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Compliance support services in the DIFC
This episode is also available as a blog post: https://10leaves.ae/publications/difc/compliance-support-services-for-difc-authorised-firms
What are compliance support services?
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.
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.
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.
However, the DFSA does not allow for compliance outsourcing in the case of firms that carry out financial activities with higher risks, such as asset management, brokerage or provision of credit. An in-house resource must be hired in these cases. However, as seen above, in-house compliance functions can have some drawbacks, and here is where compliance support services can help bridge gaps.
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By 10 LeavesThis episode is also available as a blog post: https://10leaves.ae/publications/difc/compliance-support-services-for-difc-authorised-firms
What are compliance support services?
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.
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.
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.
However, the DFSA does not allow for compliance outsourcing in the case of firms that carry out financial activities with higher risks, such as asset management, brokerage or provision of credit. An in-house resource must be hired in these cases. However, as seen above, in-house compliance functions can have some drawbacks, and here is where compliance support services can help bridge gaps.