Customer Due Diligence and Know Your Customer

Rigorous Know Your Customer and Customer Due Diligence arrangements help to protect a firm's reputation and the integrity of the financial system by reducing the likelihood of regulated firms becoming a vehicle for, or a victim of, financial crime and suffering consequential reputational damage. Inadequacy of KYC and CDD standards can expose a firm to serious business operation and control risks.

The Financial Action Task Force (FATF) recommends basic CDD measures as follows:

• Identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information.
• Identifying the beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner, such that the financial institution is satisfied that it knows who the beneficial owner is. For legal persons and arrangements this should include financial institutions understanding the ownership and control structure of the customer.
• Understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship.
• Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds.       

Source: The FATF Recommendations - updated June 2017 - http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf 

A customer risk assessment is carried out before a firm establishes a business relationship with a customer followed by Customer Due Diligence. The risk assessment evaluates the extent to which that customer exposes it to a range of risks including involvement in money laundering and a risk rating is assigned to that customer. Information required includes:

• Who is the customer?
• Who is the beneficial owner?
• Where is the customer located? Where do they live? Where are their assets located?
• What is the customer's business?
• Where is their business (or businesses) located?
• What is the structure of the business? 
• Why is the customer looking to establish the business relationship?
• Which products/services do they require?
• What is the customer's source of wealth and source of funds?
• Is the customer a Politically Exposed Person (PEP)?

CDD will be conducted to obtain / verify the information required, appropriate to the risk rating ie Simplified CDD or Enhanced CDD.

For full details of CDD requirements as per the Dubai Financial Services Authority’s Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module see http://dfsa.complinet.com/net_file_store/new_rulebooks/d/f/DFSA1547_20015_VER130.pdf  

Useful websites include:

• Financial Action Task Force – http://www.fatf-gafi.orgFor the FATF 40 recommendations, country evaluation reports, typology reports
• Dubai Financial Services Authority – http://www.dfsa.ae
• Dubai International Financial Centre – http://www.difc.ae
• Know Your Country – http://knowyourcountry.com
• Office of Foreign Assets Control - https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx
• Office of Financial Sanctions Implementation HM Treasury - https://www.gov.uk/government/organisations/office-of-financial-sanctions-implementation
• United Nations Security Council Resolutions - http://www.un.org/en/sc/documents/resolutions/

If you need Anti-Money Laundering training or require AML manuals please contact us by email at info@holtconsultancy.com or telephone +971 4 386 6360.

Compliance in the DIFC

The following article was published on the Business Inside Reporter website as part of its CEO Reports 2017 Middle East Region feature.

 

To read other CEO Reports, please visit http://businessinsidereporter.com/category/ceo-reports.  

 

Ben Holt started HOLT consultancy in October 2012 after 8 years of working as Head of Compliance in the MENA region for HSBC, Societe Generale and latterly Barclays. He could see there was a gap in the market for a high quality, niche compliance consulting firm, one which was smaller with a sole focus to put the needs of clients above all else. This is when he thought of creating a firm which was flexible enough to react to the unique situations which regulated firms in the DIFC can sometimes find themselves in and be able to respond dynamically and provide meaningful assistance. Over the past four and a half years, HOLT consultancy’s reputation in the market is testimony to the fact that they have been able to achieve this and add real value to their client’s business.

 

Central to HOLT consultancy’s success has been recruiting and retaining some fantastic people. A company is nothing if it does not have the right staff in place to deliver its mission and that is something Ben believes in passionately. His vision was to recruit two senior compliance experts who would each lead a team in different industry sectors. Shamshad Khan looks after the investment banking/private banking/funds/asset management side while Natalie Hodgins specialises in (re)insurance. Both seniors have managed to recruit some absolutely stand-out consultants and their efforts combined are what makes HOLT consultancy not only a fun and enjoyable workplace but also one which delivers a quality, value added service to its clients.

