Dubai Elaborates On New Regulatory Structure

by Lorys Charalambous, Tax-News.com, Cyprus

04 March 2002

The Dubai authorities have announced further details of the Dubai International Finance Centre (DIFC), whose creation was foreshadowed in February by Anis Al Jallaf, its Chairman designate. He said then that the venture - which follows the completion of such projects as the Dubai Internet City, the Dubai Media City, and the introduction of e-government in the region - will focus on asset management, Islamic finance, regional financial exchange, reinsurance and back-office operations, and will be formed in strict compliance with international standards. Mr al Jallaf said it was hoped that the project would make the jurisdiction a global location of choice for international financial institutions, and would become a regional hub for the Gulf, Central Asia, and North and East Africa.

Now Mr Jallaf has said that the DIFC will will have an independent regulatory agency which will adopt a two-tiered governance structure consisting of a 'Regulatory Council' and a 'Regulatory Commission', ensuring a transparent separation of execution and oversight functions.

"The Regulatory Council will ensure that the agency acts in accordance with its regulatory objectives and principles. Its members will comprise international legal, regulatory and accounting experts and representatives from regulators of selected financial jurisdictions," al Jallaf said.

The Regulatory Commission, consisting of executive members only and appointed by and accountable to the Regulatory Council, will execute all regulatory functions. The agency will adopt a model of principle-based primary legislation, and clear and specific secondary rules to ensure simplicity of framework and certain degree of flexibility. In addition, it will have the active involvement of key global practitioners and ex-practitioners through its Regulatory Council and DIFC Advisory Board.

The DIFC regulatory regime will be in strict compliance with international standards and recommendations set by organisations such as BIS, OECD (FATF), and IASB, and will adopt a statutory regime that would facilitate the exchange of tax information with countries with which its tenants are headquartered.

Financial institutions operating in the DIFC are required to have a distinctive track record of professional conduct and be headquartered in a country that is a member of the Financial Action Task Force on Money Laundering (FATF) or from a country that is in compliance with the recommendations of FATF. Institutions that have publicly subscribed to the more rigorous guidelines of Wolfsberg Principles on anti-money laundering will also qualify.

The agency will look to the boards and senior management of regulated firms to ensure financial soundness and proper conduct of their business, by acting with prudence and integrity, by developing appropriate management systems and controls and by ensuring the competency of staff.

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