According to an announcement issued on 26 March 2014, the Cypriot regulator CySEC at a board meeting on 13.1.2014 decided to impose an administrative fine of €12,000 to the company Dragon Capital (Cyprus) Ltd. This company is a retail multi asset brokerage with operations in Cyprus, while its head office is located in Kiev, Ukraine.
Indeed, Dragon Capital accounts for the largest share of turnover on the Ukrainian stock market and since its establishment in 2000 has earned numerous awards, such as Best Broker in Ukraine in 2010 and Most Professional Player of the Ukrainian Stock Market in 2012.
According to the CySEC announcement the company was found to be in breach of certain provisions of the 2007 law on The Prevention And Suppresion Of Money Laundering And Terrorist Financing and the 2012 CySEC Directive For The Prevention Of Money Laundering And Terrorist Financing.
The administrative penalty of €12,000 itself is made up of several components, of which the largest is a fine of €9,000 for infringement of Article 58 (a) of the above mentioned Law, which states that:
“Any person carrying on financial or other business activities, is obliged to apply adequate and appropriate systems and procedures in relation to the following:
(a) customer identification and customer due diligence, in accordance with the provisions of sections 60-66 of this Law;”
What perhaps merits further commentary as regards the imposition of this fine is the fact that through this decision, on a matter as grave as the inadequacy to uphold legal provisions and procedures pertaining to money laundering and the activities of an investment firm’s clients, CySEC once again opens itself to criticism for being too lenient with the CIFs under its jurisdiction and especially on the height of fines it imposes for non-compliance with legislation.
Taking into account the fact that the law allows CySEC to have imposed a fine of up to €200,000 such criticisms are not unfounded. To its credit CySEC cites as mitigating factors that were taken into account when deciding the height of the fine the fact that the company has already taken corrective measures in order to ensure its compliance with the provisions of the Law and the Directive and intends to take further measures in this direction, as well as the fact that the company is a “first time offender” since no similar breaches where found in the past.
Still, the fine imposed could be argued to be a slap in the wrist, however it is anticipated that CySEC as well as other regulators will sooner or later be obliged to become stricter and harsher with brokers, especially in light of the implementation in the EU of the MiFID II and the emergence of regulatory legislature standardization as a trend and enhanced consumer protection as a top priority for regulators.