Title: Announcement regarding issuance of Disciplinary Board Resolution No. (128/2022 Disciplinary Board) (79/2022 Authority) and imposition of a fine against each of: 1- Gulf Custody Company, 2- Talal Yousef Al-Muzaini (Deloitte and Touche - Al-Wazzan & Co) in his capacity as the former auditor of Gulf Custody Company, 3- Bader Abdullah Al-Wazzan (Deloitte and Touche - Al-Wazzan & Co) in his capacity as the former auditor of Gulf Custody Company for violating the rules of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments

Announcement regarding issuance of Disciplinary Board Resolution No. (128/2022 Disciplinary Board) (79/2022 Authority) and imposition of a fine against each of:

1- Gulf Custody Company.
2- Talal Yousef Al-Muzaini (Deloitte and Touche - Al-Wazzan & Co) in his capacity as the former auditor of Gulf Custody Company.
3- Bader Abdullah Al-Wazzan (Deloitte and Touche - Al-Wazzan & Co) in his capacity as the former auditor of Gulf Custody Company.
For violating the rules of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments.

For the following reasons:

First: Gulf Custody Company violated the following provisions:
1- Item (5) of Article (2-3) of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
It was proven that the risk assessment study prepared by the Company is not considered a study to assess the required risks due to inadequacy of the risk factors mentioned therein, inaccuracy of each of: the risk level and the possibility of the occurrence of those factors, the risk classification, and the required procedures included in the mentioned study, and that it does not correspond to the Company’s policy.

2- Article (3-16) of the mentioned Module:
Through examining the item of client acceptance “Acceptance policy (Risk assessment and the risk-based method)”, it was proven that the Company did not determine the types of clients and activities that are to be considered as high risk, but it only listed various indicative methods to determine the risk assessment. In addition, the mechanism followed by the Company to assess the clients’ risk level through reviewing the clients risk classification lists was inefficient, as the Company classified the risks of all the clients as “very low” despite the existence of beneficial owners within some of the main clients from the politically exposed persons (PEPs).

3- Article (3-20) of the mentioned Module:
The Company did not establish systems and mechanisms for identifying whether a client or beneficial owner is a PEP or not. It was also proven, through examining a sample of clients, that the company failed to identify the beneficial owners within the mentioned clients to be PEPs, as they were classified as very low risks.

4- Article (6-1) of the mentioned Module:
It was proven, through reviewing the policies and procedures guide of the Company, examining the clients’ sample, and examining the Company’s systems, that the Company did not set adequate procedures to ensure the implementation of all the obligations mentioned in aforementioned Article.

5- Article (7-6) of the mentioned Module:
It was proven, through reviewing the report of the internal audit department, that the internal audit department failed to verify the Company’s compliance with the internal policies, procedures, systems, and controls and ensure their effectiveness and conformity with the provisions of Module Sixteen previously mentioned. The report included that the policy is effective and complies with the provisions of the mentioned Module, was updated in line with the amendments issued by the CMA, and that no remarks were noted during 2020.

6- Article (7-8) of the mentioned Module:
The Company failed to ensure that one of its managers and some of its employees received the necessary training during 2019,2020, and 2021.

Second: Mr. Talal Yousef Al-Muzaini (Deloitte and Touche - Al-Wazzan & Co) in his capacity as the former auditor of Gulf Custody Company.
He violated the provision of Article (7-7) of Module Sixteen, as it was proven, after reviewing the external auditor’s reports prepared in accordance with the Article mentioned above on the year 2019 and submitted by the Company, that the reports prepared by him were insufficient.

Third: Mr. Bader Abdullah Al-Wazzan (Deloitte and Touche - Al-Wazzan & Co) in his capacity as the former auditor of Gulf Custody Company.
He violated the provision of Article (7-7) of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments, as it was proven, after reviewing the external auditor’s reports prepared in accordance with the Article mentioned above on the year 2020 and submitted by the Company, that the reports prepared by him were insufficient.  

Provided that these violations are procedural and not substantive.

The Resolution included the infliction of the following penalty: -

"First: - Levying a fine against Gulf Custody Company in an amount of KWD 3000 (three thousand Dinars) for the six attributed violations due to correlation.

Second: - Levying a fine against each of Talal Yousef Al-Muzaini and Bader Abdullah Al-Wazzan (Deloitte and Touche - Al-Wazzan & Co) in their capacities as the former auditors of Gulf Custody Company in an amount of KWD 2000 (two thousand Dinars) on each one of them for the attributed violation.”

In this regard, the CMA emphasizes the implementation of CMA Law and its Executive Bylaws on all persons dealing in securities activities, and urges them to comply with these Laws in order to promote investors' confidence, create a sound investment environment, and implement the Law according to the principles of fairness, transparency, and integrity in line with the best international practice.