Widespread ATM fraud has caused panic across the UAE. The fraud is thought to have started after a network, in which banks share sensitive information such as customer pins, was breached. Once the PIN codes were accessed, counterfeit cards were created and used to make illegal transactions all over the world. Subsequently, Lloyds TSB, Citibank, HSBC, Dubai Bank, the National Bank of Abu Dhabi and others stopped withdrawals from UAE-issued cards in several countries and put limits on local withdrawals.
Many, however, still reported large sums of money being siphoned off from personal accounts and the banks have assured their customers hit by this fraud that they will be fully re-funded. One victim, Miriam al-Hilali, told The National that the thieves appeared to know her personal details as the two sums of money taken out were just below her daily limit of $1,400. Text messages were sent by some of the banks to urge clients to change their PIN numbers when news of the fraud broke. This later led to an ultimatum by the banks that if their clients failed to change their PIN they would risk having their debit card blocked.
However, many customers complained of a delay in receiving the text message or of some banks not informing their clients of the large scale fraud that was occurring. Many of the banks affected obviously did not quite know how to handle the crisis and with miscommunication leading to complete confusion, some banks said absolutely nothing. The Central Bank of the UAE has now begun an investigation into this international fraud but has given out little public information.
Reports have begun to seep out that one bank had been identified as the location of the original security breach. However, thus far no bank has been named, no one has been arrested and confidence in the Central Banks’ ability to deal with this investigation is lacking. Thus, many of the major banks involved have decided to carry out their own investigation.
Estimates peg the money involved at tens of millions of dirhams, although no official figures, nor bank names, have been released. Both the way in which this fraud occurred and how it was dealt with subsequently, is a major blow to the UAE, and especially Dubai which is trying to be a global financial hub.
Banking – Bumps and knocks at SHUAA Capital
SHUAA Capital, the UAE’s largest investment bank with total client assets at about $2.7 billion, reported a $101 million loss for the first half of 2008; this after a $35 million profit in 2007. SHUAA announced that these losses were primarily due to the global market downturn affecting equity markets globally. The biggest losses came in the principal investment business where large capital market transactions have been delayed. These included a write-down of $21.4 million on structured products and fixed income securities exposed to the Lehman Brothers and one-time provision of $12.5 million attributable to Orion Holding Overseas.
SHUAA Capital Chairman Majid Saif Al Ghurair said “The unprecedented turmoil in global financial markets has dramatically impacted investor confidence and consequently the region’s equity markets. The effect on our results in the first half has been significant but we remain as confident as ever in the long term prospects for this region and in SHUAA’s ability to be able to deliver long term shareholder value given that we are diversified across six business lines.” He added, “SHUAA’s management has grown the company 20-fold over the past 10 years, but we are in a cyclical industry and while we remain on a solid footing, we are not immune to the world around us.”
These results follow news last month that Dubai’s financial regulator, DFSA, fined SHUAA Capital $950,000, for share price manipulation of DP world — $100,000 of which was for trying to block the investigation, the DFSA said.
DFSA’s Chief Executive David Knott said “the manipulation of markets for ulterior motives is a classic form of market abuse that is outlawed in all well regulated exchange traded markets. In this case SHUAA Capital artificially inflated the price of DP World shares and generated a false market in those shares. The seriousness of this offense was exacerbated by SHUAA Capital’s obstruction of the DFSA’s investigation … The DFSA emphasizes that DP World is entirely blameless in this matter and is not implicated in any part of the misconduct.”
The head of risk management for SHUAA was subsequently replaced. Despite this fine, and the report of substantial losses, the Dubai Banking Group has confirmed that it will take up a 32% equity stake in SHUAA Capital on October 31.
