In an effort to maintain Dubai's status as a global financial and economic hub, a new economic security regulator, the Dubai Economic Security Centre (DESC) has recently been established in the Emirate.
Established under the Dubai Economic Security Law No. (4) of 2016 (the Law), the DESC's purpose is to protect investors, and financial and capital markets, from financial instability and to deal with risks related to corruption, fraud, bribery, and money laundering.
The Law applies broadly to governmental and private bodies, charitable societies, and any other entity which the DESC is authorised by the Chairman of the Dubai Executive Council to monitor. Importantly, all private companies and organisations established in Dubai, including free zones (and notably the Dubai International Financial Centre), are subject to the DESC's authority.
Key features of the DESC to be aware of
The DESC has been established with a very broad remit, including to introduce key reforms to advance financial stability and integrity and to combat corruption. The DESC has several salient features, some of which we highlight below.
1. Financial stability and integrity
Although the Law does not introduce specific financial stability measures, it empowers the DESC to do so. The DESC is also tasked with acting as a "super-regulator" to monitor the integrity of financial markets, enhance investor trust, and implement international best practices in capital markets. Furthermore, the DESC has the power to create new rules, regulations and mechanisms to implement its objectives and to secure the cooperation of other governmental bodies, including the Judicial Authority.
2. Regulate and investigate corruption, money laundering and terrorist financing
The DESC has broad powers to monitor, investigate, sanction and prevent corruption, fraud, bribery, money laundering, terrorist financing and associated crimes, including in relation to trading in commodities, precious metals and on the financial markets. The DESC is authorised to use "all available means" to supervise, investigate and collect information, take precautionary measures and procedures, audit, detect crimes, and engage in information exchange.
3. Powerful new regulator
The DESC's broad powers and their wide application to public, private and free zone companies make it a powerful regulator. Furthermore, the DESC's mandate to collaborate with local and international regulators, and its authority to secure cooperation from other governmental bodies and the judiciary, distinguish the DESC from its counterparts in Dubai.
4. Whistle-blower protections
The Law authorises the DESC to afford any whistle-blower (defined as a person who collaborates with the DESC or reports to the DESC any matter which prejudices the UAE's national security), the "necessary protection at his place of residence, non-disclosure of information related to his identity and whereabouts and protection in the workplace to make sure he will not be subject to discrimination or mis-treatment." The Law therefore introduces, for the first time in Dubai, comprehensive whistle-blower protections within the public and private sectors.
5. Possible long-arm monitoring powers
The Law states that the DESC may "follow up" or "monitor" trans-border crimes over which it would have jurisdiction. This implies that the DESC could potentially monitor or discipline Dubai companies and organisations who contravene the Law whilst operating abroad. How these powers will be applied in practice remains to be seen.
Anyone who violates the provisions of the Law and resolutions issued by the DESC is liable to be penalised, for each offence, with a financial fine between AED 10,000 and AED 500,000. These fines and sanctions may be cumulative with any other penalties applicable under other Dubai or UAE laws, which include imprisonment in relation to many of the offences over which the DESC has jurisdiction.
7. Additional functions of the DESC
In addition to the features and functions discussed above, the DESC is tasked with, among other things:
- monitoring and regulating charitable donations;
- regulating the flow of cash funds and instruments entering or exiting Dubai ports;
- analysing, predicting and responding to economic risks and economic affairs; and
- organising international and regional conferences and engaging international expertise.
With its anti-corruption, financial stability and transparency objectives, the DESC is a significant and powerful new regulator. It remains to be seen however how the DESC will exercise and implement its powers over the coming months and years. Its influence may be felt relatively quickly if it pursues significant cases early on, as other newly developed anti-corruption, integrity and/or capital markets bodies have done in other parts of the region.