The Dubai Financial Services Authority (DFSA) has fined KPMG LLP $1.5 million and former audit principal Milind Navalkar $500,000 for failing to follow international standards during audits of Abraaj Capital Limited (ACLD), an Abraaj Group entity, for a number of years up to October 2017.
The DFSA's decisions were issued in June 2021 but only published on Monday as KPMG and Mr Navalkar sought an order from the Financial Markets Tribunal to prevent publication, the regulator said.
The tribunal subsequently refused both KPMG’s and Mr Navalkar’s requests for privacy and both then appealed to the DIFC Court against the FMT's decision.
A judgment was issued by the Dubai International Financial Centre Court on September 16, 2022, dismissing the appeals of KPMG and Mr Navalkar, meaning that the tribunal's original decision was upheld.
The tribunal's decision will be published on its section of the DFSA’s website, the regulator said.
KPMG and Mr Navalkar deny all of the DFSA’s allegations and have applied for review of the decisions to the FMT, where the parties will present their respective cases.
“The DFSA’s decisions are therefore provisional and reflect the DFSA’s belief as to what occurred and how it considers KPMG LLP’s and Mr Navalkar’s conduct should be characterised,” the DFSA said.
“The DFSA’s decisions may be confirmed, varied or overturned as a result of the FMT’s review.”
ACLD was a wholly owned subsidiary of Abraaj Investment Management Limited (AIML), a company incorporated in the Cayman Islands, which acted as the primary investment adviser and manager of private equity funds in the Abraaj Group.
The Abraaj Group, which was founded in 2002 and claimed to manage about $14 billion of assets at its peak, was the Middle East’s biggest private equity firm and one of the world’s most active emerging market investors, with interests across Africa, Asia, Latin America and the Middle East.
It was forced into liquidation in 2018 after investors, including the Bill & Melinda Gates Foundation, commissioned an audit to investigate alleged mismanagement of money in its $1bn healthcare fund.
That probe served to deepen scrutiny of the company, and allegations of misappropriation of funds secured from US investors attracted the attention of the Securities and Exchange Commission, as well as other US authorities.
In its decision issued on June 29, 2021, the DFSA said KPMG considered the Abraaj Group to be one of its most valued clients, classifying it as a “global priority” client and referring to it as “one of our crown jewel clients” when discussing it with other KPMG member firms.
The DFSA maintains that had KPMG performed its audit of ACLD to the expected standard, it probably would have identified that for more than five years ACLD’s financial statements did not conform to accounting rules, and that the unit had failed to maintain adequate capital resources and was concealing the true state of its finances from the audit firm.
As Mr Navalkar was KPMG’s audit principal who was appointed to the ACLD audit, he was responsible for signing off the report on ACLD’s audited financial statements and also ensuring that the audits and reviews of its financial statements and DFSA returns were carried out to the required standard, the authority said.
“The DFSA found that Mr Navalkar was knowingly concerned in KPMG LLP’s breaches and he also failed to act with professional competence and care,” it said.
The DFSA fined ACLD more than $15m in July 2019 for failing to maintain adequate capital resources, in breach of its rules, and for providing the regulator and KPMG with false and misleading information relating to its capital resources.
“ACLD also omitted to provide its auditor with information relating to material transactions with other Abraaj Group entities and prepared financial statements which did not accurately represent ACLD’s financial position,” the DFSA said.
“ACLD was also knowingly concerned in unauthorised activities of its parent, Abraaj Investment Management Limited (AIML)", which the DFSA previously fined more than $299m in July 2019.
ACLD was the only Abraaj entity authorised by the DFSA and the only entity in the Abraaj Group audited by KPMG LLP.
The other entities in the Abraaj Group were audited by other audit firms in the KPMG global network that operate outside of the DIFC.
Key recommendations
- Fewer criminals put behind bars and more to serve sentences in the community, with short sentences scrapped and many inmates released earlier.
