KPMG LLP and former audit principal withdraw request for review of DFSA fines

KPMG LLP and its former audit principal Milind Navalkar have withdrawn their request for a review by the Financial Markets Tribunal against the Dubai Financial Services Authority’s decision to impose financial penalties on them.

Both Mr Navalkar and KPMG had referred the DFSA’s decision to the independent appeal tribunal after they were fined $500,000 and $1.5 million respectively for failing to follow international standards during audits of Abraaj Capital Limited, an Abraaj Group entity, for a number of years up to October 2017.

The rulings were issued in June 2021 but only published on October 3 as KPMG and Mr Navalkar sought an order from the FMT to prevent publication.

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.

However, the two parties have withdrawn their FMT references and “will not contest the DFSA’s findings in its decisions”, the DFSA said on Thursday.

The fine imposed on KPMG reflects that it was only responsible for the audit of ACLD. The other entities in the Abraaj Group were audited by other audit companies in the KPMG global network that operate outside of the Dubai International Financial Centre, the DFSA said.

ACLD was a wholly owned subsidiary of Abraaj Investment Management Limited, 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 company 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 the 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.

This action underscores the important role auditors play, as corporate gatekeepers, in enhancing investor confidence and maintaining the DIFC’s reputation as a global financial services hub

Ian Johnston,
chief executive, DFSA

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 in its October 3 statement.

“KPMG LLP’s practices and Mr Navalkar’s professional competence fell far below the standard expected, which allowed ACLD to conceal its practice of window dressing for many years,” Ian Johnston, chief executive of the DFSA, said on Thursday.

“This action underscores the important role auditors play, as corporate gatekeepers, in enhancing investor confidence and maintaining the DIFC’s reputation as a global financial services hub.”

On Women's Day

Dr Nawal Al-Hosany: Why more women should be on the frontlines of climate action

Shelina Janmohamed: Why shouldn't a spouse be compensated fairly for housework?

Samar Elmnhrawy: How companies in the Middle East can catch up on gender equality

The National Editorial: Is there much to celebrate on International Women's Day 2021?

While you're here

Damien McElroy: It's too early to say who will win the vaccine hurdle race

Mustafa Alrawi: To get the 'jab' done, governments must show patience and empathy

Editorial: The fight against Covid-19 should be guided by science

German intelligence warnings

2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250

Source: Federal Office for the Protection of the Constitution

Winners

Ballon d’Or (Men’s)
Ousmane Dembélé (Paris Saint-Germain / France)

Ballon d’Or Féminin (Women’s)
Aitana Bonmatí (Barcelona / Spain)

Kopa Trophy (Best player under 21 – Men’s)
Lamine Yamal (Barcelona / Spain)

Best Young Women’s Player
Vicky López (Barcelona / Spain)

Yashin Trophy (Best Goalkeeper – Men’s)
Gianluigi Donnarumma (Paris Saint-Germain and Manchester City / Italy)

Best Women’s Goalkeeper
Hannah Hampton (England / Aston Villa and Chelsea)

Men’s Coach of the Year
Luis Enrique (Paris Saint-Germain)

Women’s Coach of the Year
Sarina Wiegman (England)

Asia Cup 2018 Qualifier

Sunday's results:

UAE beat Malaysia by eight wickets
Nepal beat Singapore by four wickets
Oman v Hong Kong, no result

Tuesday fixtures:

Malaysia v Singapore
UAE v Oman
Nepal v Hong Kong

Company%C2%A0profile

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Cryopreservation: A timeline

Keyhole surgery under general anaesthetic
Ovarian tissue surgically removed
Tissue processed in a high-tech facility
Tissue re-implanted at a time of the patient’s choosing
Full hormone production regained within 4-6 months

In Full Flight: A Story of Africa and Atonement
John Heminway, Knopff

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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.