AR

About Supervision
Firms
Market Institutions
Recognised Bodies / Members
DNFBP
Registered Auditors
Approved Individuals
AML, CTF & Sanctions Compliance
Collective Investment Funds

about supervision

The DFSA operates a risk-based supervision framework.

The DFSA monitors compliance with the Laws and Rules including provisions relating to anti-money laundering. It supervises Authorised Firms, Authorised Market Institutions, Authorised Individuals and Ancillary Service Providers.

The DFSA also undertakes market monitoring and research in order to identify, assess and address any developments either within or outside the DIFC which may pose a risk to the centre or a particular section of the DIFC community.

 

Being Supervised

The DFSA operates a risk-based supervision framework, with the primary focus of engaging with firms through ongoing site visits and transaction testing. In order to build strong relationships with firms, we base our supervision on the following principles:

 

Relationship building with firms

The DFSA’s primary focus is building a constructive relationship with firms based primarily on site visits and transaction testing. The DFSA seeks to establish and maintain an ongoing dialogue with a firm’s senior management in order to develop and sustain a thorough understanding of the firm’s business, systems and controls.

The DFSA also uses communication tools including SEO Letters.

 

Establishing and operating a risk-assessment framework

The DFSA aims to identify and target areas that pose the highest risks to its objectives. The DFSA adopts a continuous risk management cycle comprising the identification, assessment, prioritisation and mitigation of risks. General risk factors are also included in the risk management process, including external factors that apply either to particular sectors of the regulated community or to the entire community.

 

Supervisory tools

The DFSA has a range of supervisory tools available to diagnose and monitor risks, and to prevent them from occurring. It chooses appropriate tools for each situation, with a view to cost-effective regulation for the DFSA and the firm, and to preserve and enhance the marketplace. Increasingly, the DFSA uses thematic reviews as a key tool to assess risk in the marketplace.

 

International co-operation

The DFSA works closely with international regulators, in particular with home regulators of entities and individuals. The focus of this co-operation is to ensure that mutually satisfactory standards are maintained and to promote the exchange of information.

 

Anti-Money Laundering and Know-Your-Customer

The DFSA places great emphasis on adherence to Anti-Money Laundering and Know-Your-Customer regulations.

Authorised Firms

In order to meet its objectives, the DFSA requires an open, transparent and co-operative relationship between itself and the Authorised Firm.

The DFSA seeks to maintain an up-to-date knowledge of an Authorised Firm’s business. However, an Authorised Firm is also required to keep the DFSA informed of significant events, or anything related to the firm of which the DFSA would reasonably expect to be notified.

The nature and intensity of the DFSA’s relationship with an Authorised Firm will depend on a number of factors. The DFSA’s level of supervision will be proportionate to the risks which the Authorised Firm poses to the DFSA’s objectives and will emphasise the responsibilities of the Authorised Firm’s senior management in identifying, assessing, mitigating and controlling its risks. The greater the impact and probability of the Authorised Firm’s perceived risks, the more intensive the supervisory relationship will be.

The DFSA encourages open and proactive communication with all Authorised Firms. To achieve this, the DFSA follows a multi-channel approach to communication with Authorised Firms:

  • Relationship managers are the primary contact point with Authorised Firms, through regular visits and on-site risk assessments.
  • From time-to-time, the DFSA issues letters addressed to Senior Executive Officers (SEOs) regarding specific issues. Refer to SEO Letters.
  • On a quarterly basis, the DFSA hosts Outreach sessions to discuss specific regulatory issues in an open forum. Refer to Outreach Sessions.
  • The DFSA also issues Alerts regarding possible fraud issues and other regulatory warnings. To view or subscribe to Alerts, click here.
  • The DFSA reviews its regulatory regime on an ongoing basis and updates its Rulebook as and when required. To view or subscribe to notification of changes, click here.
  • Firms are also required to complete regular reports. To access the EPRS system, click here.
  • Firms are required to file Suspicious Transaction Reports immediately. To access contact information for filing of STRs, click here

For more information regarding being supervised by the DFSA, please refer to the DFSA Rulebook and the Regulatory Policy and Process Sourcebook.

 

Expanding your business

An Authorised Firm wishing to change its scope of licence or obtain specific endorsements (Islamic or Retail), should complete the relevant application form available in the AFN Module of the DFSA Rulebook. As a first step, the firm should discuss their intentions with their DFSA relationship manager.

We aim to process such applications in a timely and efficient manner.

 

SEO Letters

​The DFSA is committed to open and transparent communication with Authorised Firms. From time-to-time the DFSA issues letters to the Senior Executive Officers (SEOs) of Authorised Firms, which alert firms to specific issues which might arise in the marketplace or as part of our regulatory scope.

