10 Leaves

This episode is also available as a blog post: https://10leaves.ae/publications/difc/difc-compliance-services-outsourcing-benefits

The comparison between in-house and outsourced compliance options follows the same reasoning as for any outsourcing option. Here are some factors that can help you decide.

Cost:

The cost of hiring a full-time compliance officer in the DIFC can be high, especially for startup financial firms. Salaries range upwards of US$ 8,500 per month for a suitably qualified compliance officer, who has been previously licensed by the DFSA. Other direct costs include medical benefits, DEWS (end-of-service) registrations, and visa costs. Also add to that the costs of recruiting and the delay in joining due to notice periods from previous companies. Outsourcing, on the other hand, entails a fixed and lumpsum monthly fee, that is easy to budget for and manage. These costs increase as the firm grows, and at some point it will become more advantageous to hire someone in-house. In our experience, we have seen this to be at least 2-3 years for firms that clock an above-average rate of growth.

Another key factor of consideration is investment in tools that they Compliance Officer requires to discharge his/her duties. Financial services firms must continuously invest in new technologies and infrastructure to address evolving compliance needs. These costs are not borne by the firm in case of outsourcing the function.

Availability of talent:

One of the main reasons for outsourcing the compliance function in the DIFC is a lack of locally available resources. The supply of compliance specialists is small relative to the demand in the market.

Listen to know more!

This episode is also available as a blog post: https://10leaves.ae/publications/difc/outsourcing-compliance-services-in-difc

Does the DFSA allow compliance outsourcing?

Yes, the DFSA does allow outsourcing of core functions such as Compliance, MLRO and Finance. However, the DFSA does consider the type of financial service, the projected volume of business, additional endorsements (such as endorsements enabling firms to deal with Retail Clients), and the overall team composition before issuing approvals to outsource these functions.

For Category 4 firms and Restricted Fund Managers, this should normally be a straightforward process. You can read more about the benefits of compliance outsourcing here.

For higher categories, especially for Asset Managers and Brokerage houses, outsourcing may not be an option. In these cases, we recommend that the firm opt for our compliance support services.

Do I hire a compliance officer before, or after authorisations?

Firms that apply for authorisation to the DFSA have to, at the time of application, identify the individuals that will carry out the Authorised Functions, including Compliance and Money-Laundering Reporting. While these individuals do not have to be employed by the firm yet, it would be unusual for a compliance officer to commit to carrying out the function while being in employment with another firm. In such cases, the compliance officer would usually resign from their current employment, and come on board the new firm once it is authorised.

However, in many instances, the authorisation process itself can take 4-6 months or even more. Hence the applicant firm can also request to make the identification of the compliance officer an In-Principle condition.

The third, and most-often opted for route is to outsource the compliance function. Here, the compliance outsourcing provider would second a competent (and mostly already authorised) individual to act as the Compliance and Money Laundering Reporting Officer at the time of application itself, thus speeding up the process.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/difc-compliance

How important is the compliance function?

The Dubai Financial Services Authority (DFSA) is the regulator of DIFC financial service firms. It authorizes and supervises financial entities that conduct activities across five licensed categories.

The DFSA mandates three (and in some cases, four) mandatory appointments for all firms that wish to carry out financial services from the DIFC. The Compliance function is one of them.

The DIFC is a well-regulated jurisdiction and hence the Compliance function is critical to the authorisation and ongoing operation of all financial firms registered in the centre. The DFSA places a lot of emphasis on Compliance with it’s extensive rules and regulations, including Conduct of Business, Prudential, Investment and Data Protection Rules. A licensed firm is expected to develop and maintain a culture of compliance, starting with the senior management and across all employees and stakeholders.

The repercussions of non-compliance can be severe, ranging from financial penalties to loss of reputation and even closing of the business. While compliance does not generate revenues for the firm, it forms the cornerstone of a successful financial business. In fact, robust compliance processes can result in increased efficiencies and lead to indirect revenue-generation for the firm.

Financial firms in the DIFC must appoint a Compliance Officer and a Money Laundering Reporting Officer (CO/MLRO) at the time of application to the DFSA. These functions are usually combined for smaller firms and so one individual can be proposed as the CO/MLRO. The DFSA expects an application from an individual with sufficient knowledge, experience, and seniority to perform the role effectively. Also, the Compliance Officer is expected to be resident in the UAE once licensed.

