DIFC Regulated License

The Dubai International Finance Centre (DIFC) formed in 2004 is a sought-after jurisdiction for financial and banking licenses. Since its start, DIFC has been home to many leading banks, financial institutions, and insurance companies, serving a large clientele in the region. DIFC follows international law, which has prompted many global investors to have their presence in DIFC and also supervises Dubai’s financial enterprises’ strategic growth, operational management, and administration.

HLB HAMT, as a leading business consultant in DIFC, has a team of capable financial specialists that give crucial advice to businesses looking to establish operations. The team assists with incorporation, government rules, and post-incorporation procedures, starting with consultation services and a fundamental foundation.

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    FinTech in DIFC

    Financial technology (FinTech) is an integral part of the financial services sector’s advancement. Fintech is progressing, with regulators and governments paying more attention to the influence that businesses will have on the regional economy. DIFC adheres to stringent data protection measures that are in accordance with international norms. DIFC, having been named one of the best ten fintech centres in the world, is ideally positioned to promote this expansion and act as a breeding ground to leverage its massive potential.

    1. Commercial Licenses: DIFC provides specific commercial licenses for FinTech companies, enabling them to function within the centre while benefiting from top-notch infrastructures at a low cost. These license holders will also have access to the DIFC work hub, which is a co-working space.
    2. Innovation Testing License (ITL): The DIFC’s regulatory authority, the DFSA, assists ITL owners in testing unique and innovative financial products, activities, and business ideas without being subject to regulatory requirements.

    DIFC features one of the most comprehensive FinTech and venture capital settings in the region, with cost-effective licensing choices, suitable laws, innovative programmes, and developmental start-up financing, since it is the region’s largest financial hub.

    DEWS (DIFC Employee Workplace Savings) 

    The DEWS plan, which was implemented in February 2020 for employees stationed in the DIFC, was the first of its type in the market to provide a systematic end-of-service benefits plan. Employees can effortlessly plan for their financial future with this well-funded and professionally sound contribution plan. DEWS also have a voluntary savings scheme that allows DIFC workers to contribute to their savings.

    By revising the end-of-service benefit plan to meet with worldwide retirement savings norms, the DEWS support employers and employees and also DIFC’s objective of driving the evolution of the finance sector in the region.

    Benefits of forming business in DIFC

    The DIFC venture is driven by an economic portfolio that focuses on the development and creation of financial markets throughout the GCC area. The DIFC was developed to host the nation’s financial sector that serves as a crossroad between Asia and Europe.

    The following are some of the benefits of forming a business in the DIFC:

    DIFC regulatory entities include:

    1. DIFC Authority (DIFC): The DIFC Authority, which was founded as a legal organization affiliated to the Government of Dubai under Dubai Law No. 9 of 2004, is in responsible of monitoring the operation and administration of DIFC.
    2. The Dubai Financial Services Authority (DFSA): This is a government agency that regulates the financial services industry in Dubai. The DFSA is the integrated regulator responsible for the authorization, licensing, and registration of institutions and individuals who intend to operate financial and operational services in or from DIFC.
    3. DIFC Courts (DIFC Judicial Authority): The statutory duty of the DIFC Courts is to properly execute DIFC’s civil and commercial legislation.
    4. The Registrar of Companies (ROC) is a government agency that oversees the registration of businesses. The ROC is in charge of providing advice, receiving, examining, and processing all applications filed by potential DIFC registrants wanting to establish a presence in the DIFC.
    5. Registrar of Securities (ROS): The ROS is in charge of documenting and registering security pledged against loans, guarantees, and other financial transactions, and thereby establishing priority.
    6. Registrar of Real Property (RORP): The RORP safeguards the interests of purchasers, sellers, and lessees.

    How to set up a company in DIFC?

    DIFC company registration, like any other business setting, is performed through a procedure that the firm owners are obligated to follow. When the processing of their DIFC company registration follows the right regulations, the businessmen’s schedule and timeframe for beginning their firm can be met.