Although these letters are not legally binding, we do expect firms to consider their content and react appropriately.

To subscribe to receiving an e-mail update when new SEO letters are issued, please click here.

 

Current SEO Letters

Previous SEO Letters

17 November 2014: The DIFC Authority's Announcement - DIFC Registrar of Companies (Registrar) Role Regarding Foreign Account Tax Compliance Act (FATCA)

1 May 2014: United States Foreign Account Tax Compliance (FATCA)

13 March 2014: Retail Foreign Exchange ("RFX") Transactions in the DIFC

27 February 2014: Retail Foreign Exchange Risk Disclosure - in English

27 February 2014: Retail Foreign Exchange Risk Disclosure - in Arabic

27 February 2014: Retail Foreign Exchange Risk Disclosure - in Tagalog

27 February 2014: Retail Foreign Exchange Risk Disclosure - in Chinese

27 February 2014: Retail Foreign Exchange Risk Disclosure - In Hindi

29 January 2014: Thematic Review - Corporate Governance

4 February 2014: Awareness Survey of the US Foreign Accountant Tax Compliance Act

5 December 2013: Remuneration Thematic Review

4 November 2013: Trading Desk Survey

9 July 2013: Implementation of the EU Alternative Investment Fund Managers Directive

6 December 2012: New and Enhanced PIB Module of DFSA Rulebook – Roll-Out and Implementation

28 November 2012: Markets Law 2012 Article 38 Declaration

4 November 2012: Public Offers of Securities in or from the Dubai International Financial Centre (DIFC)

21 October 2012: Outcome of Thematic Review - Client Take-On Processes and Suitability

13 March 2012: Thematic Review - Client Acceptance and Take-On Processes

8 February 2012: Dubai Financial Services Authority Stakeholder Survey - 2011

2 March 2011: UNSCR 1970 (2011)

27 January 2011: MENA Region PEPs

3 November 2010: New Risk Management Concerns

17 August 2010: Outcome of Thematic Review - Client Assets and Insurance Monies

29 July 2010: Notification of Theme Review - Corporate Governance

20 June 2010: United Nations Security Council Resolution 1929 (2010) and Related Matters

17 March 2010: Outcome of Thematic Review - Anti-Money Laundering and Counter Terrorist Financing

17 March 2010: AML/CTF Alert - Financial Task Force Public Statements on High Risk Jurisdictions

20 December 2009: Outcome of DFSA's Controls Questionnaire 2009

16 September 2009: Outcome of Theme Review - Outsourcing of Functions

23 June 2009: Importance of UN Security Council Sanctions and Customer Due Diligence

11 June 2009: Enhancements to our Supervisory Programme for Authorised Firms 

20 April 2009: Suitability & Fair Treatment of Customers Theme Review

19 August 2008: DFSA Stakeholder Survey and the executive summary of the Chant Link Report

12 May 2008: Compliance with Federal Law Provisions on Dealing in Dirham and Deposit Taking

12 May 2008: Capital Adequacy Planning and Monitoring Processes Theme Review

6 January 2008: Financial Action Task Force Statement on Iran

1 November 2007: Changes in the Frequency and Scope of On-site Risk Assessments for Low-Risk Firms

6 September 2007: Results of AML/CTF Theme Review

Supervised Firm Contact Form

Before you contact us, please read our Frequently Asked Questions page, as it might be able to answer your question.

If you have a complaint, please visit the DFSA Complaints Portal for more information.​​​​

Market Institutions

The DFSA has regulatory oversight of the two Authorised Market Institutions that operate in the DIFC, namely NASDAQ Dubai (formerly known as DIFX) and the Dubai Mercantile Exchange (DME).

For more information, please refer to the AMI module of the DFSA Rulebook and the Regulatory Policy and Process Sourcebook.
 

recognised bodies/members

Supervision as a Recognised Member

Recognised Members are required to notify the DFSA immediately of any material changes which could impact their recognition status within the DIFC. This includes making copies available of any information provided to financial services regulators outside of the DIFC.

Supervision as a Recognised Body

A Recognised Body is required to deal with the DFSA and their home Financial Services Regulator/s in an open and co-operative manner. This includes keeping the DFSA promptly informed of significant events, as well as submitting a copy of annual reports and accounts.

The DFSA relies upon the home Financial Services Regulator to act as the primary regulator of the Recognised Body. The focus of the DFSA’s interest will be on activities carried on in the DIFC or activities which have an impact on the DIFC.

Designated Non-Financial Business or Profession (DNFBP)

The DFSA employs a risk-based approach to the supervision of a DNFBP.  Our supervisory approach is proportionate to risks posed by a DNFBP to the DFSA objectives.

