Why setup a financial services firm in the DIFC?
The DIFC is a leading financial hub in the region. Besides offering a wide range of financial service activities, the centre also provides an integrated environment and world-class standard of living. It is well regarded in the international community as well.
There exist opportunities for startups as well. The recent focus on fintech led to the DIFC Fintech Hive initiative, that serves as an accelerator for fintech firms to test their products and pitch it to prospective investors. Sarwa (https://www.sarwa.co) and SmartCrowd are two such success stories.
Here are some specific advantages of establishing in the Dubai International Financial Centre:
LEGAL AND REGULATORY FRAMEWORK:
- Legal framework supports cross-border activities
- 100% foreign ownership permitted
- No restriction on foreign talent or employees
- No restrictions on capital repatriation
- Zero tax for 50 years on profits, capital or assets from 2004
- Zero tax on employee income
- Highly regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE legal system
- Risk-based regulatory approach
- Central to regional deal making
- High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
- World-class regional and international law and auditing firms, and other professional services
- The largest fund domicile in the region
- Management offices, holding companies and family offices are located closer to the assets they own or manage
- The Middle East, Africa and South Asia (MEASA) is increasingly the centre of gravity for the global economy
- Dubai plays a central role in the growing South-South trade, principally between Asia and Africa
- Well-positioned to harness the potential of emerging markets
What is a Money Services Business?
Money Services Businesses cover a wide range of money-related activities, starting from payment processing companies to investment services, from individuals and startups to major global enterprises. They can include providing account information services, payment initiation services or analytics on client and corporate accounts. Other core money services can include issuing payment instruments, providing money transmission, payment processor services, operating payment accounts and issuing stored value. Transferwise, Nymcard, Paypal and Revolut are examples of money service businesses.
DIFC AISP and PISP License:
Firms interested in carrying out money services business activities from the DIFC are required to submit applications to the Dubai Financial Services Authority, or DFSA.
The DFSA, for the purposes of authorisation and supervision, categorises money services business activities based on the type of money services being carried out, and the minimum base capital required.
The DFSA categorises the range of activities that comprise the Money Services Business into two groups: 1) Arranging and Advising on Money Services and 2) Providing Money Services.
Arranging and Advising on Money Services :
These include firms that provide open banking services, such as Account Information Services, Payment Initiation Services and other advising and arranging services.
Account Information Services – These firms are authorised to retrieve account information data from banking and other financial institutions such as lenders, mortgage providers, and credit card issuers. Such firms cater to both individuals, and institutions (mostly SMEs). Account Information Services come under Open Banking activities.
Some examples of Account Information Services Provider applications include:
Money management tools – These AISPs collate information from multiple sources – your many bank accounts, credit cards, mortgages, loans etc., and present such information in a format that is easy to understand and interpret. AISPs simplify money management for both individuals and SMEs that need to understand and manage their cash flows effectively.
Online loan applications – Enabling paperless transactions, such AISPs collate and present information to lending institutions that enable such lenders to make informed decisions on granting loans.
Other examples include comparison portals or online shops, that use digital account checks for seamless transactions.
Payment Initiation Services – PISPs go one step further that AISPs, by being authorised to make payments on behalf of customers. PISPs can do this by using the bank’s own tools. This is akin to a ‘read-write’ access, as opposed to ‘read-only’ access provided to AISPs. PISPs also come under Open Banking activities.
Some examples of Payment Initiation Services Provider applications include:
Financial Management Tools – such as Systematic Investment Plans and direct-debit applications. A small portion of money can be transferred automatically using a previously-defined process – such automation saves a lot of time and effort of the customer.
Solutions for businesses – Business back-office systems can integrate with PISPs to provide value-added services to companies, such as managing payments, collections, real-time bank transfers, in addition to displaying consolidated information on their financial standing.
How to go about it
Due to the higher risks associated with these activities, the DFSA places higher entry-level requirements and restrictions on the license itself. Chances are that the first point of entry be through the DFSA Innovation Testing License, rather than a full-scale application. This is however, decided on a case-to-case basis.
You can also setup in the DIFC with a DIFC Innovation License, which is for non-regulated technology startups. Such a license encourages startups to establish a presence in the region, employ staff and prepare for regulation by then applying to the DFSA for regulatory approvals. You cannot however, carry out regulated activities until a Financial Services Permission has been obtained.
DIFC Regulatory Capital requirements:
The base capital requirement for a AISP and PISP Money Services Business license US$ 10,000. Actual capital required will depend on the nature, quantum of business and forecasted annual expenditure, as per the financial model of the proposed firm.
There are three components of capital considered – base capital, risk-based capital and expense-based capital. For smaller firms, expense-based capital is usually the highest, and can be around US$ 150,000 for an AISP/PISP Money Services Business application.
Setting up a DIFC Regulated Firm involves the following interactions:
The DFSA is responsible for reviewing and approving all applications for financial services. Costs depend on the activities applied for, which puts the applicant in one of five categories.
Generally, there are two components of DFSA fees. One – an application processing fee, and the other, an annual licensing fee.
Application fee: from US$ 5,000 for an AISP/PISP license application.
License fee: US$ 5,000 for an AISP/PISP money services business.
Registrar of Companies (DIFC ROC):
The ROC helps to set up the legal structure of the DIFC Regulated Firm. Shareholders can be individual, or corporate. There are many options available, such as ‘Private Company Limited by Shares’ and ‘Limited Liability Partnerships’. In case of Private Company Limited by Shares, the costs for setting up include:
Application for reserving a name (2 working days): US$ 800
Application for Incorporation of a Private Company Limited by Shares (5 working days): US$ 8,000
Commercial License on Incorporation (5 working days): US$ 12,000 (annual fee)
This can vary, depending on the entry strategy adopted.
The data protection notification is part of the process of registering a new entity in the DIFC. The costs involved are as follows:
Registration - US$ 500
Annual renewal – US$ 250
Every entity registered in the DIFC is required to lease a physical office. You can choose from the Gate and surrounding buildings, or other buildings within the DIFC, such as Emirates Financial Towers, Central Park, Park Avenue, Burj Daman and Currency House.
Prices vary, depending on the space availed and the building. Here is an indication of the prevailing rates:
DIFC Business Centre – from a two-desk office at US$ 35,000.
DIFC Fitted Offices – from US$ 55 per square foot.
Other buildings – from US$ 32,000 per annum
For fintech licenses, DIFC has attractive packages starting from US$ 15,000 per annum. Get in touch for more details.
Establishment Card Application – US$ 630
PSA Deposit – US$ 682
Visas (per visa) – from US$ 1,500
PSA Deposit (per visa) – US$ 682
We provide turnkey services for AISP and PISP Money Services Business license applications. From fintech consulting, to assistance in authorisations, to assistance in preparation of the legal documentation, 10 Leaves helps you navigate the DFSA Rulebook and submit an application that is comprehensive, complete and compliant.
Our services include assistance in:
1. Reviewing the business model and advice on the applicable regulatory framework;
2. Preparation of the Regulatory Business Plan and comprehensive financial projections;
3. Preparation of all policies, processes and manuals required;
4. Provision of Outsourced Compliance Officer and Outsourced Finance Officer services;
5. Finalising the legal structure, including holding company setup and customisation of Memorandums; and
6. Finalisation of leased space, bank account opening and obtaining Financial Services Permissions.
Get in touch today! for More Information on AISP and PISP Licensing in the DIFC