Dubai court can hear case against Deloitte unit after collapse of Hezbollah-linked bank

Members of Lebanon's Hezbollah wave their flags during a rally. The collapsed Lebanese Canadian Bank has been linked to funding for Hezbollah. (Reuters)
Updated 14 February 2018
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Dubai court can hear case against Deloitte unit after collapse of Hezbollah-linked bank

LONDON: A Dubai court could hear evidence relating to the alleged role of auditor Deloitte & Touche (M.E.) in the collapse of Lebanese Canadian Bank – which went bust after being linked to an international drug smuggling and money laundering racket with ties to Hezbollah.
It follows a ruling in a legal row between a group of investors in the collapsed Lebanese Canadian Bank and the regional Deloitte partnership of the auditor, over whether or not the Dubai International Financial Center (DIFC) Courts had jurisdiction to hear the case.
The shareholder group is led by Nest Investments Holding SAL, which was founded by Gulf entrepreneur, Ghazi Abu Nahl. They claim they lost some $128 million from the collapse of the bank.
A Nest spokesperson said: “The allegations against Deloitte & Touche (M.E.) are serious in nature – involving complicity in money laundering and terrorist financing through the Lebanese Canadian Bank. The defendant plays a prominent role in the Middle East audit market and remains the auditor in liquidation at the bank. It is therefore particularly important that the allegations against DTME be heard and answered in a competent court.”
The case stems from a US government probe into the Beirut-based Lebanese Canadian Bank which alleged that it was at the center of a global drug trafficking and money laundering network that shipped narcotics from South America to Europe and the Middle East through Africa, with the proceeds laundered through Lebanon’s financial system.
The investigation led the US authorities to issue a so-called “FinCen” notice on Lebanese Canadian Bank as a “financial institution of pri­mary money laundering concern.”
Such notices, issued under the US Patriot Act, typically sound the death knell for banks because they effectively prevent them from accessing the global financial system.
A group of 11 shareholders including Nest launched proceedings at the Dubai International Financial Center Courts in 2016, alleging that Deloitte & Touche (M.E.) acted negligently during its audit of the bank and failed to identify grounds for concern under anti-money laundering laws.
The audits were undertaken by Deloitte’s Lebanon partnership between 2006 and 2009.
One of the central claims made by the shareholder group was that the audits of the bank failed to disclose various illicit activities at the lender, that included terror financing and money laundering.
Specifically, it was claimed that Lebanese Canadian Bank had intentionally or negligently aided and abetted terrorist activity by maintaining bank accounts for Hezbollah entities.
Deloitte & Touche (M.E.) had argued that the case should be dismissed for jurisdiction-related and other reasons — including that Lebanese law, not DIFC law, applied.
But a judgment handed down by Justice Roger Giles in the DIFC Courts found that while Lebanese law was indeed applicable, the “matters were open to factual and legal investigation at trial and were not so clear that the claimants had no real prospect of success.”
He added that “further materials were likely to become available to show the relationship between the claimants and the Lebanese auditor.”
Nest hailed the decision as a “landmark” ruling.
“This is the first claim of its kind to be considered by the DIFC Courts – targeting a leading audit brand for negligence and deceit in their audits of a client bank that was allegedly acting as the financial arm for drug traffickers and terrorist financiers,” it said in a statement.
A Deloitte & Touche (M.E.) spokesperson said in a statement to Arab News that  the claim against the firm was “without merit” and that it would vigorously resist any attempt to pursue it.


Davos organizer WEF warns of growing risk of cyberattacks in Gulf

Updated 16 January 2019
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Davos organizer WEF warns of growing risk of cyberattacks in Gulf

  • Critical infrastructure such as power centers and water plants at particular risk, says expert
  • Report finds that unemployment is a major concern in Bahrain, Egypt, Morocco, Oman and Tunisia

LONDON: The World Economic Forum (WEF) has warned of the growing possibility of cyberattacks in the Gulf — with Saudi Arabia, the UAE and Qatar particularly vulnerable.

Cyberattacks were ranked as the second most important risk — after an “energy shock” — in the three Gulf states, according to the WEF’s flagship Global Risks Report 2019.

The report was released ahead of the WEF’s annual forum in Davos, Switzerland, which starts on Tuesday.

In an interview with Arab News, John Drzik, president of global risk and digital at professional services firm Marsh & McLennan said: “The risk of cyberattacks on critical infrastructure such as power centers and water plants is moving up the agenda in the Middle East, and in the Gulf in particular.”

Drzik was speaking on the sidelines of a London summit where WEF unveiled the report, which was compiled in partnership with Marsh and Zurich Insurance.

“Cyberattacks are a growing concern as the regional economy becomes more sophisticated,” he said.

“Critical infrastructure means centers where disablement could affect an entire society — for instance an attack on an electric grid.”

Countries needed to “upgrade to reflect the change in the cyber risk environment,” he added.

The WEF report incorporated the results of a survey taken from about 1,000 experts and decision makers.

The top three risks for the Middle East and Africa as a whole were found to be an energy price shock, unemployment or underemployment, and terrorist attacks.

Worries about an oil price shock were said to be particularly pronounced in countries where government spending was rising, said WEF. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil — that is, the price required to balance the national budget — rise to $88 a barrel, 26 percent above the IMF’s October 2017 estimate, and also higher than the country’s medium-term oil-price target of $70–$80.

But that disclosure needed to be balanced with the fact that risk of “fiscal crises” dropped sharply in the WEF survey rankings, from first position last year to fifth in 2018.

The report said: “Oil prices increased substantially between our 2017 and 2018 surveys, from around $50 to $75. This represents a significant fillip for the fiscal position of the region’s oil producers, with the IMF estimating that each $10 increase in oil prices should feed through to an improvement on the fiscal balance of 3 percentage points of GDP.”

At national level, this risk of “unemployment and underemployment” ranked highly in Bahrain, Egypt, Morocco, Oman and Tunisia.
“Unemployment is a pressing issue in the region, particularly for the rapidly expanding young population: Youth unemployment averages around 25 percent and is close to 50 percent in Oman,” said the report.

Other countries attaching high prominence to domestic and regional fractures in the survey were Tunisia, with “profound
social instability” ranked first, and Algeria, where respondents ranked “failure of regional and global governance” first.

Looking at the global picture, WEF warned that weakened international co-operation was damaging the collective will to confront key issues such as climate change and environmental degradation.