The saga around the launch of a family office connected to Dubai’s ruling family raises the glaring question as to why the government isn’t doing the same kind of due diligence it asks of banks.
It all started in March when finews.asia reported on the setting up of a new family office in Hong Kong by Sheikh Ali Al Maktoum, a nephew of Dubai’s ruler.
The usual generic, prosaic financial market fanfare was accompanied by a city government announcement, the nephew being paraded as the third speaker at the Wealth for Good summit, following in the footsteps of movie mogul Jeffrey Katzenberg and NBA Hall of Famer Dwayne Wade.
Possible Pop Star
Then, the whole thing started to unravel. The opening was postponed at the last minute after the daily newspaper and online website «South China Morning Post» appeared to discover in early April that the Sheikh bore a «striking resemblance» to a singer-songwriter known as Alira – an enthusiastic Philippine fan base and all in tow.
The family office website went blank, and everything seemingly stopped. Questions were asked and they became increasingly sharp, with the closeness of his relationship to the royal family even being probed, as a washup of the general situation by the «Hong Kong Free Press» then indicates.
New Name
That was followed by silence – until now. All of a sudden everything is back on, according to the «SCMP», and the office will open as if nothing had happened – if under a different name to attract less scrutiny.
That is all well and good except that it seems inconsistent at best that the government doesn’t appear to have done the work it constantly hounds banks to do.
Nothing Due
Originally, it didn’t deem it necessary to do any due diligence before allowing the Sheikh to speak at the wealth summit in March, the «SCMP» maintained then, as it was «challenging to scrutinize each person individually».
That might be true if the person was relatively famous worldwide and there to make a speech and stop at that. But this individual, and the wider family, ostensibly intend to open a bricks-and-mortar operation on the ground that invests $500 million.
Not a Great Look
Moreover, it is not a good look considering that the Hong Kong Monetary Authority (HKMA), the city’s de facto banking regulator, hounds each and every bank to do that kind of due diligence on every single client, particularly the riskier and wealthier ones.
That seems to be slowly dawning on the government, particularly as the city’s secretary for Financial Services and Treasury Christopher Hui Ching told city lawmakers on Wednesday, as the SCMP also reported, that any capital was welcomed in Hong Kong «as long as lawful and rule-compliant».
Hard to Do
That sounds innocent enough in theory, but that «rule-compliant» phrase has caught many off guard in the past. It often proves unbelievably challenging in practice, not least given the office is more than likely going to have to open several commercial banking accounts and individual accounts, unlikely to be pure retail ones, at the very minimum to get the operation off the ground, pay salaries, and other daily matters.
On the face of it, he is more than likely to be deemed both the beneficial owner and a PEP. That means that any self-respecting bank will have to trawl through the mass of adverse news while asking for watertight identification and documentation of family relationships, sources of wealth, and sources of funds.
Banking Groundhog Day
If he is rated a PEP, and the ultimate beneficiary of the family office assets, that also means he will be a high-risk client, which means that every new year will feel like banking Groundhog Day, with the whole process starting again from zero almost as if it had never happened.
The Sheikh himself seems to be taken aback by all the scrutiny, with the CEO of the prince’s future office, Eleanor Jane Mak, saying in an exclusive interview with the «SCMP» that she hoped that his imminent return to Hong Kong would serve «to clear the air» after all the unflattering publicity, adding that no newspaper in the Middle East «would discuss the royal family in this way».
More Scrutiny Ahead
To do that, the office has now apparently hired public relations professionals, and that might assuage a few things here or there on the sidelines publicly, quietening things down.
But in all likelihood, a few months down the line, and with the benefit of hindsight, everyone involved with the family office, including the Sheikh, will realize that the scrutiny to date has been child's play in comparison to what's ahead.