The AML Module of the DFSA Rulebook contains the Rules applicable to a DNFBP.

Registered auditors

The DFSA employs a risk-based approach to the regulation of Auditors through the use of a continuous risk management cycle, incorporating both planned and event-driven activities.

With respect to planned activities, it is anticipated that each Auditor will be subject to an onsite assessment every three years. This can be varied according to risk and impact factors. The onsite assessment will be conducted in conjunction with the Association of Chartered Certified Accountants who will provide monitoring and technical advice.

The following regulatory tools are employed in the supervision of Registered Auditors:

  • Post Registration Meeting with Auditor
  • Onsite Assessments
  • Desk-Based Reviews
  • Event-Driven Reviews
  • Theme Reviews

Refer to the GEN Module in the DFSA Rulebook and the Regulatory Policy and Process Sourcebook.

Approved Individuals

 

As members of Authorised Firms, Authorised Individuals are assessed against their fitness and propriety. However, it is essential that an Authorised Individual remains fit and proper throughout their tenure.

Refer to the section on Becoming Authorised for more information on Authorised Individuals, as well as the General Module (GEN) in the DFSA Rulebook and the Regulatory Policy and Process Sourcebook.

AML, CTF & Sanctions Compliance

Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Compliance

Money laundering and terrorist financing can destabilise communities, economic sectors, or whole national economies. Criminals and terrorist networks may be able to carry out their criminal and potentially destructive activities through undetected financial support structures.

The DFSA is committed to maintaining a supervisory regime that acts as a significant deterrent to any criminal elements, including money launderers and persons wishing to assist, in any way, acts of terrorism.

The DFSA’s supervisory regime for Anti-Money Laundering, Counter Terrorist Financing (CTF) and Sanctions Compliance applies to:

  • An Authorised Firm other than a Credit Rating agency
  • An Authorised Market Institution
  • A DNFBP
  • An Auditor

Collectively referred to as Relevant Persons.

The DFSA commits to keeping its regulatory regime in line with the standards set by key international standard-setters including the Financial Action Task Force (FATF).

The AML Module of the DFSA Rulebook contains all of the DFSA requirements on Anti-Money Laundering, Counter-Terrorist Financing and relevant sanctions in one module. It has been designed to provide a single reference point for Relevant Persons. The various obligations and requirements set out in the AML Module takes into consideration that different Relevant Persons have different AML risk profiles. Therefore it is important for Relevant Persons to familiarise themselves with the AML Module and assess the extent to which the Rules apply to them.

The requirements and obligations contained in the AML Module include:

Senior Management Responsibility: The senior management of a Relevant Person is ultimately responsible for compliance with the AML Module. In carrying out their responsibilities every member of a Relevant Person’s senior management must exercise due skill, care and diligence.Anti-Money Laundering policies and procedures: Relevant Persons must establish and maintain effective Anti-Money Laundering policies, procedures, systems and controls designed to prevent opportunities for money laundering in relation to the Relevant Person and its activities.

Money Laundering Reporting Officer: Relevant Persons must nominate a person as the Money Laundering Reporting Officer (MLRO). This person must be an individual who is ordinarily resident in the United Arab Emirates.

Risk Assessments and Customer Due Diligence: Relevant Persons must conduct risk assessments of their business and customers. The findings of these assessments should be used to determine the level of Customer Due Diligence (CDD) that should be undertaken. Generally, CDD is information and documents obtained about a customer and may assist a DNFBP to mitigate any AML risks identified with undertaking business with a customer.

Suspicious Activity Reports (SAR): Where a Relevant Persons or one of its employees knows or suspects, or has reasonable grounds for knowing or suspecting that a person is engaged in or attempting money laundering, terrorist financing it must report the matter internally to its MLRO. The MLRO must investigate and where required submit an SAR to the AMLSCU, and notify the DFSA.

AML Training and Awareness: Relevant Persons must provide AML training to all relevant employees at appropriate and regular intervals. This training should be tailored to the level of exposure to AML risks and issues.

The assessment considered 29 of the 30 IOSCO Principles (one Principle pertaining to payment systems was not applicable), and concluded that the DFSA had "Fully Implemented" 27 Principles and has "Broadly Implemented" the remaining two Principles.

Reporting Requirements to the DFSA: Relevant Persons are required to submit an Annual AML return to the DFSA. This return covers how the Relevant Person has complied with its AML obligations and is due 4 months after the end of the Relevant Person’s financial year end.

