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, in line with its risk-based approach, performs periodic risk assessments of Registered Auditors based on a risk cycle. These risk cycles are determined based on the level of activities a Registered Auditor undertakes in the DIFC and their individual significance to the DFSA’s risk tolerance. The following are the standard risk cycles for Registered Auditors:
 

Type of Registered Auditor Risk assessment cycle
Auditor of Public Listed Company Once every year
Big4 Registered Auditors Once every two years
All Others Once every four years








Audit Monitoring Reports
Annually, the DFSA issues a public report detailing our findings from audit inspections carried out in previous calendar year. These reports also present other relevant quantitative and qualitative data which could be used by the Registered Auditors for internal training purposes.  

• Audit Monitoring Report 2016 - 2017. Click here to view in English.
• Audit Monitoring Report 2015. Click here to view in English and here for Arabic.
• Audit Monitoring Report 2014. Click here to view in English and here for Arabic.
• Audit Monitoring Report 2013. Click here to view in English and here for Arabic.
• Audit Monitoring Report 2008-2012. Click here to view in English and here Arabic.

Practice Notes
An Auditing Practice Note highlights new, emerging, or otherwise noteworthy circumstances that may affect how a Registered Auditor conducts an audit in the DIFC. A Registered Auditor should determine whether and how to respond to these circumstances based on the specific facts presented. A Practice Note is non-binding and does not have the status of a DFSA Rule or Guidance.

• Auditing Practice Note No 1 - Understanding the audited person’s Regulatory Environment (January 2017).

Annual Audit Outreach
Annually, the DFSA conducts a dedicated outreach for its Registered Auditors. The purpose of this session is to present the inspection findings of the previous inspection cycle while providing a platform for Registered Auditors to discuss topical matters of interest. The event is intended for:
• Managing Partners
• Audit Principals registered to conduct audits of Authorised Firms, Authorised Market Institutions, Domestic Funds and Public Listed Companies
• Money Laundering Reporting Officers of Registered Auditors
• Audit managers who have worked, or are expected to work on audits of Authorised Firms, Authorised Market Institutions, Domestic Funds and Public Listed Companies

Breakfast Briefings
Breakfast Briefings is a joint initiative between the DFSA and the Institute of Chartered Accountants in England and Wales (ICAEW) to discuss and raise awareness of key pertinent matters affecting the accounting and auditing profession. The target audience is DFSA Registered Auditors and ICAEW Members. To-date, the following Breakfast Briefings have been organised:
• The role of audit monitoring in improving the quality of, and confidence in the financial information in the Middle East (March 2010).
• The future of audit (September 2010)
• Importance of Professional Accounting Bodies (September 2011)
• Detection of Fraud: Whose role is it? (March 2012).
• The Challenges of Emiratisation: Attracting Talent into the Finance Industry (April 2013).
• Extended Audit Reports (May 2016). To view click here.
• Exploring the practical challenges of implementing IFRS 9 for financial institutions (February 2017). To view click here.
• Impact of Technology on Audit and Finance (December 2017). To view click here.

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

Aml, ctf & 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 as a supervisory authority is committed to maintaining a 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 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.

Please keep in mind:This material is intended only as informal guidance, is not intended to be all encompassing and is not any form of, and must not be relied upon on any basis whatsoever as, legal or other advice or directions. Although the DFSA does regularly consider AML/CTF matters, the information on this page may not always be current, complete or accurate. You should consider whether any relevant laws, regulations, rules, directives, standards or other requirements may apply to you. The DFSA’s informal guidance is no substitute or compensation for, or mitigation of, your own responsibility.

 

the uae federal aml legislation 

The Anti-Money Laundering and Countering Financing of Terrorism and its regulations place obligations on all financial institutions and Designated Non-Financial Businesses and Professions to detect and deter money laundering and terrorism financing in the UAE.

The relevant Federal laws that apply to anti money laundering (“AML”) and counter terrorism financing (“CTF”) in the UAE are as follows:

  1. Federal Law No. 4/2002 Issued on 22/01/2002 On Anti-Money Laundering and Combating Financing of Terrorism amended by virtue of Federal Law No. 9/2014 dated 26/10/2014.

