DIFC licensing criteria for financial institutions issued

The Regulatory Authority of the DIFC has issued an Information Paper on its proposed criteria for institutions and individuals that wish to operate in the DIFC.

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By  Massoud Derhally Published  August 27, 2002

The Regulatory Authority of the DIFC has issued an Information Paper on its proposed criteria for institutions and individuals that wish to operate in the DIFC.

The full details of the Authority’s licensing regime will be finalised later in 2002, but the Authority is now able to provide guidance on the main elements of the structure it expects to have in place.

“We expect to be able to make application forms for licensing available towards the end of September 2002 and to commence preliminary processing of applications during the last quarter of 2002,” said Phillip Thorpe, chief commissioner for the regulatory authority.

“The Authority will then be in a position to authorise those institutions and individuals, and issue licenses, from the beginning of 2003. We are currently seeking comments from institutions and their advisers on the licensing criteria and will expect to issue further updates on licensing, and a related paper on the fee structure for the Regulatory Authority, in due course,” added Thorpe.

The over-riding aim of the Authority is to have licensing standards that match or exceed those applying in other leading financial centres. Institutions or individuals wishing to operate in the DIFC will need to be able to show that they meet high standards in their business dealings and have the qualifications and competence appropriate to the roles that they seek to perform.

Specific requirements on institutions will include the need to provide the Authority with information on its business plan, the key individuals employed and major shareholders and controllers of the institutions, the operating systems and controls for the institution, the compliance systems and internal audit functions, the anti-money laundering procedures, the financial position of the institution and the regulatory history of the institution or its regulatory ‘track record’.

In addition, individuals being employed by licensed institutions will also need to be registered, if they perform certain specified functions.

Those individuals will include the institution’s managing director or branch manager, the individual responsible for compliance oversight, the individual responsible for systems and controls, the money-laundering reporting officer, or any officer undertaking a significant management function in respect of a regulated activity, a settlement function, the solvency aspect (for insurers) or in respect of customer relations.

As with firms, there will be high standards for these individuals relating to their honesty, integrity and reputation, their competence and capability, and their personal financial soundness.

The Regulatory Authority anticipates that institutions will either be established within the DIFC through a subsidiary incorporated in the DIFC, or will operate as a branch of an institution licensed elsewhere.

Where the institution takes the latter route, the DIFC Regulatory Authority will expect to work closely with the institution’s “home regulator” to ensure complete regulatory oversight of the institution and that full co-operation between the regulatory bodies occurs.

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