Federal AML Laws and Bodies

The AML Module of the DFSA Rulebook cannot be read in isolation from relevant UAE legislation.The UAE criminal law applies in the DIFC and, therefore, persons in the DIFC must be aware of their obligations in respect of criminal law as well as these Rules contained in the AML Module of the DFSA Rulebook. Relevant UAE criminal laws include Federal Law No. 4 of 2002 regarding the Criminalisation of Money Laundering, Federal Law No. 1 of 2004 regarding Combating Terrorism Offences and the Penal Code of the United Arab Emirates. The Rules in the AML Module of the DFSA Rulebook should not be relied upon to interpret or determine the application of the criminal laws of the UAE. Any criminal investigation and resulting penalties would be performed by UAE authorities.

The legislation referred to above can be found using the below links:

AML, CTF and Sanctions Resource

The information contained in this page and the associated links are designed to assist Relevant Persons to comply with the DFSA’s AML Module. The content of this resources page is not Guidance for the purposes of Article 2 of Schedule 1 of the Regulatory Law 2004.

The material contained in this page may be updated from time to time. Users of this resources page are advised to visit this page and its attachments periodically.

The topic areas covered in this page include:

  • Applying a Risk-Based Approach
  • Suspicious Activity Reports
  • Politically Exposed Persons (under construction)
  • Customer Due Diligence (under construction)
  • Sanctions and other International Obligations (under construction)
  • AML Training and Awareness (under construction)

The DFSA is committed to maintaining this page as a useful and valuable resource to Relevant Persons. Should you have any comments, feedback on the contents of this page or suggestions for further topics, please do not hesitate to contact the DFSA via the Supervised Firm Contact Form.

Suspicious Activity Reports (SAR)

The requirement to lodge a suspicious transaction report with the Central Bank of the UAE Anti-Money Laundering and Suspicious Cases Unit (AMLSU) is contained in UAE Federal Law No. 4 of 2002 regarding criminalisation of money laundering.

The AML Module of the DFSA Rulebook also contains a requirement that Relevant Persons report suspicious activities, including transactions, to the AMLSU. A Relevant Person is also required to notify the DFSA immediately following the submission to the AMLSCU.

The details of the AMLSCU are:

Central Bank of the UAE, AMLSCU, PO Box 854, Abu Dhabi, UAE.

Tel: +971 2 666 8496 | Email: cbuaeamlscu@cbuae.gov.ae

1. What is a Suspicious Activity Report (SAR)?

The Federal Law No. 4 of 2002 regarding Criminalisation of Money Laundering creates an obligation on all Financial Institutions to report suspicious transactions to the AMLSCU. The DFSA uses the term SAR to refer to such reports lodged by Financial Institutions.

The AMLSCU has made clear through various public outreach events that SARs should not be restricted to reporting of suspicious transactions.



SARs should include:

  • Any suspicious transactions
  • Any attempted suspicious transactions
  • Any suspicious activity or behaviour, including the actions of customers or potential customers



SARs should be submitted using the approved form and include the following:

  • All information that supports your SAR
  • Any additional information which would help the AMLSCU to further its investigations
  • Any additional information which could link the SAR to other SARs and other investigations if possible

Information contained in an SAR is confidential and Article 20 of the UAE Federal Law No. 4 of 2002, provides Relevant Persons with a protection from any criminal, civil or administrative liability which may result from providing the required information, provided it is submitted in good faith.

Following the SAR submission a Relevant Persons will often have on-going dialogue with the AMLSCU as the investigation continues and more information may be requested. The AMLSCU will provide the Relevant Person with a final outcome when a conclusion is reached.

The AMLSCU may instruct you on how to continue your business relationship with the subject of an SAR. If the subject of the SAR expresses a wish to move funds before you receive instructions from the AMLSCU, you should immediately contact the AMLSCU for further instructions.

Under Article 15 of the UAE Federal Law No. 4 of 2002 the failure to report an SAR to the AMLSCU by those who are aware of a suspicious activity or transaction may be a criminal offence, punishable by a fine or imprisonment or both.


 

Tipping Off

If a Relevant Person submits an SAR, the Relevant Person or its employees must not inform or tipoff the subject of the SAR that a report has been lodged, or that the person is being investigated. Tipping Off is an offence created by Article 16 of the UAE Federal Law No (4) of 2002 and is punishable by a fine or imprisonment or both.

 

Where can I find the SAR form?

Please click here for the soft copy (Word version) of the SAR Form that can be filled in and completed.

Please click here for a copy of the SAR Form as per the UAE AML Laws. The SAR Form can be located on the last page of this document - page 26.

 

3. Best practices when submitting an SAR?

Please click here to view a sample SAR form and how to respond to each section.

