A former partner at global accounting firm Ernst & Young has won $11m in damages and expenses after whistleblowing on money laundering at a gold refinery in Dubai.
The high court in London ruled on Friday that EY had repeatedly breached the code of ethics for accountants in its work for a client, precious metal dealer and refinery Kaloti Jewellery International.
Amjad Rihan claimed he was forced out of EY after voicing concerns over irregularities at United Arab Emirates-based Kaloti in 2013.
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Rihan’s audit of Kaloti in 2012 found that the firm had paid out $5.2bn (£4bn) in cash in 2012, which he claimed was evidence of money laundering. EY, however, didn’t report the activity to the authorities.
High court judge Timothy Kerr ruled that EY had helped conceal the results of Rihan’s audit into Kaloti’s business practices. The firm, Rihan alleged, had paid billions of dollars in cash for gold without adequately checking its origin, and bought gold bars from Morocco coated in silver to avoid export restrictions. Precious metals had also been obtained from Sudan, the Democratic Republic of the Congo and Iran without due diligence.
Kerr’s 133-page ruling stated: “The EY organisation was supposed to have a written whistleblowing policy, though I have no evidence that it had one.”
“It is generally known to professional persons such as accountants that to become a whistleblower often involves a major risk of financial loss through subsequent ‘unemployability’,” Kerr said.
After telling EY about his concerns, Rihan claimed he was ordered to return to Dubai but, fearing for his and his family’s safety, he resigned and, in 2014, made whistleblowing disclosures. In his claim, he said he had struggled to find work after being driven out of EY.
With the precious metals industry under scrutiny over the use of gold to fund organised crime and its role in conflicts and human rights abuses, Rihan’s allegations in 2014 were seen as particularly serious.
Last year, a BBC Panorama investigation revealed that the smuggled gold Rihan uncovered at Kaloti was owned by a criminal gang that laundered money for British drug dealers. Twenty-seven members of the money laundering gang, working for French company Renade International, were jailed in France in 2017.
The gang had collected cash from drug dealers in the UK and other European countries and had laundered the dirty money by buying and selling black market gold.
Kaloti, which was the UAE’s largest gold refiner in 2013, has not yet commented, but has previously denied wrongdoing. However, in 2015 it was found to be buying gold from Sudan, which was then under US sanctions, and the firm lost its accreditation.
EY, one of the world’s big four accounting firms, said it was surprised and disappointed by the ruling. It said it would not comment further given its wish to appeal.
“We will appeal and, therefore, not comment in detail,” EY said in a statement. “It was the work of an EY Dubai assurance team that uncovered serious irregularities and reported them to the proper authorities.”
“Their work ultimately resulted in sanctions against the refiner and contributed to significant changes in the sourcing of precious metals and the regulation of refiners in Dubai.”
A Reuters investigation last year found that the UAE is the destination for billions of dollars’ worth of gold smuggled from across Africa.
The high court awarded Rihan $10.8 million in damages and £117,960 in expenses.
Liz Gardiner, chief executive of whistleblower advice body Protect, said: “We’re pleased to see this award to Amjad Rihan, who courageously blew the whistle on serious financial irregularities and who suffered career-long losses as a result. A whistleblower who had exhausted internal processes, he acted reasonably in bringing this global scandal to public attention via the media and the judge said he would have had a strong whistleblowing claim. His employer owed him a duty of care, and failed in that duty.
While this was not a claim under the whistleblowing law (The Public Interest Disclosure Act 1998, Pida), nevertheless the judge took into account the principles of Pida when assessing whether Amjad acted reasonably. We’re also pleased to see the judgment accepts that the public interest should not be constrained by what may be an offence in other jurisdictions. Pida states that a disclosure is not protected if the whistleblower commits an offence in making it – but today’s judgment clarifies that should only apply to offences under the laws of Great Britain.”
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