 

Earlier in 2017, HOLT consultancy took the strategic decision to join the DIFC Insurance Association. HOLT consultancy provides advice and outsourced compliance services to a number of DIFC based (re)insurance firms. So, joining a professional body like the DIFC Insurance Association would enable HOLT consultancy to represent the best interests of their clients in a market that continues to grow and mature. 

 

Even at the early stages of HOLT consultancy’s existence, its successful approach to business meant that HOLT consultancy was awarded the 2014 Best Consulting Firm of the Year at the Thomson Reuters Governance, Risk and Compliance Awards, 8th GCC Regulators Summit in Dubai. 

 

Ben says “We are a relatively small firm. I purposely want to retain it at about the size it is now, possibly recruiting two or three additional consultants. I believe that keeping the firm at this size enables both myself as CEO and Shamshad and Natalie as seniors to retain effective oversight of everything which is happening and means that we can keep a good level of interaction from the top with all of our clients”.

 

Delivering a top-down service is essential to the success of HOLT consultancy. When employing one of its consultants, firms also buy the senior management team as they take relationship-building and ongoing maintenance extremely seriously. “How can I, as CEO, understand the nature of a problem a consultant may bring me if I do not know the dynamics of the client for whom they are working? It also demonstrates to clients that HOLT consultancy, as a whole, is committed to delivering a truly stand-out, value add compliance service” comments Ben.

 

He says recruitment is sometimes a significant challenge. Finding the right people with the right experience and knowledge of the DIFC/DFSA rules and regulations and with relevant qualifications can sometimes be problematic. They are always looking at the market for good quality candidates that can not only add real value to the HOLT consultancy business but also to its clients. 

 

The companies vision is very simple. They want to be the premier choice for companies when selecting a professional compliance and risk management service provider.

 

HOLT’s mission is to develop their client's business through premier quality and expert execution by focusing on their needs and providing business solutions. They strive to offer a service that exceeds expectations through its commitment to clients, adding maximum value to their business and protecting their reputation.

 

Main offerings of HOLT consultancy

1. Applications and authorisation – they provide assistance with the licence application process for companies seeking to set up in the DIFC (both non-regulated as well as regulated companies).
2. Compliance support - being a retained outsourced Compliance Officer/MLRO or mentoring new or less experienced Compliance Officers/MLROs.
3. Compliance reviews – these could be focused on a specific area of the business or a general health check to assess whether a firm’s systems and controls are functioning as they should.
4. Drafting Compliance Manuals, Anti Money Laundering Manuals, policies, procedures and designing systems and controls to mitigate risk.
5. Training – they assist clients in providing a wide range of regulatory, Compliance and Anti-Money Laundering & Counter Terrorist Financing related training.

 

Their clients range from (re)insurance companies to companies providing asset management, wealth management, private banking, investment banking (M&A, corporate and project finance, trading, research etc) and the funds business. Effectively, the primary target is all financial services which are regulated by the Dubai Financial Services Authority (DFSA) in the DIFC.

 

Diversity and experience of their team – HOLT consultancy has employees who have experience ranging from private banking, asset management, insurance, corporate finance etc. They try to match the experience of the team member to the type of client, which results in the client being happy with the service they receive. 

 

Their consultants all have something different to offer and a large part of that shines through in their unique personalities. As Ben reiterates “relationships are at the centre of everything we do and our consultants are the focal point for nurturing and cementing these relationships with the people who are the face of our clients. I will not employ anyone I cannot engage with and relate to because if I can’t then the chances are HOLT consultancy clients will not either and that is not good for either party.”

 

HOLT consultancy is constantly looking towards innovation to enhance and develop their processes and procedures. They want to match the pace of change in this part of the world, thereby helping to facilitate change on behalf of its clients. This is exemplified by developments in the DIFC such as the FinTech Hive and Innovation Testing License which the DFSA has developed to allow qualifying FinTech firms to develop and test innovative concepts from within the DIFC, without being subject to all the regulatory requirements that normally apply to regulated firms.