Please consider the following “Do’s and Don’ts” when submitting an SAR:

DO:

  • Do submit all supporting documentation with your SAR
  • Do submit an SAR for suspicious behaviour only i.e. no transaction is required
  • Do provide a soft copy SAR form, rather than submitting a handwritten SAR
  • Do submit an SAR within a reasonable timeframe of identified suspicious
  • Do include all relevant details in your SAR including source of funds, linked accounts, etc
  • Do report confidentially without involving unrelated people as it could alert the customer and be considered as “Tipping Off”
  • Do maintain your SARs as per the record keeping requirements
  • Do send additional SARs when further information comes to light in order to supplement the original suspicion; Please ensure that you make references to previous submissions
  • Do provide your contact details so that the AMLSCU can contact you with follow up questions
  • Do provide a clear trail of your cause for suspicions and as much detail as possible about the person(s) involved. Do notify the DFSA of any SAR you have lodged with the AMLSCU

DO NOT:

  • Do not terminate the relationship intentionally prior or post raising the SAR unless there is a logical and/or unavoidable reason behind such action. Please wait for an official response from the AMLSCU.
  • Do not insert “refer to documents attached” under “Source of Suspicion.” A brief explanation in the space provided is required and identify the suspicion clearly and concisely. Do not forget to notify the DFSA when you have lodged an SAR with the AMLSCU.



4. Ideal SAR submission process:

*This flowchart is a simple representation of the typical process for lodging an SAR by a Relevant Person.

UN Security Council Resolutions and Sanctions and Other International Sources

The DFSA requires Relevant Persons to establish and maintain systems and controls to obtain and make appropriate use of relevant resolutions or sanctions issued by the United Nations Security Council. You may access current UN Security Council Resolutions using the following link: www.un.org/sc/committees/

Please note that DFSA will not issue any notifications in relation to the frequent amendments to the UN Consolidated List made by the United Nations Sanctions Committee. Accordingly, DNFBP need to ensure that their systems and controls are able to monitor any relevant changes.

Other International Sources

The DFSA expects Relevant Persons to obtain and take into consideration the broad range of information and tools used by competent authorities and international organisations. Relevant Persons may obtain relevant information from consolidated lists issued by international government agencies of which further details are contained below.

The DFSA encourages all Relevant Persons to regularly check and monitor these lists, where applicable, as a matter of good practice.

Foreign AML/CTF lists

The following lists published in the United Kingdom, United States of America, and by the European Union provide details of persons and entities identified by relevant authorities as being connected with illegal activity.

Consolidated list for financial sanctions in the European Union (EU)

The EU list is the consolidated list of persons, groups and entities subject to the Common Foreign and Security Policy related financial sanctions by the European Banking Federation, the European Savings Banks Group, the European Association of Co-operative Banks and the European Association of Public Banks ("the EU Credit Sector Federations") and the European Commission.

HM Treasury lists (UK)

The HM Treasury lists include those persons whose assets have been frozen in the UK on the direction of HM Treasury.

Office of Foreign Asset Controls – OFAC lists (US)

The US list consists of names that have been issued by the US authorities. They are individuals and organisations that are suspected as being connected with terrorist activities and other illegal activities.

Please note that some of the names on the US list appear also - either directly or as aliases for those names - on the HM Treasury lists or other lists.

Collective Investment Funds

Key Features of the DFSA Funds Regime

Guide to the DFSA Fund Regime, please click here to view

Q&A - The DFSA's Collective Investment Fund Regime, please click here to view

The DFSA introduced its Collective Investment Funds regime (the Funds regime) in 2006. It was designed to provide adequate investor protection, while meeting international standards for regulation

Some of the key features of the DFSA's Funds regime are as follows:

  • A Public Fund regime, which provides greater protection to retail investors through requirements such as the independent oversight of a Fund and detailed disclosure in a Prospectus;
  • An Exempt Fund regime where Funds enjoy a fast-track notification process, where the DFSA aims to complete the notification process within a period of 5 days, with lesser regulatory requirements than a Public Fund;
  • A Qualified Investor Fund (QIF) regime, which provides proportionate regulation, allowing flexibility for QIF Managers and QIFs, by relying on key requirements in the Collective Investment Law and the DFSA Rulebook. The regime requires self-certification regarding the adequacy of systems and controls. QIFs enjoy a fast-track notification process where the DFSA aims to complete the authorisation process within a period of 2 days;
  • Domestic Fund Managers (i.e. DFSA-licensed Fund Managers) are DIFC-based and are able to establish and manage Funds in the DIFC, as well as in jurisdictions outside the DIFC;
  • Fund Managers coming from acceptable jurisdictions are able to establish and manage Funds in the DIFC under certain circumstances;
  • DFSA-licensed Firms are allowed to market and sell units in a wide range of Foreign Funds in, or from, the DIFC;
  • A competitive fee structure is applied to Fund Managers and Funds;
  • Fund Managers of Umbrella Funds have the flexibility to use the Protected Cell Company (PCC) structure for open-ended Umbrella Funds. This gives investors in each Sub-Fund of the Umbrella legal segregation from liabilities arising in other Sub-Funds and the Umbrella;
  • Bespoke Shari'a governance requirements applying to Islamic Funds, which promote high Shari'a governance standards with flexibility of application;
  • Bespoke regulatory requirements to accommodate specialist Funds, such as Private Equity, Property, REIT, Money Market and Hedge Funds1; and
  • The DFSA also regulates the key players in the Fund management service sector, such as Fund Administrators, custody providers and Trustees. This is to ensure adequate investor protection by promoting high industry standards that meet international best practice.
  • To establish and manage a Fund in the DIFC you need to be either:
  • A Domestic Fund Manager (i.e. a DFSA-licensed Fund Manager); or
  • An External Fund Manager.

