ADGM imposes $4.76m fine on investment company and sole shareholder

The financial free zone is clamping down on companies that carry out unlicensed activities and try to mislead the public

The ADGM building in Abu Dhabi. Elia Investments was at no time authorised to conduct any form of regulated activity in ADGM. Ruel Pableo for The National

The Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA) imposed a $4.76 million penalty and prohibition order against investment management company Elia Investments and Babar Abbas, the organisation’s sole shareholder and former director.

The FSRA found that Elia had “carried on the regulated financial services activity of providing credit in [the] ADGM on an unauthorised basis” between July 2019 and June 2021, the regulator said on Tuesday.

Elia was at no time licensed or authorised by the FSRA to conduct any form of regulated activity in ADGM, the FSRA said.

“The FSRA will take the necessary and appropriate action against entities and individuals that are in breach of our regulations and rules, including those that engage in unlicensed activities in ADGM or who falsely purport to be licensed and seek to mislead the public in this way,” FSRA chief executive Emmanuel Givanakis said.

“The conduct in this matter was particularly serious, in that the entity and individual engaged in unauthorised activities to obtain upfront payments of money from their victims, the majority of which they then failed to return.”

The FSRA has been clamping down on companies that fail to comply with its anti-money laundering requirements.

In August, the regulator imposed a penalty of $360,000 on Wise Nuqud, a licensed money service company, for failing to abide by several anti-money laundering requirements.

It also fined five financial institutions for breaching reporting requirements in September.

Elia was incorporated and registered in ADGM in September 2017 and held a commercial licence to conduct non-financial business activities only. This licence expired on September 11, 2021, the regulator said.

Elia was never granted or never applied for permission to the regulator to carry out financial services, the FSRA said.

The FSRA’s investigation found that Elia had conducted unauthorised regulated activities by entering into credit agreements with at least four victims.

However, Elia did not provide the credit it purported to offer under each agreement and did not have the capacity to provide the credit it purported offer, the FSRA said.

Instead, the company solicited and obtained upfront payments worth $2.59m from its victims under these arrangements and then failed to return the majority of this money, causing financial harm to its victims, the regulator said.

The FSRA imposed a financial penalty of $2.38m on Elia, which includes a disgorgement amount of $1.88m and a fine of $500,000.

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The financial watchdog’s investigation also found that Mr Abbas directed Elia’s conduct and used the money Elia had obtained, and not returned, for his own personal benefit.

“In addition, Mr Abbas was found to have provided false information to the FSRA when being interviewed during the course of the investigation,” Mr Givanakis said.

“These are serious acts of misconduct and warrant the severe penalties imposed in this matter, as well as the prohibition imposed on Mr Abbas to perform functions in [the] ADGM.”

The entity imposed a financial penalty of $2.38m on Mr Abbas, which includes a disgorgement amount of $1.88m and a fine of $500,000.

In addition, the FSRA said that Mr Abbas was “not a fit and proper person to be involved in the industry” and prohibited him indefinitely from performing functions within the ADGM.