In brief
- The FCA has taken enforcement action against three former senior figures at Dolfin over a scheme that generated £35.5 million in fees by enabling clients to bypass the £2 million Tier 1 investor visa investment requirement for a £400,000 fee.
- The former chief executive and finance director received bans and fines of £324,800 and £122,000 respectively. Roman Joukovski, whom the FCA found acted as a shadow director, as he had no formal role at Dolfin, has referred his case to the Upper Tribunal.
- The case highlights the FCA’s scrutiny of misconduct beyond financial services rules when assessing honesty and integrity, alongside its use of supervisory powers ahead of enforcement action.
Overview
The FCA has banned three former senior figures at Dolfin Financial (UK) Limited (Dolfin) after finding they ran a scheme, which generated £35.5 million in fees, that helped clients bypass UK visa rules. Two of the individuals, the former CEO and former Finance Director, also received fines of £324,800 and £122,000 respectively. A third individual, Roman Joukovski, was deemed a Shadow Director, despite having no formal role at Dolfin. Mr Joukovski has appealed his Decision Notice to the Upper Tribunal.
Background
Dolfin provided custody, brokerage and asset management services to private clients, financial advisers and institutional investors in respect of a range of investments and products. It also provided services to 'Tier 1 investor visa clients' who were introduced by immigration agents. Those services were originally conventional in nature, but in November 2015, Dolfin commenced the development of a new business line to be offered to prospective clients. In short, the business offered loans to individuals to satisfy the Home Office's Tier 1 investor visa programme criteria, which required foreign nationals to meet certain financial eligibility criteria.
Between July and November 2019, the FCA undertook supervisory work and identified significant concerns regarding the services provided to Tier 1 investor visa clients, and Dolfin's management of conflicts of interest. In particular, Dolfin had distributed a large number of bonds to foreign nationals, that had been issued by companies in which Dolfin or its directors had an interest (the Conflicted Securities). Based on those concerns, on 19 December 2019, the FCA and Dolfin agreed a set of voluntary requirements (VREQs), which prevented Dolfin from accepting new Tier 1 investor visa clients and from distributing the Conflicted Securities.
In March 2021, the FCA then used its own-initiative powers to prevent Dolfin from carrying out any regulated activities. In that period, the FCA's concerns expanded to encompass the fact that Dolfin appeared to have operated the visa loan business which enabled clients to obtain a Tier 1 investor visa while circumventing, and falling significantly below, the financial thresholds in the immigration rules (foreign nationals were able to obtain a tier 1 investor visa for a fee of £400,000 rather than making a minimum £2 million investment in the UK). The FCA found that the scheme was inherently artificial, because it enabled Tier 1 investor visa applicants to purchase Conflicted Securities with a nominal value of £2 million for the £400,000 fee.
The FCA found that Mr Joukovski was central to the design, implementation and oversight of the visa loan business, and deliberately concealed from the regulator both his involvement with Dolfin and his role in the scheme. Further, the FCA found that Mr Joukovski did not take steps to ensure that Dolfin complied with its Principle 11 obligations in that it did not give the FCA notice that Dolfin was commencing provision of the visa loan business. The FCA also noted that there was a clear need for Mr Joukovski to ensure that Dolfin took appropriate steps to ensure that the visa loan business was lawful and to assess the risks associated with it, but failed to take any steps to do so. As a result of its findings, the FCA found that Mr Joukovski demonstrated that he is not a fit and proper person on the basis that he lacks honesty and/or integrity.
The FCA found that Mr Nagy, the former chief executive, played a leading role in creating and operating the scheme, while Mr Maraj, the former finance director, was responsible for the finances. Mr Nagy and Mr Maraj also deliberately concealed its true nature from both the FCA and the Home Office.
Comment
First, this case is an interesting example of the FCA considering conduct that, on one view, is as much a breach of immigration rules as the FCA's rulebook, and demonstrates the manner in which the FCA will consider misconduct more broadly in assessing an individual's honesty and integrity. The case marks a significant expansion of the FCA's enforcement focus and serves as a warning to firms operating at the intersection of financial services and other policy areas, in this case, immigration policy.
Second, this matter is a good example of the FCA using its more enhanced supervisory powers, prior to conducting an Enforcement investigation. In this case, Dolfin was subject to a VREQ and then used its own initiative powers, long before issuing the Final Notices and Decision Notice.
Finally, the referral by Mr Joukovski to the Upper Tribunal while Mr Nagy and Mr Maraj have received Final Notices, gives rise to two interesting points:
- There is a clear risk of inconsistent findings in circumstances where Mr Nagy and Mr Maraj have already received significant fines, and been prohibited from performing any function in relation to any regulated activities. If the Upper Tribunal overturns the FCA's findings, this will be an inherently unfair outcome.
- Managing the rights of the individuals to anonymity in the other Final Notices and Decision Notice has apparently proved to effectively be impossible. As one would expect in a matter of this nature, large extracts of the Notices are substantively similar to one another, and refer to 'Individual A', 'Individual B' and 'another individual', yet they are referred to by name in identical text in the other documents. Plainly in such circumstances, the purported 'anonymisation' afforded to them is of no value at all.