Domestic Fund Manager

To become a Domestic Fund Manager i.e. to obtain a DFSA licence, you need to demonstrate to the DFSA that:

  • You have adequate systems and controls to manage the type of Fund you propose to establish; and
  • The individuals performing certain functions within the firm, such as its Board members, senior management and key control functions (e.g. compliance and Anti-Money Laundering), meet the relevant suitability and integrity criteria.

Once you have been granted a licence, the DFSA will supervise on an ongoing basis your activities which relate to the Funds you manage.

External Fund Manager

Under the applicable requirements, a Fund Manager from an acceptable jurisdiction may establish and manage a Domestic Fund established or domiciled in the DIFC, without having to obtain a DFSA licence, provided:

  • it is a body corporate;
  • It manages the Domestic Fund from a place of business located in a jurisdiction which is either:
  • It subjects itself to the DIFC Laws and Courts; and
  • It appoints a DFSA-licensed Fund Administrator or Trustee, who will be required to undertake certain functions. Such functions include acting as the local agent of the External Fund Manager to receive, process, and deal with the DFSA for regulatory processes. The DFSA-licensed Fund Administrator or Trustee will also have to undertake certain investor-relation functions relating to the Fund (those include, but are not limited to, maintaining the Unitholder register and making the Fund's Prospectus available to investors).
Types of Domestic Funds

There are two types of Funds that can be established in the DIFC, and be managed by either a DFSA licensed Fund Manager or an External Fund Manager:

Public Fund regime

  • A Public Fund regime provides greater protection to larger numbers of investors (and may include retail investors) through requirements such as the independent oversight of a Fund and detailed disclosure in a Prospectus.

Exempt Fund regime

  • An Exempt Fund enjoys a fast-track notification process, where the DFSA aims to complete the process within a period of 5 days, with lesser regulatory requirements than a Public Fund.

QIF regime

  • The Qualified Investor Fund (QIF) regime provides proportionate regulation, allowing flexibility for QIF Managers and QIFs, by relying on select key requirements in the Collective Investment Law and the DFSA Rulebook. The regime requires self-certification regarding the adequacy of systems and controls. QIFs enjoy a fast-track notification process where the DFSA aims to complete the process within a period of 2 days

Specialist Funds

  • Note the specialist Fund requirements do not apply to QIFs.

Islamic Funds

  • The Fund Manager of an Islamic Fund needs to have a licence that authorises it to conduct Islamic Business, or an Islamic Window, before setting up an Islamic Fund. The Fund Manager must, in respect of the Islamic Fund:
  • Appoint a Shari’a Supervisory Board (SSB) to the Fund. It may use the Firm’s SSB for Shari’a governance purposes of the Islamic Fund;
  • Establish and maintain Shari’a compliant systems and controls and an Islamic financial business policy and procedures manual for the Fund; and
  • Ensure that the Constitution and Prospectus of the Fund are approved by the Fund’s or Firm’s SSB.

Private Equity Funds

These are generally Exempt Funds and taking account of the practices and associated risks, the Fund Manager of an Exempt Fund, for example:

  • Is not required to entrust the Fund Property to an Eligible Custodian; instead it must appoint an Investment Committee to the Fund; and
  • Must make certain disclosure in its Prospectus relating to how the Fund’s assets are held.

Money Market Funds

All Money Market Funds (i.e. Funds investing in high quality deposits and debentures to preserve the capital of the Fund and provide daily liquidity, while achieving returns that are in line with money market rates) must be structured as Variable Net Asset Value Funds only. Money Market Funds must only invest in certain investments.