The Compliance Officer thus forms an integral part of the core team that the DFSA reviews and considers when making a authorisation decision.

Part 5 of 5

Join us for an engaging discussion with Derek Watson from N2 Technology, and Bishr Shiblaq, LLM, CIFD.

We speak on being investment-ready and preparing for the due-diligence questions that investors usually ask.

Also featured is a panel discussion with Egor Romanyuk, an early-stage investor, in which he speaks about how he decides which startups to invest in.

For startups, and VCs, and everything in between!

Read up more on DIFC Innovation Licenses, and get in touch to be part of the UAE’s premium tech ecosystem.

For More Details, Mail us at: [email protected] or Call us at: +97142778349 or Visit us at: https://10leaves.ae/ or chat with us!

Part 4 of 5

Join us for an engaging discussion with Derek Watson from N2 Technology, and Bishr Shiblaq, LLM, CIFD.

We speak on being investment-ready and preparing for the due-diligence questions that investors usually ask.

Also featured is a panel discussion with Egor Romanyuk, an early-stage investor, in which he speaks about how he decides which startups to invest in.

For startups, and VCs, and everything in between!

Read up more on DIFC Innovation Licenses, and get in touch to be part of the UAE’s premium tech ecosystem.

For More Details, Mail us at: [email protected] or Call us at: +97142778349 or Visit us at: https://10leaves.ae/ or chat with us!

Part 3 of 5

Join us for an engaging discussion with Derek Watson from N2 Technology, and Bishr Shiblaq, LLM, CIFD.

We speak on being investment-ready and preparing for the due-diligence questions that investors usually ask.

Also featured is a panel discussion with Egor Romanyuk, an early-stage investor, in which he speaks about how he decides which startups to invest in.

For startups, and VCs, and everything in between!

Read up more on DIFC Innovation Licenses, and get in touch to be part of the UAE’s premium tech ecosystem.

For More Details, Mail us at: [email protected] or Call us at: +97142778349 or Visit us at: https://10leaves.ae/ or chat with us!

Part 2 of 5

Join us for an engaging discussion with Derek Watson from N2 Technology, and Bishr Shiblaq, LLM, CIFD.

We speak on being investment-ready and preparing for the due-diligence questions that investors usually ask.

Also featured is a panel discussion with Egor Romanyuk, an early-stage investor, in which he speaks about how he decides which startups to invest in.

For startups, and VCs, and everything in between!

Read up more on DIFC Innovation Licenses, and get in touch to be part of the UAE’s premium tech ecosystem.

For More Details, Mail us at: [email protected] or Call us at: +97142778349 or Visit us at: https://10leaves.ae/ or chat with us!

Part 1 of 5

Join us for an engaging discussion with Derek Watson from N2 Technology, and Bishr Shiblaq, LLM, CIFD.

We speak on being investment-ready and preparing for the due-diligence questions that investors usually ask.

Also featured is a panel discussion with Egor Romanyuk, an early-stage investor, in which he speaks about how he decides which startups to invest in.

For startups, and VCs, and everything in between!

Read up more on DIFC Innovation Licenses, and get in touch to be part of the UAE’s premium tech ecosystem.

For More Details, Mail us at: [email protected] or Call us at: +97142778349 or Visit us at: https://10leaves.ae/ or chat with us!

Part 4 of 4

You can also view this episode on You Tube - https://youtu.be/PKSwMsWVzt4

Join me for an engaging discussion with Bishr Shiblaq, LLM, CIFD and Derek Watson from the pioneering N2 Technology on setting up in the DIFC Innovation Hub and being part of an ecosystem that does so much more than just provide a license and a fantastic place to do business...

For startups, and VCs, and everything in between! For More Details, Mail us at: [email protected] or Call us at: +97142778349

Do also tune in to our podcasts on the DIFC Innovation License and the DIFC VC Fund Manager Regime. Happy listening!

Part 3 of 4

You can also view this episode on You Tube - https://youtu.be/PKSwMsWVzt4

Join me for an engaging discussion with Bishr Shiblaq, LLM, CIFD and Derek Watson from the pioneering N2 Technology on setting up in the DIFC Innovation Hub and being part of an ecosystem that does so much more than just provide a license and a fantastic place to do business...

For startups, and VCs, and everything in between! For More Details, Mail us at: [email protected] or Call us at: +97142778349

Do also tune in to our podcasts on the DIFC Innovation License and the DIFC VC Fund Manager Regime. Happy listening!