on 28 October, examined the trail of laundered British drug money through Dubai’s gold markets. Gold, as Panorama pointed out, is both easier to move and harder to trace than cash.

The gang under investigation moved millions in cash to Antwerp, where it was sold for gold in a corrupt deal. It was then moved to Dubai, and sold to Kaloti for ‘clean’ cash.

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Rihan, who was interviewed by the BBC and contributed to the documentary, saw a first major warning sign in the vast quantities of cash that Kaloti handed out in exchange for gold.

In one year, the gold refinery paid $5.2bn (£4.04bn) in cash, which staff in local banks had to use wheelbarrows to manoeuvre.

The cash originated from Kaloti’s accounts in Deutsche Bank. Another whistleblower, the bank’s then-head of compliance Anna Waterhouse, spotted the transfers and raised her concerns.

Having reported the issue, Waterhouse says that the investigation undertaken by the Dubai Financial Services Authority (DFSA) ignored the cash itself and rounded the accusation back to Waterhouse. She subsequently lost her job.

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Documents shown by Panorama suggest that senior managers at Deutsche Bank considered whether to “offer up Ms Waterhouse”, to “Express settle everything for the bank. Deutsche Bank denies this, saying that there was “ample reason” to act against Waterhouse.

Rihan was interviewed by The Guardian in 2014. He told the paper that “when [EY] realised that we weren’t going to alter our findings, they went ahead and changed their own guidelines”.

A document seen by the BBC suggests that EY edited lines written by Kaloti, which refered to “bars coated with silver”, to read “certain documentary irregularities which our risk assessment did not red flag” instead.

EY vigorously denies Rihan’s claim, saying that his allegations are “unfounded”.

“Mr Rihan’s suggestion that EY Dubai somehow helped Kaloti to hide irregularities related to its acquisition of gold is baseless and is denied,” a spokesperson for the firm says.

“The facts are that in early 2013, EY Dubai was engaged to review the supply-chain compliance and due diligence of Kaloti when sourcing gold. Through this process EY Dubai identified several compliance issues. EY Dubai’s assurance and management reports addressed to Kaloti identified these compliance issues and Kaloti, as required by local law/regulation, supplied these reports to Kaloti’s local regulator, the Dubai Multi

Commodities Centre (DMCC). Separately, Kaloti prepared compliance reports, which were reviewed by EY Dubai, that further addressed its compliance deficiencies and related remedial measures. These reports too were provided to the local regulator DMCC.

“EY is confident that all legal and reporting obligations have been complied with by the relevant EY entities”, they added.

EY stopped acting for Kaloti in 2014. The DMCC sanctioned the refinery in 2015, which EY says was a result of the firm having brought issues to the attention of the regulator.

Rihan’s case will be heard in January 2020.

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