    For setting up a business in UAE, there are two types of licenses available.

    1. Regulated License – This refers to any type of registration that is associated with banking and finance-related business operations.
    2. Non–Regulated License – This refers to any type of business registration that isn’t associated with banking or financial transactions.

    Businesses wishing to setup and do business in the DIFC must first apply for a DIFC entity’s incorporation or registration. They can do so by applying to the Registrar of Companies (ROC), who will assist, collect, examine, and verify all submissions from the applicants.

    Non-Financial & Financial services in DIFC

    Non-financial Service

    The most effective financial hubs generate a wide range of economic activities. Non-financial companies supply the service that main financial companies uses to perform profitably. Business consultants, legal companies, and professional service providers are among them. Nevertheless, not all of it focuses on work. These non- financial services contribute to the development of a recreation and lifestyle setting. Professionals seek a luxury environment, as well as personal services like tailoring, salons, gyms, retail outlets like restaurants and coffee shops, and even fine dining alternatives to amuse their clients. They also give non-financial activities to establishments like hotels and educational institutions too.

    Financial Service

    The Dubai Financial Services Authority, or DFSA, requires firms involved in obtaining financial services from the DIFC to file proposals. The sort of business that the applicant wants to run determines the type of license that is needed.

    It’s also worth noting that in order to obtain a full banking license (i.e., a DIFC Category 1 license), the DIFC entity must be either a branch or a subsidiary of a bank regulated by a regulator in a jurisdiction acceptable to the DIFC, or a joint venture between two or more banks regulated in a jurisdiction satisfactory to the DIFC. The kinds of financial activities that an Authorized Firm is authorised to offer to define the range and category of an Authorised Firm’s license. Let’s look at how financial services are categorized.

    • (Category 1) Accepting Deposits/Managing an Unrestricted Profit Sharing Account A Category 1 Authorised Firm is one that has been granted permission to provide the financial service of accepting deposits or managing a profit-sharing investment account (received on an unrestricted basis). Although an authorised Firm in this category may be licensed to provide other financial services, its authorization to accept deposits and/or manage a profit-sharing investment account is what distinguishes it as a Category 1 Authorised Firm.
    • (Category 2) Principal Investor (not matched)/Providing Credit This is a licensed authorised Firm that provides the financial services of dealing in principal investments and providing credit. In addition to this activity, an authorised Firm in this category may be authorised to conduct other Financial Services from Categories 3A, 3B, 3C, or 4, provided that it is not authorised to provide Financial Services from Category 1.
    • (Category 3A) Dealing in Investments as Principal/Dealing in Investments as Agent An Authorised Firm is permitted to take out one or more of the Financial Services of:
      1. Dealing in Investments as Principal (where it only does so as a Matched Principal)
      2. Dealing in Investments as Agent (where it only does so as a Matched Principal)

      An authorised Firm in this category may be permitted to undertake other Financial Services found in Categories 3B, 3C, or 4, but it may not conduct any Financial Services found in Categories 1 or 2.

    • (Category 3B) Providing Custody (for a Fund)/Acting as a Trustee of a Fund This type of authorised Firm is allowed to provide custody (but only for a Fund) and act as a trustee for a Fund. This type of authorised Firm can provide financial services in Categories 3C and 4, but not in Categories 1, 2 or 3A.
    • (Category 3C) Managing a Collective Investment Fund/Managing Assets An authorised Firm in this category may be licensed to provide one or more of the following Financial Services:
      1. Managing a Collective Investment Fund
      2. Managing Assets
      3. Providing Trust Services as a trustee of an express trust
      4. Providing Custody (other than for a fund), and
      5. Managing a Profit Sharing Investment Account (received on a restricted basis)

      Financial Services in Category 4 can be provided by an authorised Firm with a 3C license, but they cannot be provided in Categories 1, 2, 3A, or 3B.

