Guide to the DIFC Category 3D Money Services License - 10 Leaves

  • 07-03-2020

 

ANNOUNCEMENT
 
The DFSA currently offers a discount of 50% on application fees, till the end of 2020. Take advantage of this limited time offer - GET IN TOUCH TODAY!
 
DIFC is one of the world’s top ten onshore financial centers and offers a secure and efficient platform for businesses and financial institutions to reach into and out of the emerging markets of the region. The quality and independence of DIFC’s regulator, the prevailing common law framework, excellent infrastructure and tax efficiencies make it the perfect base to take advantage of the rapidly growing demand for financial and business services in the MENASA region. 

DIFC fills the time-zone gap for a global financial centre between the leading financial centres of London and New York in the West and Hong Kong and Tokyo in the East. 

 

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) is one such success story. 

Specific Advantages:

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 

TAX BENEFITS:

  • Zero tax for 50 years on profits, capital or assets from 2004 
  • Zero tax on employee income 

COUNTERPARTY CONFIDENCE:

  • Highly regarded, independent regulator
  • Independent, English-speaking, common law judicial system 
  • Distinct from the UAE legal system
  • Risk-based regulatory approach 

DIVERSE ECOSYSTEM:

  • 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

GEOGRAPHIC EPICENTRE:

  • 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 or 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 (https://transferwise.com/ae), Paypal (https://www.paypal.com/), Revolut (https://www.revolut.com/en-AE) and Nymcard (https://nymcard.com) are examples of money service businesses. 
 
 
DIFC Money Services 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:

Arranging and Advising on Money Services (includes Account Information Services, Payment Initiation Services and other advising and arranging)

Providing Money Services (includes issuing payment instruments, providing money transmission, issuing stored value and providing or operating a payment account). 

Arranging or Advising on Money Services

Comes under a Category 4 license, with a minimum base capital of US$ 10,000. 

Money Transmission Services

Comes under a Category 4 license, with a minimum base capital of US$ 140,000. 

Providing or Operating a Payment Account, executing Payment Transactions or Issuing Payment Instruments 

Comes under a Category 3D license, with a minimum base capital of US$ 200,000. 

Issuing Stored Value

Comes under a Category 3C license, with a minimum base capital of US$ 500,000. 

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 Capital requirements: 

The base capital requirement for a Category 3D Money Services Business license is US$ 200,000. Actual capital required will depend on the nature, quantum of business and forecasted annual expenditure, as per the financial model of the proposed firm.

Costs:

Setting up a DIFC Regulated Firm involves the following interactions:

Dubai Financial Services Authority (DFSA):

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$ 10,000 for a Category 4 license application. The application fee for a Category 3D license application will be US$ 15,000.

License fee: US$ 10,000 for a Category 4 license application. The application fee for a Category 3D license application will be US$ 15,000.

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)

Data Protection

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

Office spaces:

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

Visas:

Establishment Card Application – US$ 630

PSA Deposit – US$ 682

Visas (per visa) – from US$ 1,500

PSA Deposit (per visa) – US$ 682

Our Services

We provide turnkey services for DIFC Crowdfunding 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:

• Reviewing the business model and advice on the applicable regulatory framework;
• Preparation of the Regulatory Business Plan and comprehensive financial projections;
• Preparation of all policies, processes and manuals required;
• Provision of Outsourced Compliance Officer and Outsourced Finance Officer services;
• Finalising the legal structure, including holding company setup and customisation of Memorandums; and
• Finalisation of leased space, bank account opening and obtaining Financial Services Permissions.

Get in touch today!

 

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