 

“We have introduced a greater element of automation into the way in which we work and I see this only increasing in the future as regulation itself becomes more automated” Ben concluded.

If HOLT consultancy can help you meet your compliance requirements, please contact us by email using info@holtconsultancy.com or call +971 4 386 6360.

Clothes for Humanity - DIFC CSR Campaign

HOLT consultancy took part in the DIFC’s Corporate Social Responsibility Initiative CLOTHES FOR HUMANITY on Thursday 15 June 2017 by donating clothes and shoes.

The donation was in line with the UAE Year of Giving and in the spirit of the Holy month of Ramadan.

The clothes and shoes donated will be given to the Emirates Red Crescent to be distributed before the Eid holidays.

Well done to all those who contributed.

Compliance Culture - DFSA Authorised Firms

A good compliance culture is where senior management and employees understand and value the importance of compliance within a firm. Senior management should start with setting the right tone at the top. A negative view of compliance can expose firms to risks, for example, Anti-money laundering (AML) risks, reputational risks, financial risks and eventually, even destabilize the financial system. Does your firm have a compliance culture?  Below are some areas to look at.

Responsibilities

Do the senior management team and employees understand what their responsibilities are? Do they understand the importance of compliance and the risks and consequences of non-compliance? 

Is the Compliance Officer (CO) given enough seniority within the firm? Does he/she have access to senior management? Is he/she able to make and enforce decisions?

The firm must apportion significant responsibilities to its senior management and maintain this apportionment in such a way that it meets the corporate governance requirements in Dubai Financial Services Authority (DFSA) GEN Rule 5.3.30.  The firm must also be clear who is responsible for which matters.  Responsibilities are usually identified in the job descriptions of the Authorised Individuals and other members of senior management.

Ensuring compliance with DFSA Rules and Regulations should be a part of every employee’s job description. Compliance with the DFSA’s 6 Principles for Authorised Individuals (GEN 4.4) should be part of the obligations of every Authorised Individual.

Training

Have all employees received compliance and AML training? Senior management and all employees need to receive training to ensure they understand relevant legislation applicable in the Dubai International Financial Centre (DIFC) and the DFSA rules and regulations. AML training is mandatory for all relevant staff at appropriate and regular intervals (upon joining and at least annually thereafter). 

Risk management

Does your firm understand the risks it faces? Has the firm established and maintained systems and controls to identify, assess, mitigate, control and monitor its risks?

Open door

Can employees raise their questions, concerns or obtain clarification on matters or highlight training needs without fear of criticism? If supervisors or management are unapproachable it could prevent staff from raising important issues. 

Relationship with your regulator

Does your firm have a good relationship with the DFSA? The DFSA expects authorised firms to have an on-going honest and open relationship with them. Aside from mandatory notifications, this means reporting anything to the DFSA that they would expect to be notified of.

Relationship with your compliance function

Does your senior management team have a good relationship with its compliance function? The CO/Money Laundering Reporting Officer (MLRO) must have sufficient authority to carry out his/her functions satisfactorily and also have direct access to the senior management team, including the Board of Directors.

Compliance is an independent control function that provides advice, issues policies, conducts training for the business, and monitors and tests business activities proactively.  Compliance helps to protect the company by taking steps so that potential regulatory risks and liabilities are identified and addressed appropriately.

Regular meetings should take place between the Senior Executive Officer (SEO) and the Compliance Officer.

Remuneration

Have you reviewed your employee remuneration structure recently? Are incentives in line with what you are trying to achieve in terms of creating/retaining a good compliance culture? Does your incentives plan focus purely on generating sales/hitting targets?

Accountability and responsibility

Are staff competent and accountable for their actions? Do you have disciplinary procedures in place to address any breach of rules/policies/procedures by your employees? Do you have appropriate policies (such as whistleblower protection) in place that afford protection to those employees that provide information on any potential wrong-doing/breach?