Property Funds

All Property Funds (i.e. Funds investing predominantly in real estate or real estate-related assets) must be closed-ended Funds. In addition to being a closed-ended Fund, a Property Fund which is a Public Fund must:

Invest only in Real Property or Property Related Assets, but may retain cash, government and public Securities, up to a maximum of 40%;

Be an Investment Company or Investment Trust;

Be listed, within six months of its establishment, either on an Authorised Market Institution or an Exchange in a Recognised Jurisdiction;

Value the Fund property annually on the basis of an independent valuation, and before acquiring or disposing of any asset; and

Limit its aggregate borrowings to 50% of the gross asset value of the Fund.

Property Funds – Real Estate Investment Trusts (REITs)

REITs are a sub-set of Property Funds, which are designed for income generation. A REIT must, in addition to being closed-ended:

  • Use only Investment Company or Investment Trust as the fund vehicle;
  • Be a Public Fund that is listed and traded on an Authorised Market Institution;
  • Distribute 80% of its audited annual net income to Unitholders;
  • Limit its aggregate borrowings to 50% of the gross asset value of the Fund; and
  • Invest up to 30% of its total assets in ‘property under development’.

In addition to the above specialist classes of funds, the DFSA Fund regime also has specific provisions dealing with Umbrella Funds, Feeder Funds and Fund of Funds.

Domestic Fund Vehicles

Three types of Fund vehicles can be used to establish a Domestic Fund in the DIFC. These are Investment Companies, Investment Trusts and Investment Partnerships.

Each has its unique features, with the most popular to date being the Investment Company model, with Trust structures predominantly utilised for Property Funds and Limited Partnerships being utilised for Hedge Funds and Private Equity Funds.

An Investment Company will need to be incorporated in the DIFC and the Fund Manager must be a corporate director of the Investment Company. An Investment Company established as an Umbrella Fund can also use the PCC structure.

An Investment Trust will need to be established by trust deed between a Fund Manager and a Trustee. A Trustee can be a DFSA licensed Trustee or a custody provider, or a person regulated and supervised in a reputable jurisdiction for custody or depository services. The Trustee is responsible for the safe-keeping of Fund Property and the maintenance of the Unitholder register, and must monitor whether the Fund is managed in accordance with the Trust Deed and the applicable laws.

An Investment Partnership is a Limited Partnership registered in the DIFC, comprised of a General Partner and Limited Partners. The General Partner must be authorised by the DFSA to act as the Fund Manager of the Fund.

External Fund

Domestic Fund Managers are permitted to manage a Fund in a jurisdiction outside the DIFC (i.e. an External Fund), if you are proposing to establish an External Fund, the DFSA will assess the desirability of the relevant jurisdiction in terms of its Financial Action Task Force compliance and whether you have adequate systems and controls to address any risks arising from having the Fund established in that particular jurisdiction.

Fees for Fund Managers and Funds

​Firms will find the costs competitive and comparable with other jurisdictions, as follows:

There are no fees directly applicable to the External Fund Manager's business. However it will of course be responsible for the payment of all Fund related fees payable to the DFSA.

Marketing Funds

The marketing of both Domestic and Foreign Funds are based on generally accepted principles of disclosure through Prospectus requirements. However, the level of Prospectus disclosure required for Public Funds, which are open to more than 100 investors and/or Retail Clients, is higher than the disclosure requirements for Exempt Funds, which are open only to professional investors.

Foreign Funds

Foreign Funds can only be marketed in or from the DIFC by DFSA licensed Firms holding advisory or arranging authorisations. Such Firms can now market units of Foreign Funds if one of the following criteria is met:

  • The Foreign Fund is a regulated Fund in a jurisdiction included in the DFSA's Recognised Jurisdictions List (available on the DFSA website) and the Fund is a Designated Fund in that list; or
  • The Fund Custodian/Investment Manager can meet the required criteria; or
  • The Firm makes a suitability recommendation of the investment in the Units of the Foreign Fund to the particular investor, in light of that investor's investment objectives and circumstances; or
  • The Foreign Fund is open to 100 or fewer investors each of whom meets the Professional Client test and makes a minimum subscription of USD $50,000 and is not offered to investors by way of public offer.

Property Funds cannot be marketed unless they meet specific criteria including 60% or more of assets invested in Property, the Fund is closed ended, the units are either listed or traded in a Recognised Jurisdiction or offered only by means of private placement.

Foreign Funds which cannot be marketed to retail investors in the home jurisdiction of that Fund are prohibited from being marketed to retail investors in or from the DIFC.

Representative Offices can also market Foreign Funds in or from the DIFC.  However it should be noted that the approaches which can be used by Representative Offices are far more restricted to that noted above for advisory / arranging firms.  All Representative Offices should refer to the Representative Office Module of the DFSA Rulebook to understand the limited approaches which can be adopted.

