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EY Accused of Misconduct, Ordered to Pay AML Whistleblower $11 Million

By Koos Couvée

A U.K. judge on Friday ordered Ernst & Young to pay a former auditor in the United Arab Emirates almost $11 million in damages, six years after the consultancy forced him out of his job for flagging a Dubai gold refiner’s alleged violations of anti-money laundering rules.

In a 133-page judgement, Justice Timothy Kerr ruled that EY failed in its duty of care to Amjad Rihan, 45, an erstwhile partner in Dubai who sued his former employer last year alleging he had no choice but to resign after his attempts to report suspicious transactions involving Kaloti Jewellery International were met with hostility.

“The claimant was intimidated, threatened with adverse career consequences and unjustly accused of lacking professionalism,” Kerr ruled in broadly accepting Rihan’s version of events. “That was a breach of the duty owed to him.”

During a three-week trial in January, Rihan told the court that he raised concerns to his superiors after discovering evidence that in 2012 the refinery handled billions of dollars in cash without conducting adequate due diligence on the parties involved and purchased more than four tons of gold bars from Morocco that had been coated in silver to avoid trade restrictions.

The firm also handled minerals from conflict zones and struck multimillion dollar deals with Iranian and Sudanese companies in potential violation of U.S. and EU sanctions, Rihan claimed during the trial.

Seeking more lucrative business in Dubai and under pressure from the local regulator, senior managers at EY rejected his concerns, watered down Rihan’s report on Kaloti’s compliance regime and failed to disclose any of the suspicious transactions to authorities in the UAE and elsewhere, Rihan told the court.

Rather than accept Rihan’s concerns and terminate the business in question, EY chose to collude with the refinery and the regulator, the Dubai Multi Commodities Centre, or DMCC, to “sanitize Kaloti’s wrongdoing and conceal the grounds for reasonable suspicion that the firm was involved in money laundering” in the final report, Kerr ruled.

EY’s suggestion to Kaloti to omit any reference to the Moroccan gold issue in the final report and instead refer only to “documentary irregularities” amounted to professional misconduct, according to the ruling.

Rihan told the court he left Dubai for the United Kingdom in July 2013 in fear of his safety and lacking confidence that EY would support him. He resigned six months later.

Rihan said he later approached another “Big Four” accounting firm, PwC, for employment, who allegedly told him he was “too hot” to hire after his appearance on the BBC. He has been unable to earn any meaningful income since, he said.

“I think the law of tort would protect an employee or quasi-employee from having their career ruined by becoming ‘tainted with unemployability’ after being embroiled by the employer or quasi-employer in unethical conduct and forced to dissociate themselves from the wrongful activity,” Justice Kerr ruled Friday.

Polly Sprenger, former head of strategic intelligence for the U.K. Serious Fraud Office, told ACAMS moneylaundering.com that the ruling should give comfort to attorneys, accountants and compliance officers whose roles often require them to disclose suspected malfeasance involving their clients and sometimes even their own colleagues.

“When your partnership asks you to cover up misconduct, what this court is saying is: ‘the law will protect you’,” Sprenger, now an attorney in London, said. “It gives precedence to professional regulatory obligations over partnership obligations.”

Attorneys for EY characterized Rihan as a liar and an opportunist motivated by a thirst for publicity and fortune—an argument that Kerr rejected entirely.

“The judge’s decision calls into question the objectivity and integrity of the Dubai regulator and suggests that it was not sufficient to conduct the assurance engagement in accordance with the regulatory standards of Dubai,” an EY spokesperson said in response to the ruling, which the firm plans to appeal.

Contact Koos Couvée at kcouvee@acams.org

Topics : Anti-money laundering , Sanctions
Source: United Kingdom
Document Date: April 17, 2020