Staff must continue to remain fit and proper to discharge their duties.

Consequences of non-compliance are greater now than ever before. Increased focus of regulators on compliance is evident in the frequent actions taken by authorities world-over against non-compliant institutions as well as individuals. We also see greater responsibility and accountability attached to the senior management in this regard. The financial implications of non-compliance go much beyond monetary fines – there is potential to affect business profitability as well as the ability to offer certain services and all firms should procure the right type and amount of resources to build an effective compliance culture at the workplace.

HOLT consultancy delivers compliance and AML training for senior management and employees. Please contact the team at HOLT consultancy by email using info@holtconsultancy.com or by phone on +971 4 386 6360 to discuss your requirements.

More information can be found on our website http://www.holtconsultancy.com. 

Eliminate Their Thirst - DIFC CSR Campaign

HOLT consultancy took part in the DIFC’s Corporate Social Responsibility Initiative 'ELIMINATE THEIR THIRST' Campaign on Monday 22^nd May 2017.

Volunteers distributed food and water to construction workers under the gate in the scorching heat. 

Whilst it was a very simple exercise, it is such acts that really bring us close to the daily struggles of millions of people around us and inspires one to do something to change their lives, in whatever way possible.

Well done to all those who took part.

DIFC Consultation Paper No. 1 - Companies Law Regime

On the 20th of March 2017, the Dubai International Financial Centre (DIFC) issued Consultation Paper No. 1 (“CP 1”) in which a number of significant changes were proposed to the existing DIFC Companies Law regime (“Existing Law”), replacing it with a new DIFC Companies Law (DIFC Law No. 3 of 2017, the “Proposed Law”). These changes were proposed with a view to enhancing the Existing Law to meet international standards and best practices. These amendments are expected to have an impact on both regulated as well as non-regulated companies incorporated in the DIFC and will also be of interest to those that wish to incorporate a company in the Centre.

The new Companies Regulations will also be introduced pursuant to the changes being made to the Companies Law. The proposed draft of the new Companies Regulations is expected to be published for consultation following consideration of public comments on the Proposed Law.

This article provides a brief insight into some of the significant changes proposed in CP 1.

The deadline for providing comments on CP 1 to the DIFC is 19 June 2017.

New classification of companies:

The Proposed Law will create a distinction between Public and Private Companies (something that is not present in the Existing Law) and provide a different set of rules and requirements for each. The rationale behind this is indicated as introducing a more stringent regime and requirements for Public Companies as investment from the public can be sought for such entities, and reducing the level of regulation for Private Companies where public investment cannot be sought.

The following are the key differences, in the Proposed Law, between Private and Public Companies:

	Private Company	Public Company
Shareholders	Maximum of 50	Unlimited
Directors	At least 1	At least 2
Company Secretary	Not required	Required
Financial Statements (It is to be noted that the section on Accounts, Reports and Audit in the Proposed Law will not apply to DFSA regulated entities)	Should prepare annual accounts but is exempt from having them audited, and filed with the DIFC Registrar of Companies (Registrar), if the Private Company does not have more than 20 shareholders and an annual turnover not exceeding USD 5,000,000.	Should prepare and maintain accounts that are to be audited by external Auditors. A copy of the audited accounts should be presented at the General Meeting, and  provided to the shareholders as well as the Registrar. They should also be accompanied by a Directors’ Report.
Annual General Meeting	Not required	Should hold one annually

The Proposed Law also seeks to do away with the concept of Limited Liability Companies (LLCs) that operate under the Existing Law and transitional arrangements for this will be put in place. Recognised Companies (i.e. foreign companies conducting business through a branch in the DIFC) will be grandfathered into the new regime, subject to substantially the same requirements under Existing Law.

