Deloitte Middle East is set to face trial over its audits of the collapsed Lebanese Canadian Bank (LCB), after it was found to be involved with money laundering by drug cartels and terrorist financiers.
In February 2018, a judge of the Dubai International Finance Court dismissed arguments by Deloitte that a claim against them relating to their audits of LCB had no real prospect of success.
Deloitte initially appealed the decision but has since abandoned its appeal which means the claim against it will now be processed.
The claimants, which include Nest Investments SAL, allege that Deloitte knew, or should have known, the LCB was involved in criminal activity.
The claim also alleges there were failings relating to Deloitte’s audit of Tabadul, A UAE-based subsidiary of LCB.
A spokesperson for the claimants said: “These allegations are serious in nature – involving complicity in money laundering and terrorist financing through the LCB, and serious audit failings in relation to Tabadul in the UAE.
“The defendant plays a prominent role in the Middle East audit market and remains the auditor in liquidation at the bank. It is therefore important that the allegations against Deloitte and Touche (Middle East) are heard and answered in a competent court.”
Criminality at LCB was uncovered in an investigation by the US FBI and Drug Enforcement Agency (DEA), which found that the bank and its management played a ‘key role’ in facilitating money laundering for Hezbollah-controlled organisations.
According to the US Financial Crimes Enforcement Network, almost $230m of illicit funds had passed through LCB’s accounts while Deloitte was acting as its auditor.
In 2011, the US Treasury identified LCB as a ‘financial institution of primary money laundering concern’ which resulted in the bank being banned from the USD clearing system globally.
The International Accounting Bulletin has requested comment from Deloitte.