    • (Category 4) Credit Arrangements or Investment Deals / Financial Product Advice
      1. Organising Investment Deals
      2. Recommending on Financial Products
      3. Arranging Custody
      4. Insurance Intermediation
      5. Insurance Management
      6. Operating an Alternative Trading System
      7. Providing Fund Administration
      8. Coordinating Credit and Advising on Credit
      9. Operating a Fund raising Forum, and
      10. Providing Trust Services
    • (Category 5) Islamic Financial Institutions
      An Islamic Financial Institution administers a profit-sharing investment account and conducts its whole operation in compliance with Sharia standards (received on an unrestricted basis).

    The Dubai Financial Services Authority (DFSA)

    The Dubai Financial Services Authority (DFSA), an independent regulator that awards licenses and controls the operations of all banking and financial institutions in DIFC, has been at the crux of the DIFC paradigm. The DFSA has figured prominently in ensuring that financial institutions have a strong, resilient, safe, and growth-oriented infrastructure for their operations. The DFSA takes a risk-based approach to regulation. The independent regulator focuses and prioritises its efforts on avoiding unacceptably high and needless risks. As a result, the DFSA is dedicated to achieving a high level of competence in all aspects of its administrative and consultative operations.

    Regulated license registration in DFSA

    Businesses must be approved and get a license from the DFSA in order to perform financial services in or from the DIFC. The DFSA issues authorization in the format of a license that outlines the types of Services that can be done. Businesses must be registered with the DFSA in order to conduct designated non-financial business. The DFSA performs its first evaluations as a risk-based regulator to verify that enterprises follow the DFSA’s ethical guidelines.

    It’s important to take the time to prepare all of the required papers and paperwork before submitting an application. It is critical to plan ahead of time, whether you are a new investment firm or an existing payment institution looking to expand your business in Dubai’s International Financial Centre.

    By using the most recent DFSA application forms, you can prevent having to redo the procedure due to obsolete requirements. Furthermore, confirm that the DFSA recognises the business operations to be offered and that they correspond to certain financial and associated services.

    In the United Arab Emirates, the procedure for obtaining authorization is as follows:

    To gain license from the relevant authority, an applicant company must go through a formal process.

    For example, obtaining approval from the DFSA entails the following steps:

    (a)Submitting a Letter of Intent – A Letter of Intent typically contains the following topics:

    • The applicant’s objective and the actions that will be carried out;
    • Grounds for establishing a business in the DIFC;
    • Corporate structure and founding directors
    • Resources and functions – which will be based in the DIFC entity and what their roles will be.
    • The need for permanent office space.

    (b) A Regulatory Business Plan must be submitted (RBP)(RBP)

    The RBP should include the plan and justification for establishing a DIFC operation, as well as how the company will be managed and controlled. The DFSA must comprehend the applicant firm’s business model in order to guarantee that it is permitted for the appropriate financial services, investment types, and client categories, as well as to examine the adequacy of the applicant firm’s resources. The applicant company will be required to:

    • Determine all financial services and other activities that will be provided;
    • Compile a list of all potential commercial and regulatory risks;
    • Describe in broad terms how it intends to monitor and manage these risks;
    • Account for any planned activities.


    (c) Additional DFSA Application Forms and accompanying paperwork must be submitted

    From the date of receipt of the applicant firm’s full and complete application, processing each application for authorisation.


    (d) Performing a thorough review procedure

    All applications are subjected to a thorough evaluation by the DFSA. Multiple rounds of follow-up questions, explanations, and even an interview to clearly understand the project and their duties are all part of this procedure.


    (e) In-Principle approvals are granted

    The DFSA issues an In-Principle Approval (IPA) after a successful assessment process. According to the IPA, the DFSA invites the user to the center if all of the IPA’s prerequisites are met.


    (f) ROC Process of DIFC

    The DIFC Registrar of Companies (ROC) is in charge of processing applications for legal organisations to be established in the DIFC. The DIFC Commercial License is issued at the successful completion of the procedure.

