The Dubai International Financial Centre (DIFC), the world’s fastest growing financial centre, was declared open for business in 2004.

Introduction
The Dubai International Financial Centre (DIFC), the world’s fastest growing financial centre, was declared open for business in 2004. Located to bridge the gap between existing financial centres of London and New York in the West and Hong Kong and Tokyo in the East, it is designed to complete the 24/7 global financial network. It services a region with the largest untapped emerging market for financial services.

The DIFC has been designed to:

• divert the regional liquidity back into investment opportunities within the region and contribute to its economic growth
• facilitate planned privatisations in the region; enable initial public offerings by privately owned companies; give impetus to the programme of deregulation and market liberalisation throughout the region
• create added insurance and reinsurance capacity - 65 per cent of annual premiums are re-insured outside the region
• develop a global centre for Islamic finance - this is now a $260 billion plus market serving large Islamic communities stretching from Malaysia and Indonesia to the US.

The Dubai International Financial Centre was conceived by the Government of Dubai for the benefit of the UAE and the wider region as a whole. Its remit is to create a regional and international capital market, offering investors and issuers of capital world-class regulations and standards.

Focusing on seven primary sectors, Banking and Brokerage; Capital Markets; Wealth Management; Re-insurance and Captives; Islamic Finance; Professional Service Providers and Business Infrastructure and Corporate Offices; the DIFC aims to be universally recognised as a hub for institutional financial services not just in the region but worldwide. It also aims to create a global centre for Islamic Finance and enhance reinsurance capacity in the region.

As with established international financial centres, at the heart of the overall DIFC concept is an independent regulator, the Dubai Financial Services Authority (DFSA). The DFSA is the independent regulatory and supervisory body which grants licences and regulates the activities of financial institutions in the DIFC. It has been created using principle-based primary legislation modelled closely on that used in London and New York, and its regulatory regime will operate to standards that meet those in the world's major financial centres.

The independent status of the centre is further enhanced by the establishment of the DIFC Courts. The laws establishing the DIFC Courts have been designed to ensure the highest international standards of legal procedure thus ensuring that the DIFC Courts provide the certainty, flexibility and efficiency expected by the global institutions operating within the DIFC.

Banking and Brokerage/ Capital Markets
Businesses in the region have traditionally sourced their funding from domestic lenders at often inefficient, expensive and illiquid cost. Similarly, underdeveloped capital markets have forced local investors and borrowers to seek opportunities in international markets. However, the growing programme of liberalisation and privatisation in the region, a rising need for IPOs and secondary offerings, the growth of foreign direct investment and, rapid expansion of regional trade, is driving demand for more sophisticated forms of financing. The DIFC will act as a catalyst to facilitate the mobilisation of capital. It intends to be the regional gateway for investment banks and other financial institutions who wish to establish underwriting, M&A advisory, venture capital / private equity, foreign exchange, trade finance and capital markets operations to service this large and relatively untapped market.

Wealth Management
The DIFC provides an onshore centre offering a wide range of investment opportunities, such as: mutual funds, exchange traded funds, open and closed ended investment companies, index funds, hedge funds, consultant wrap accounts and Islamic compliant funds. Further, the DIFC will provide a low cost environment and a highly skilled work force to asset management firms and private banks for their fund registration and administration functions.

Reinsurance and Captives
The penetration and density of insurance in the region has been significantly below average world levels. Statistics show that the sum of insurance premiums in the Middle East is much below the developed or other developing markets. However, with economic growth, industrialisation and improved regulation, the region is experiencing a changing attitude towards risk and an increased awareness of the need for insurance. Due to slow growth in more mature markets, the world’s insurance and reinsurance companies are now assessing markets such as the Middle East. The DIFC has set out to create a global insurance hub by attracting global reinsurance companies, brokers, captives and other service providers.

Islamic Finance
Islamic finance is a $400 billion dollar industry, growing at a rate of over 15 per cent per annum and with expected double-digit growth rates for the next 15 to 20 years. The DIFC’s ambition to become the global hub for Islamic finance comes at a very interesting time in the market’s development. Each Islamic market has developed relatively independently, setting its own regulations and standards, developing a wide variety of products with different benchmarks and pricing techniques. This has now been recognised as untenable if the industry is to grow, respond to the needs of Islamic investors and be given global recognition. There is increasing recognition that collaboration is the key to competitiveness. The DIFC’s ground-up approach puts Dubai in a leading position to establish global standards for Shariah compliance that will foster cross-border trading and product innovation.

Professional Service Providers/ Business Infrastructure and Corporate Offices
In addition to the above sectors of financial activity, the DIFC will continue to attract high-calibre, reputable ancillary service providers, thereby providing a fully robust platform to support the operational needs of financial institutions. These services will include accounting and legal practices, actuaries, management consultants, recruitment firms, and market information providers, among others. The expertise that the world’s major international professional services firms bring to the DIFC will complete the process of building a world-class international financial centre. The DIFC offers these service providers with the kind of unique opportunities that can come only from locating their operations in a hub which is in close physical proximity to a wealth of business opportunities, including significant cross-border synergies across multiple industries and functions.

