Going for Gold: Ex-EY partner awarded £8.8m in gold smuggling case against Big Four firm

May 26, 2020

2 min read

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What's going on here?

Amjad Rihan, an ex-Ernst & Young (EY) partner and whistleblower, sued the firm for an alleged cover-up on gold smuggling for suspected money laundering purposes in an audit report for Kaloti Jewellery International (Kaloti), the United Arab Emirates’ largest gold refiner in 2013.

What does this mean?

The defendants in the case were EY Global, EY Europe, the Middle East and Africa and EY Global Services. Rihan was based in EY’s Dubai office, which had been engaged by gold bullion company Kaloti, to audit and assess its regulatory compliance in Dubai. He resigned in 2014, due to pressure for threatening to report Kaloti after seeing the report’s findings.

In 2013, Kaloti received gold coated in silver from Morocco but declared as gold to Dubai authorities, to evade export restrictions. EY also discovered precious metals sourced from Sudan, Iran, and the Democratic Republic of the Congo, without due diligence. Rihan further alleged evidence of money laundering, because 40% of Kaloti’s business was conducted in cash, equivalent to £4.2bn. As the report misrepresented these facts, Rihan leaked them to the public.

EY accepted its report on Kaloti revealed severe non-compliance with Dubai Multi Commodities Centre (DMCC) regulations. High Court judge Justice Kerr found by deliberately misreporting the way Kaloti ran its business in 2012 in their report, EY breached their duty of care as auditors.

What's the big picture effect?

For professionals becoming a whistleblower involves major financial risks. It often results in unemployment because whistleblowers are forced out by their companies or resign to avoid breaching their duties, as in Rihan’s case. His allegations were particularly serious. They came when the precious metals industry was already under scrutiny for its ties to organised crime, conflict, and human rights abuses. 

Rihan’s big reveal had an impact on both Kaloti and whistleblowing. His actions moved Kaloti’s practices into the public eye. After a second audit by Grant Thornton, the company was “delisted” by the DMCC, which prohibited their shares from being traded and removed Kaloti’s authorisation as a registered gold trader. The ex-partner’s case shows future whistle-blowers that they may be rewarded for reporting corruption in the long run, but the consequences of unemployment and exhaustive court battles may not always be worthwhile. 

Rihan’s case is an exception to the rule of corporate corruption, being a rare instance where commercial scandals are reported. Although Rihan’s reveal secured a big payoff in the end, it took several years too long to end Kaloti’s prohibited practices.

Report written by Evania D’souza

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