Enhanced directors’ duties:

Duties of directors are significantly enhanced under the Proposed Law. The following seven aspects are discussed in CP 1 as being owed by the directors of a company to the company itself:

(a)  the duty to act in accordance with the constitutional documents of the company;

(b) the duty to act in a way that is considered (in good faith) to promote the success    of the company;

(c)  the duty to exercise independent judgement;

(d)  the duty to exercise reasonable care, skill and diligence;

(e)  the duty to avoid situations that could create a conflict between the interests of the director and that of the company;

(f)   the duty not to accept gifts or benefits from third parties capable of creating a conflict of interest; and

(g)  the duty to declare any interests, directly or indirectly, in a proposed or existing transaction or arrangement.

Enhancements to the Registrar’s powers:

The Proposed Law seeks to introduce important enhancements and clarifications to the powers of the Registrar. Some of these include indicating the objectives that the Registrar should pursue in performing his functions, clarification on the different types of permissions that the Registrar can issue, and introducing ‘due process’ procedures to bring about transparency in administrative decision making.

Disclosure of beneficial ownership:

In line with international standards in the fight against money laundering, tax evasion and financing of terrorism, companies will be required, under the Proposed Law, to disclose their ultimate beneficial owners to the Registrar. Such information will, however, not be made available to the public.

Whistle-blower protection:

In line with OECD directives in this regard, the Proposed Law seeks to offer protection and immunity (against civil liability, dismissal, etc.) to any person who discloses to the Registrar or a company’s auditor or director, any information relating to a reasonable suspicion that the company has, or may have, contravened the companies law regime.

Other miscellaneous amendments:

Some of the other miscellaneous enhancements indicated under the Proposed Law include:

i.    a requirement for only Public Companies to meet a minimum subscription threshold of USD 100,000;
ii.  introduction of more formal pre-emption rights, to safeguard shareholders from dilution of rights;
iii.  provisions against the use of a company name which is misleading, deceptive or conflicting with the name of another entity and an obligation to change the name within 30 days of becoming reasonably aware of having a misleading/ deceptive name; and
iv.   express prohibition against firms to conduct business in the DIFC unless they are duly registered and hold a valid Commercial Licence issued by the Registrar.

HOLT consultancy is experienced in helping clients establish and operate in the DIFC. Please contact the team at HOLT consultancy by email using info@holtconsultancy.com or by phone on +971 4 386 6360 to discuss your requirements.

More information can be found on our website http://www.holtconsultancy.com. 

10 Reasons to Establish in the DIFC

Dubai is ranked the number one financial centre in the Middle East and Africa according to The Global Financial Centres Index 21, March 2017.[1]

HOLT consultancy has helped many companies to establish in the DIFC. Below is a list of why the DIFC is so appealing:

1. Zero taxation rate on income and profits (guaranteed for a period of 50 years).
2. 100% foreign ownership.
3. No restrictions on foreign exchange or capital/profit repatriation.
4. High standards of laws, rules and regulations.
5. International legal system based on Common Law of England & Wales.
6. Access to a large pool of skilled professionals residing in Dubai and the region.
7. A modern transport, communications and internet infrastructure.
8. A wholly transparent operating environment, complying with global best practices and internationally accepted laws and regulatory processes.
9. The financial services regulator, the Dubai Financial Services Authority is internationally respected.
10. Platform to access regional wealth and investment opportunities.

Reasons to stay in the DIFC

 

• DIFC is growing and is looking to triple in size by 2024.
• Gate Avenue, a AED 1bn retail development, is currently being constructed to bring all areas of the DIFC together. Completion is expected by the end of 2017.
• Dubai is hosting Expo 2020 which will attract millions of visitors. 

HOLT consultancy can help you establish your business in the DIFC as a regulated or non-regulated entity. Contact us now for help on +971 4 386 6360 or email info@holtconsultancy.com

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[1] http://www.luxembourgforfinance.com/sites/luxembourgforfinance/files/files/gfci_21.pdf