  2. Cabinet Resolution 38/2014 Concerning the Executive Resolution of Federal Law 4/2002.

  3. Federal Law No. (7) of 2014 Issued on 20/08/2014 On Combating Terrorism Offences.

  4. Regulations regarding Declaration by Travellers entering or leaving the United Arab Emirates carrying cash and monetary or financial bearer instruments 2011.

  5. Federal Law 5/2012 on Combating Cyber Crimes.

  6. Federal Penal Law 3/1987 (as amended).

  7. Federal Penal Procedures Law 35/1992 (as amended).

  8. UAE Central Bank (“CBUAE”) and/or the Financial Intelligence Department of the CBUAE circulars issued from time to time. Although the CBUAE does not have oversight of Relevant Persons in the DIFC, such circulars cover specific local and regional concerns or changes to the international anti-money laundering and countering financing terrorism directives, standards or structure which may be a useful reference.

All Federal laws issued by the UAE are available on the Ministry of Justice’s Legislation Portal (available in Arabic and English).

The above list may not be all encompassing and may also be subject to change by relevant Federal authorities. Accordingly, Relevant Persons should contact the relevant Federal authorities.

difc aml/ctf legal regime

The DIFC is governed by two separate and complementary regimes in relation to AML/CTF regulation, both administered by the DFSA:

  1. the Federal regime: Under Article 3 of Federal Law No. 8 of 2004, the provisions of Federal Law No. 4 of 2002 on Combating Money Laundering and Terrorist Financing and Federal Law No. 7 of 2014 on Combating Terrorism Offences and the implementing regulations under those laws apply in the DIFC. The DFSA, as the DIFC’s supervisory authority for the purposes of those laws, is obliged to issue regulations and guidance in the DIFC relating to the regulation of anti-money laundering and combating the financing of terrorism and unlawful organisations. The DFSA may also impose administrative penalties for breaches of those laws and the implementing regulations. See Article 11(2) of Federal Law No. 4 of 2002 and also Article 17 of Cabinet Resolution No. 38 of 2014; and
  2. the DIFC regime: Under Article 70(3) of the DIFC Regulatory Law 2004 (the “Regulatory Law”), the DFSA has jurisdiction for the regulation of anti-money laundering in the DIFC relating to Relevant Persons (see para 4 below) and their officers, employees and agents. The DIFC specific regime is contained in Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module (AML) Chapter 2 of Part 4 of the Regulatory Law and any DFSA Rules made in connection with anti-money laundering measures, policies and procedures.

Note that under Article 71(1) of the Regulatory Law, the DIFC regime requires compliance with the Federal regime. It follows that a failure to comply with a provision of Federal Law No. 4 of 2002 on Combating Money Laundering and Terrorist Financing or Federal Law No. 7 of 2014 on Combating Terrorism Offences or the implementing regulations under those laws, may also provide evidence of failure to comply with Article 71(1), which may then be addressed under the disciplinary and remedial provisions of the Regulatory Law and DFSA Rules.

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

  1. an Authorised Firm other than a Credit Rating agency;
  2. an Authorised Market Institution;
  3. a Designated Non-Financial Business and Profession (DNFBP); and
  4. a Registered Auditor,

collectively referred to as “Relevant Persons”.

the aml module of the dfsa rulebook

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.

The AML module has been designed to provide a single reference point for all persons and entities (collectively called Relevant Persons) who are supervised by the DFSA for Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF) and sanctions compliance under the regimes referred to above.

It is important for Relevant Persons to familiarise themselves with the AML Module and assess the extent to which the Rules apply to them, and on a continuing basis.

the risk-based approach

FATF Guidance in relation to the Risk-Based Approach

The FATF has developed specific guidance in relation to the Risk-Based Approach. Relevant Persons can access the guidance by clicking here.

suspicious activity report (sar)

The requirement to lodge a suspicious transaction report with the Financial Intelligence Department (FID) of the Central Bank of the UAE (formerly known as Anti-Money Laundering and Suspicious Cases Unit (AMLSCU) 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 Financial Intelligence Department. A Relevant Person is also required to notify the DFSA immediately following the submission to the FID.