    Basic guidelines of financial categories

    The licensed firm may only execute the operations for which it has been officially authorised in each DIFC financial category. Authorized enterprises must obey the DFSA rulebook’s guidelines, which include the following restrictions:

    1. Clients may only be offered items or services that comply with the DFSA’s conduct of business client categorization rules.An authorised firm must guarantee that its business and financial operations are conducted in accordance with the DFSA and DIFC’s rules and regulations in all aspects. Breaching the laws and regulations may result in revoking the authorised firm’s license. This might be in relation to one or more of the company’s financial services. Such repercussions may also apply to authorised individuals or other persons performing any tasks in the authorised firm if the DFSA deems it essential. Any violation of the aforementioned people’ requirements empowers the DFSA to prevent them from executing their functions, or, in the case of authorised individuals, to suspend or revoke their status.

    Frequently Asked Questions – Regulated License

    1. How to set up an insurance advisory firm in UAE?

      To start an insurance business in Dubai, you must first register with the Dubai Economic Department and then receive a license from the Insurance Authority. The type of services supplied determines which operating license is awarded.

    2. How to apply for a regulated license in DIFC?

      The Department of International Financial Centre, or DIFC, performs a wide range of regulatory functions for the DIFC which are to help protect the financial system and markets in Dubai. As part of its duties to regulate licensing in Dubai, they issue licenses in order to carry out business in Dubai. It is necessary for any company that conducts business in Dubai to be licensed to do so by the DIFC. Given below are the stages for applying a license.

    3. How to establish a crowdfunding platform in UAE?

      It may seem like an impossible task, but establishing a crowdfunding platform in UAE isn’t as difficult as you might think.  Before establishing your crowdfunding platform in UAE, it’s best to formulate an idea for a project you want to fund. You can’t just launch a campaign for no reason – people want to know the purpose behind your project and what you hope to achieve by receiving donations. Anyone can now start their own crowdfunding campaign with the help of online platforms. These websites allow entrepreneurs to create profiles where they can post about their planned project, including videos, information about the product or cause, and a deadline for fundraising. A properly executed crowdfunding campaign can be very effective at raising funds. They allow you to connect directly with potential investors or customers, building your brand one person at a time.

    4. How to register a private equity firm in DIFC?

      In order to register a private equity firm in the DIFC, you will need to complete the following steps:

      • STEP 1 – Submission of application form.
      • STEP 2 – Provide necessary information about your company and provide copies of relevant documents when requested by the DIFC Authority.
      • STEP 3 – Pay for registration fee at any bank branch in UAE Dirhams or US Dollars via wire transfer/online banking/at any branch of Commercial Bank of Dubai or through credit card.
    5. How to set up financial services company in Dubai?

      To set up a financial services company in Dubai, a company needs to have a paid up capital of at least Dh500,000. It needs to be registered with the appropriate authorities and present basic documentation such as a certified copy of passport, trading license and memorandum and articles of association.

    6. How to setup a regulated license in ADGM?

      If you would like to set up a regulated ADGM license, it is best to start by consulting with the ADGM licensing and regulatory services. They will be able to tell you whether or not your product requires a license and how to go about getting one. Before they can help you, though, they will need an accurate description of your product.

    7. What are the procedures for regulated license in UAE?

      The United Arab Emirates has been working to build a regulated environment for the financial industry. In order to issue a license in the United Arab Emirates, businesses must be registered with their respective central bank as well as sign a Memorandum of Understanding (MoU) with Dubai International Financial Centre Authority (DIFCA). The MoU outlines particular objectives of any given company’s activities and can also allow certain companies to make use of foreign currency transactions.