Reporting to the DFSA: Form CIR - Notification of the marketing and selling of Funds

CIR 15.1.10 requires certain information on the marketing of Funds to be reported to the DFSA by Authorised Firms. This information is required to be reported by completing the Form CiR – Notification of the marketing and selling of Funds.

The purpose of this form is to assist an Authorised Firm with its reporting requirements in the Collective Investment Rules of the DFSA Rulebook in relation to the marketing and selling of all Foreign Funds and Domestic Funds it carries on in or from the DIFC.

The report covers the same period for all firms – the preceding calendar year – and is required to be submitted to the DFSA by the 31st of January each year. The form should be submitted to dfsafunds@dfsa.ae

EU Alternative Investment Fund Managers Directive

Given the global nature of activities conducted through the DIFC, the European Union's Alternative Investment Fund Managers Directive ('AIFMD') will affect a number of Firms in the DIFC who manage and/or market investment funds that have a connection to the EU. The DFSA has received a number of questions about how AIFMD is implemented in the UAE and the DIFC.

As EU legislation, AIFMD cannot be interpreted or enforced by the DFSA. We are aware that a number of professional advisers (law Firms, etc.) have been briefing clients on the potential impact of the AIFMD and we would expect this to continue. In the meantime, however, the DFSA has worked to make sure that it can share regulatory information from the DIFC. The DFSA has entered into a separate information sharing Memorandum of Understanding on AIFMD with 28 of the European Economic Area Regulators noted below.

Bilateral MoUs with European Economic Area Regulators under the Alternative Investment Fund Managers Directive

  1. Finanzmarktaufsicht (Austria)
  2. Financial Services and Markets Authority (Belgium)
  3. Financial Supervision Commission (Bulgaria)
  4. Cyprus Securities and Exchange Commission (Cyprus)
  5. Czech National Bank (Czech Republic)
  6. Finanstilsynet (Denmark)
  7. Estonian Financial Supervision Authority (Estonia)
  8. Finanssivalvonta (Finland)
  9. Autorité des marchés financiers (France)
  10. Hellenic Capital Market Commission (Greece)
  11. Pénzügyi Szervezetek Állami Felügyelete (Hungary)
  12. Fjármálaeftirlitið (Iceland)
  13. Commissione Nazionale per le Società e la Borsa (Italy)
  14. Central Bank of Ireland (Ireland)
  15. Finanšu un kapitāla tirgus komisija (Latvia)
  16. Finanzmarktaufsicht (Liechtenstein)
  17. Bank of Lithuania (Lithuania)
  18. Commission de Surveillance du Secteur Financier (Luxembourg)
  19. Malta Financial Services Authority (Malta)
  20. Finanstilsynet (Norway)
  21. Polish Financial Supervision Authority (Poland)
  22. Comissão do Mercado de Valores Mobiliários (Portugal)
  23. Romanian Financial Supervisory Authority (Romania)
  24. Narodna banka Slovenska (Slovak Republic)
  25. Comisión Nacional del Mercado de Valores (Spain)
  26. Finansinspektionen (Sweden)
  27. Autoriteit Financiële Markten (The Netherlands)
  28. Financial Conduct Authority (United Kingdom)

Considerations for DIFC Firms

Although the DFSA is not in a position to interpret the AIFMD, firms may wish to consider the following points:

  • if the DIFC Fund manager is part of a larger operation/group which spans across the EU, it will need to determine whether any of its Fund management services in the EU may be captured under AIFMD;
  • whether delegation arrangements in respect of management activities create any issues against the requirements of the AIFMD;
  • if there are any other non-EU entities (in other third countries) that perform delegated functions, and whether the authorities in those countries have a cooperation agreement with the respective EEA regulator in place;
  • whether an EU member state where the DIFC Fund manager wishes to market a Fund has a private placement regime that the DIFC AIFM may use;
  • the requirements of any relevant national private placement regimes; and
  • whether the Firm need to comply with AIFMD disclosure and transparency provisions.

Form CIR – Notification of the marketing and selling of Funds

The Form CIR – Notification of the marketing and selling of Funds, please click here to view.

Recognised Jurisdiction List

The DFSA's Recognised Jurisdiction List, please click here to view.

Leaflet: A Guide to the DFSA Funds Regime

A Guide to the DFSA Fund Regime, please click here to view.

Q&A – The DFSA’s Collective Investment Fund Regime

The DFSA's Collective Investment Fund Regime Q&A, please click here to view.

Structure Chart of the DFSA's Investment Fund Regime

Structure Chart of the DFSA's Investment Fund Regime, please click here to view.