How and why to set up in the Dubai International Financial Centre

Why choose the UAE?

Ranked 16th in the 2020 World Bank Ease of Doing Business guide, the UAE is considered by many as the ideal hub for their business operations. Its geographic location perfectly lends itself to act as a regional base to serve the high growth markets of the Middle East, Africa and South Asia.

That said, companies looking to launch or grow a business in the UAE must consider some important factors before getting started, including where to set up.

The Dubai International Financial Centre (DIFC) is an appealing option. In recent years, it has cemented its position as a leading international financial hub in the Middle East. According to data published by the DIFC, it achieved a record number of company registrations in H1 2020 (310 new companies registered; an increase of 25% on prior year) and it is now home to 820 financial related firms; a 22% increase year-on-year and 11% increase on FY2019.

This article provides a broad overview of the options available to those wishing to set up a company in the DIFC.

Regulated/financial entities

The Dubai Financial Services Authority (DFSA), the independent regulator of financial service providers in the DIFC, supervises and regulates more than 600 firms.

New applicants wishing to apply to the DFSA for a regulatory licence are required to go through an application process; the specific requirements and timelines in respect of which are determined by the prudential category of licence involved. Existing Authorised Firms also may apply to the DFSA to upgrade or vary their licence.

The DFSA licensing regime allows firms to be regulated as banks, credit providers, asset/fund managers, brokers/dealers, trust service providers, investment advisors, etc.

Below are the steps involved with a typical DFSA licensing process:

1. Engaging in initial dialogue with the DIFC Business Development team and DFSA Authorisations team regarding proposed business activities.
2. Preparing the Regulatory Business Plan for the DFSA licence application.
3. Completing various application forms as required for the applicant entity and associated Authorised Individuals.
4. Drafting and finalising the required policies, procedures and manuals including, without limitation, the compliance manual, AML manual, risk management policy, compliance monitoring programme, business continuity plan, etc.
5. Responding to queries from the DFSA further to their review of the submitted application.
6. Satisfying conditions stipulated as part of DFSA’s in-principle approval and seeking final regulatory licence.

An Authorised Firm can be set up as a stand-alone entity, a subsidiary, or a branch of a regulated financial institution. Regulatory capital requirements for these firms (where applicable) are determined by the prudential category that they fall under. 

Firms are also able to apply to the DFSA for an endorsement on their licence to provide financial services to retail clients, to hold or control client assets and to provide financial services as an Islamic Financial Institution.

Non-regulated/non-financial entities

The DIFC also attracts a variety of non-regulated/non-financial entities. These include holding company structures, single family offices, foundations, managing offices and other forms of prescribed companies.

Setting up a non-regulated/non-financial entity in the DIFC involves liaising with the DIFC Business Development team and making an application to the DIFC Registrar of Companies.

Recent developments

• The DIFC’s FinTech Hive was launched in 2017 and has gradually grown to become a leading innovation centre in the region. The Hive saw a record number of applications in 2020 for its annual accelerator programme (620 applications received against 425 received in 2019 with H1 2020 seeing the FinTech Hive triple in size).
• The DFSA allows FinTech firms to apply for a restricted (regulated) licence through its Innovation Testing Licence (ITL) programme. This enables firms to test their new products/services without being subject to all regulatory rules and requirements. Testing can typically be carried out for up to 12 months. The process consists of applying first to be accepted into the DFSA’s ITL Cohort (they run a summer and winter cohort each year), followed by submitting an ITL application. The DFSA review timeframe is 8 weeks and the current ITL fee is USD 5,000 (covering the application process and testing period).
• Recently, the DFSA has significantly amended its rules and started accepting applications for Money Service Businesses including for those wishing to be account information service providers (AISP) and payment initiation service providers (PISP).
• The DFSA introduced crowdfunding rules in 2017 for loan and investment-based crowdfunding. These rules were further strengthened in 2019.
• In August 2020, the DIFC launched its Innovation Licence to attract startups, entrepreneurs and technology firms. The licence comes with subsidised licensing and leasing options and will allow the firm to have access to DIFC’s Common Law based legal and regulatory framework, intellectual property and data protection regime.

How we can help

Equiom Corporate Services (Middle East) Ltd is located at Liberty House in the DIFC. Our team includes experienced compliance professionals who have assisted numerous firms/new applicants in the DIFC with licence applications (both financial and non-financial), licence variation applications, drafting/reviewing/updating compliance and AML related policies/procedures, compliance and AML training, and compliance reviews. We are available to assist you throughout the licensing and incorporation process and can also provide firms in the DIFC with Compliance Officer and MLRO services on an outsourced basis. Please get in touch with us at middleeast@equiomgroup.com to discuss how we can help you.