Regulatory Framework
As with established international financial centres, at the heart of the overall DIFC concept is an independent regulator, the Dubai Financial Services Authority (DFSA). Staffed by experts with experience of working at leading regulatory agencies around the world, the DFSA is the independent regulatory and supervisory body which will grant licences and regulate the activities of financial institutions in the DIFC. It has been created using principle-based primary legislation modelled closely on that used in London and New York, and its regulatory regime will operate to standards that meet those in the world's major financial centres. This world-class regulatory framework as well as the laws of the DIFC will be familiar to the financial institutions and organisations that choose to locate in the DIFC and will provide legal certainty for their business operations.

The independent status of the centre is further enhanced by the establishment of the DIFC Courts. The laws establishing the DIFC Courts have been designed to ensure the highest international standards of legal procedure thus ensuring that the DIFC Courts provide the certainty, flexibility and efficiency expected by the global institutions operating within the DIFC.

Firms wishing to carry out financial services in the DIFC need to be authorized by the DFSA, which requires a demonstration of fitness and propriety, some guidelines of which include:

1 An applicant’s relationship with a group entity and the regulatory history of the group. Firms which are subject to regulatory supervision in other comparable jurisdictions will be in a better position to demonstrate their ability to comply with the stringent regulatory requirements of the DIFC.

2 An applicant’s capability in terms of financial resources, human resources and technical competency.

3 An applicant’s ability to devise and maintain appropriate systems and procedures to support, monitor and manage its affairs, resources and regulatory obligations, including sound anti-money laundering policies and procedures.

4 A sound business plan and the experience and qualification of the organisation and the key personnel within it.

5 The ability and willingness of an organisation to comply with regulations including levels of capital adequacy, high standards of business conduct and a robust risk management system.

When considering an application for a license and assessing the fitness and the propriety of the applicant, the DFSA will also consider:

• Any matter which may harm the integrity or reputation of the DFSA or DIFC;

• The activities of the applicant, the associated risks and accumulation of risks that those activities pose to the DFSA’s objectives

• The cumulative effect of factors which, if taken individually, may be regarded as sufficient to give reasonable cause to doubt the fitness and propriety of an applicant. An applicant must be able to demonstrate that it has compliance arrangements, including processes and procedures that will enable it to comply with all applicable rules.

Authorised Firms must comply with the Conduct of Business (COB) Module which entails adherence to the following best principles and practices:

1) Integrity
2) Due skill, care and diligence
3) Management, systems and controls
4) Resources
5) Market conduct
6) Conflicts of interest
7) Suitability
8) Customer assets and money
9) Relations with regulators

DIFC Subsidiaries
Being responsible for marketing and managing the DIFC, the DIFC Authority is the core body established by federal law and is the body that issues all the laws and regulations for all the non-financial entities that will operate in the DIFC. In addition, the DIFC Authority is responsible for the Company Registry and Security Registry.

DIFC Investments (DIFCI)-a wholly owned subsidiary of the DIFC Authority- has been established to conduct activities of the DIFC Authority which are non-public administration related. This includes amongst other things activities such as the operation and management of current and future NPA subsidiaries and the undertaking of strategic investments or NPA alliances which will further the goals and objectives of the DIFC and contribute to the fulfilment of the Centre’s vision.

Some of the companies and organizations that DIFC Investments owns include:

A) The Dubai International Financial Exchange (DIFX) is the region’s first international exchange. Being a liquid and transparent electronic market trading securities, bonds and derivatives, the DIFX was launched on September 26th 2005. It has been created to provide both investors and issuers with a larger and more liquid securities market than currently exists elsewhere in the region. The DIFX will not restrict investment to local investors as regional exchanges do. It will allow Governments and companies globally to access regional investment opportunities. In time, it is anticipated that companies outside the region will seek to have their shares dual-listed on the exchange in order to benefit from the large pool of capital accessible in the region. The DIFX will facilitate anticipated privatisations in the region and enable initial public offerings by privately owned companies, giving impetus to the program of deregulation and market liberalisation throughout the region.

B) Hawkamah, the institute for corporate governance: Hawkamah is a regional entity whose mission is to assist countries and companies of the wider MENA region in developing sound and globally well-integrated corporate governance frameworks and practices. It takes part in regional and international initiatives to support open and transparent markets and sound corporate governance regimes.

Infrastructure and Location
The physical infrastructure is also a major factor in enticing international business to locate in the DIFC. So much more than just a financial district, the DIFC is planned to be a ‘city within a city’ that will comprise of a unique integration of buildings and open spaces with over 65 per cent of the total site landscaped with specific green zones.

It will ultimately provide over several million square feet of ultra modern office space, residential and leisure areas which will include offices, serviced apartments, hotels, shops, restaurants, a museum, an art gallery and a performing arts centre.

Guaranteeing the DIFC’s success is its location. The cosmopolitan city of Dubai has a safe, secure, economically, politically and socially stable environment with superb infrastructure and a highly skilled, educated and multi-cultural workforce.

With such a sophisticated physical infrastructure, a visionary leadership and a stringent regulatory framework, the DIFC is poised to tap the largest emerging market for financial services within a region of 2.2 billion people and a combined economy worth $2.3 trillion in terms of GDP, growing at an annual rate in excess of 5 per cent. The world’s newest international financial centre has become a reality and both the region and the world’s financial community are set to benefit.