In order to protect Dubai’s economy from financial risks and crimes, Law No (4) of 2016 on the Dubai Economic Security Centre was issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Ruler of Dubai, Vice President and Prime Minister of the UAE.
The new Law has come into force upon its publication in the Official Gazette on May 15th, 2016.
The purpose behind the creation of the Dubai Economic Security Centre (DESC) is to minimize illegal and harmful activities within Dubai’s financial markets, protect investors from risks and predict and manage risks and negative economic practices which could threaten the stability of Dubai’s economy.
The DESC’s structure
The DESC shall comprise an executive authority including an Executive Director as well as administrative, financial and technical staff members. The Executive Director shall be appointed by the Chairman of the Dubai Executive Council.
Entities subject to the DESC’s authority
The DESC’s authority is very broad. It has oversight over local government bodies that are guaranteed minimum profit by the government as well as those that are subsidized by the government and any company or institution licensed to engage in economic activity in the emirate, including licensed companies operating in free zones such as the Dubai International Financial Centre. Entities subject to the DESC’s authority also include charities operating in the Emirate of Dubai as well as any institution that is required to be monitored by the Centre as per a decision of the Chairman of Dubai Executive Council.
Main roles and prerogatives of the DESC
The main role of the DESC is to combat all crimes likely to jeopardize Dubai’s financial stability such as corruption, fraud, bribery, embezzlement, destruction of public property, forgery, counterfeiting, money laundering, the financing of terrorism, illegal organizations or other crimes that may be committed by entities that are under the DESC’s jurisdiction.
In order to achieve its objectives, the DESC was granted several prerogatives by the new Law. One of the DESC’s most significant prerogatives is its power to review and propose legislations relating to Dubai’s financial and economic activities, to research and report on Dubai’s financial and economic activities and to provide recommendations and training programs.
However, the DESC is not merely an advisory entity. The Centre also has regulatory responsibilities. It must monitor economic activities within Dubai and sanction abuses and financial irregularities. One of the DESC’s duties is to monitor trading of currencies, commodities, precious metals as well as listed and unlisted trading securities. The Centre must also supervise donations sent or received by charitable organizations.
In light of recent events throughout the world, the new Law gives the DESC an important role in countering terrorism: the Centre shall develop rules and procedures aimed at preventing interactions with individuals or organizations involved in terrorism.
Sanctions in case of violations of the new provisions
The new Law encourages the disclosure of information by participants in Dubai’s financial markets. Thus, disclosing any information relating to Dubai’s economic security shall not be considered by the DESC as a violation of the new provisions. The new law further provides that any person who provides such information shall not be subject to any disciplinary or legal action unless the information provided is false.
The new provisions also outline the penalties in case of violation of the new Law. The disclosure of information or data considered as confidential according to the Law is sanctioned by way of detention (the term shall be not less than three month and shall not exceed one year) and a fine of AED 50,000. Any person violating the provisions of the Law shall incur a fine comprised between AED 10,000 and AED 500,000.
The new Law is an additional milestone in Dubai’s continuous efforts to confirm its position as an international financial hub. It guarantees international investors with economic/ financial stability and transparency in Dubai. The regulatory role of the new Centre and its broad scope should be effective in minimizing illegal activities within Dubai’s financial markets. Furthermore, the significant penalties provided by the new Law should have a dissuasive effect on potential violators.
For more information about this article, please contact Ashraf El Motei at [email protected]
