A regulator in the UAE has hit Damas, a jewellery company with headquarters in Dubai, with unprecedented penalties over charges of corporate corruption.

The Dubai Financial Services Authority (DFSA), a regulator, blamed Damas for failing to apply sufficient internal oversight and for not preventing unauthorised transactions totalling $165 million.

The sanctions imposed by the watchdog include the resignation of the company's entire board of directors, fines totalling $3.7 million, and a 10-year ban on the three Abdullah brothers who oversaw the family-run business, from running any company in Dubai.

Damas was started by their grandfather over a century ago in the Syrian capital, Damascus.

The ruling also requires that the Abdullah brothers fulfil an earlier promise to repay nearly $100 million in cash and 1,940kg of gold improperly taken from the company, according to DFSA's regulatory filings.

Message sent

Paul Koster, the DFSA's chief executive, said the penalties are the regulator's most severe since it was founded in 2004, and were meant to send a message that Dubai's regulatory standards aimed to emulate those of major financial centres.

Speaking to Al Jazeera's Dan Nolan, he said: "Clearly the authorities have said we want to be more transparent. There is a crackdown on corruption and we play our role in that and I think there is a message that Dubai will make changes that are required."

Referring to the Damas case, Koster said: "You need to make disclosures when you take money from a company that is publicly owned. When you're a full 100 per cent owner, it's different, but in this case they had only 35 per cent and should have disclosed these withdrawals.
 
"I think it's a lesson for family-owned companies - as soon as you move to the market, you have different requirements, one of them being obviously transparency, but also that you have governance systems in place that protect shareholders."

Long overdue

Financial analysts say the move is long overdue in the UAE where under-the-table dealings have helped fuel the economy.

"It's a positive step forward but I think it's a shock for a lot of people because I think the economy here is many ways still depends on these more nefarious ways to make money," Andrew Critchlow, a Dow Jones financial analyst, told our correspondent.

"Dubai is changing and it is changing very quickly in ways that people had not expected."

Critchlow said that with family-run operations making up more than 70 per cent of Dubai's businesses, the Damas sanctions could be the first of many.

"I think this is scratching the surface of what we can expect in the future," he said.

Source: Al Jazeera & agencies