- Greater use of curfews and exclusion zones to deliver tougher supervision than ever on criminals.
- Explore wider powers for judges to punish offenders by blocking them from attending football matches, banning them from driving or travelling abroad through an expansion of ‘ancillary orders’.
- More Intensive Supervision Courts to tackle the root causes of crime such as alcohol and drug abuse – forcing repeat offenders to take part in tough treatment programmes or face prison.
Who has lived at The Bishops Avenue?
- George Sainsbury of the supermarket dynasty, sugar magnate William Park Lyle and actress Dame Gracie Fields were residents in the 1930s when the street was only known as ‘Millionaires’ Row’.
- Then came the international super rich, including the last king of Greece, Constantine II, the Sultan of Brunei and Indian steel magnate Lakshmi Mittal who was at one point ranked the third richest person in the world.
- Turkish tycoon Halis Torprak sold his mansion for £50m in 2008 after spending just two days there. The House of Saud sold 10 properties on the road in 2013 for almost £80m.
- Other residents have included Iraqi businessman Nemir Kirdar, singer Ariana Grande, holiday camp impresario Sir Billy Butlin, businessman Asil Nadir, Paul McCartney’s former wife Heather Mills.
Hunting park to luxury living
- Land was originally the Bishop of London's hunting park, hence the name
- The road was laid out in the mid 19th Century, meandering through woodland and farmland
- Its earliest houses at the turn of the 20th Century were substantial detached properties with extensive grounds
Terminator: Dark Fate
Director: Tim Miller
Starring: Arnold Schwarzenegger, Linda Hamilton, Mackenzie Davis
Rating: 3/5
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MATCH INFO
Sheffield United 0 Wolves 2 (Jimenez 3', Saiss 6)
Man of the Match Romain Saiss (Wolves)
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
ESSENTIALS
The flights
Fly Etihad or Emirates from the UAE to Moscow from 2,763 return per person return including taxes.
Where to stay
Trips on the Golden Eagle Trans-Siberian cost from US$16,995 (Dh62,414) per person, based on two sharing.
Farage on Muslim Brotherhood
Nigel Farage told Reform's annual conference that the party will proscribe the Muslim Brotherhood if he becomes Prime Minister.
"We will stop dangerous organisations with links to terrorism operating in our country," he said. "Quite why we've been so gutless about this – both Labour and Conservative – I don't know.
“All across the Middle East, countries have banned and proscribed the Muslim Brotherhood as a dangerous organisation. We will do the very same.”
It is 10 years since a ground-breaking report into the Muslim Brotherhood by Sir John Jenkins.
Among the former diplomat's findings was an assessment that “the use of extreme violence in the pursuit of the perfect Islamic society” has “never been institutionally disowned” by the movement.
The prime minister at the time, David Cameron, who commissioned the report, said membership or association with the Muslim Brotherhood was a "possible indicator of extremism" but it would not be banned.
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6.30pm UAE 1000 Guineas Trial Conditions (TB) US$100,000 (Dirt) 1,400m
Winner Final Song, Christophe Soumillon (jockey), Saeed bin Suroor (trainer).
7.05pm Handicap (TB) $135,000 (Turf) 1,000m
Winner Almanaara, Dane O’Neill, Doug Watson.
7.40pm Handicap (TB) $175,000 (D) 1,900m
Winner Grand Argentier, Brett Doyle, Doug Watson.
8.15pm Meydan Challenge Listed Handicap (TB) $175,000 (T) 1,400m
Winner Major Partnership, Patrick Cosgrave, Saeed bin Suroor.
8.50pm Dubai Stakes Group 3 (TB) $200,000 (D) 1,200m
Winner Gladiator King, Mickael Barzalona, Satish Seemar.
9.25pm Dubai Racing Club Classic Listed Handicap (TB) $175,000 (T) 2,410m
Winner Universal Order, Richard Mullen, David Simcock.
Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