Relevant Persons are reminded that the failure to report suspicions of money laundering or terrorist financing may constitute a criminal offence that is punishable under the laws of the UAE.

dfsa annual aml return

All Relevant Persons are required to complete the DFSA annual AML Return and submit it to the DFSA by the end of September each year. The annual AML Return covers the period from 1 August of the previous year to 31 July of the reporting year.

Information from the AML Return provides the DFSA with important information on the Relevant Persons we supervise.  The information also helps us to:

  a. understand the risk of money laundering and financing of terrorism activities in each Relevant Person;

  b. ensure that information we have for our reporting entities is complete, accurate and current; and

  c. determine the best use of our resources in meeting our AML/CTF regulatory objective

compliance with international obligations

The DFSA wishes to emphasise that the particular obligations set out below are not all encompassing. It is the responsibility of each Relevant Person to ascertain and assess the relevant international obligations to which they are subject.

UN Security Council Resolutions

As a member state of the United Nations (“UN”), the United Arab Emirates is committed to implementing the UN Security Council Resolutions (“UNSCRs”). Amongst other measures, the UNSCRs may impose targeted financial sanctions against specific individuals and entities identified by the UN Security Council (or relevant UN Committees) as contributing to a particular threat to, or breach of, international peace and security.
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 UN Security Council or relevant UN Committees. These include:

  1. immediately freeze funds, other financial assets or economic resources of designated individuals and entities;

  2. restrictions on entering into financial transactions with or providing financial assistance or services in relation to: (i) designated individuals, entities or specifically referenced items; or (ii) proliferation and nuclear, or other sanctioned activities; and

  3. inform the DFSA of any fact or information relating to the funds, other financial assets or economic resources owned or controlled, directly or indirectly, by any designated individual or entity.

 
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, Relevant Persons need to ensure that their systems and controls are able to monitor any relevant changes.
The DFSA encourages all Relevant Persons to regularly check and monitor these lists, where applicable, as a matter of good practice. You may access the current UN Security Council Resolutions using the following link: www.un.org/sc/committees/ or access the Consolidated UNSCR List using the following link: https://www.un.org/sc/suborg/en/sanctions/un-sc-consolidated-list.


UAE’s list of designated terrorist organisations and groups

All natural and legal persons have to comply with other targeted financial sanctions found in the Federal Law No. 7 of 2014 On Combating Terrorist Offences (the “Law”). The UAE Government updated the UAE’s list of designated terrorist organisations and groups (the “List”) maintained pursuant to the Law. The List can be found in the UAE’s Federal Official Gazette issued by the Ministry of Justice.

The UAE Government announces changes to the List via the Emirates News Agency (“WAM”). Following the WAM public announcement, the DFSA will consider the announcement and may issue a ‘Dear SEO’ Letter if the DFSA considers it appropriate to do so. Relevant Persons can find the WAM announcements along with the UAE Cabinet of Ministers' Resolution reference number here.


The Financial Action Task Force

The Financial Action Task Force (“FATF”) is the global standard-setting body for anti-money laundering and combating the financing of terrorism (“AML/CTF”).  The FATF is an inter-governmental body, which promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing (“ML/TF”) and other related threats to the integrity of the international financial system.  The FATF monitors the progress of implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally.  For more information, please refer to the following link: http://www.fatf-gafi.org/about/

The FATF also identifies jurisdictions that have strategic deficiencies and works with them to address those deficiencies that pose a risk to the international financial system.  The identified jurisdictions are set out in two FATF public documents that are issued three times a year. Click here to view the FATF public statements and click here to view the latest DFSA announcements.

FATF Guidance

The FATF has developed the guidance and best practices to assist jurisdictions in their implementation of the FATF Recommendations. The DFSA encourages all Relevant Persons to regularly check the FATF website and ensure that they consider all issued guidance, as a matter of good practice. Click here to view the FATF Guidance.

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.

Fund Disclosure Documentation Checklists

Public Fund / Exempt Fund Constitution Checklist, please click here to view.

Public Fund Prospectus Disclosure Checklist, please click here to view.

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.