    8. How to establish a representative office in Dubai?

      A Representative Office (Rep Office) is permitted to carry on a very narrow set of activities described as ‘marketing’ of financial services or financial products offered in a jurisdiction outside the DIFC by a ‘related party’ (i.e., its head office, another branch of the head office or a Group member).The ‘marketing’ activities of a Rep Office can include one or more of the following:

      1. Providing information about financial services or products offered by its head office or a Group member outside the DIFC;
      2. Engaging in Financial Promotions (such as holding events and seminars) relating to the financial products or financial services referred to above; and
      3. Making introductions or referrals to its head office or a member of its Group for the financial services or financial products offered by them outside the DIFC

      Activities not permitted

      Arranging deals

      Advising

      Promoting a third–party products

      Marketing financial products of a related party located in DIFC

      Compliance Requirement

      1. Officers required:
      2. A resident authorized representative
      3. Annual AML return filing

      Requirements

      1. A detailed business plan
      2. Corporate documents attested from UAE Embassy in Country of origin
      3. Passport copy of authorized representative (authorized representative must be a resident)
      4. UBO passport copy
      5. Financial Regulatory Authority certificate of the parent

      General Procedure

      1. Submission of intent letter to DIFC
      2. Initial application with DIFC
      3. Submission of Business plan to DFSA
      4. Initial Application with DFSA
      5. Arranging Meeting with DFSA for presentation
      6. Obtaining in Principal approval from DFSA
      7. Identifying office space
      8. Completion of registration of companies with Registrar for companies (Office set-up, Visa, bank account opening etc.)
      9. DFSA inspections
      10. Authorization from DFSA

      Estimated Timeline

      Usually, the time taken for a representative office is 3-5 Months from the date of submission of interest. However, the timeline depends on the approval from authority.

    9. What is technology license in DIFC?

      The Dubai International Financial Centre (DIFC) is in the process of issuing licenses to companies in the digital technology sector. They are doing so by way of a licensing framework, which has been designed to encourage innovation and entrepreneurship in different areas. This framework will comprise two different types of license: The Digital Technology Innovation License (DTLI) and the Digital Innovation Business License (DIBL). There are 37 criterias that need to be met for any applicant wishing to obtain one, but these licenses will provide greater legal protection for technology-related matters.

    10. How to get central bank approval for a regulated license in UAE?

      The Central Bank of UAE is the country’s financial regulator and is responsible for protecting and developing the economic and financial system of UAE. It oversees the operations of all the banks in the country, as well as operating licenses for financial institutions.UAE has recently announced plans to tighten its already existing regulation for issuing licenses for businesses and financial institutions in the country.Banks are required to submit detailed plans detailing their plans for finances, risk management, effective internal controls for operations for approval. These are all determined by regulation No. 1 of 2002. The regulation was put into place to ensure respect for UAE’s international commitments with regard to transparency, accountability and compliance with international standards in banking systems.

      Based on the review of the regulatory business plan, an in principle approval will be granted, allowing the applicant to proceed with the remaining formalities, such as appointing officers and locating office space. The central bank will grant the final license if all of the conditions have been met.

    11. How to register a foundation in DIFC?

      The DIFC Authority has issued the following guidelines to help you set up your own foundation in Dubai International Financial Centre.

      Type of registration: The DIFC Authority recognizes two types of foundations, private and public, which have different requirements for operation and registration. Private foundations must be created to provide a specific charitable or social benefit to a defined group of people, while public foundations are established with a social agenda that can span across borders and geographical regions.

      Scope of work: To set up a private foundation you must demonstrate written evidence of the intended use of the registered funds.

      Determine duration: The term for which the foundation is to remain active can vary depending on its purpose for public and private.

      Obtain approval: The foundation must be registered with the DIFC Authority and be approved by its client. Approval is granted after consideration of the foundation’s objectives, activities and benefit to the DIFC community.

      The Dubai International Financial Centre (DIFC) has established a new license for startups, entrepreneurs, and technology enterprises. The new Innovation License will bring new sorts of enterprises to the Centre and is a crucial project for His Highness Sheikh Mohammed bin Rashid Al Maktoum’s Dubai Future District. The new license will encourage regional innovation, creativity, and entrepreneurship by providing commercial licensing choices at a reduced cost. Companies will also get discounted entry to DIFC co-working spaces.

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