Compliance Update: The Crucial Role of the Control Function in DIFC–Regulated Financial Institutions
Located in the Gulf, but strategically positioned to services the larger Middle East, Africa, and South Asia (MEASA) region, the Dubai International Financial Centre (“DIFC”) is a leading international financial hub with a vibrant business ecosystem of over 36,000 professionals. It is home to more than 4,300 active companies that benefit from the centre’s robust independent judicial system and regulatory framework, a global financial exchange, inspiring architecture, and enabling support services. [1]
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- Compliance Officer [2]
- Money Laundering Reporting Officer [2]
- Risk Officer
- Finance Officer
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Control Functions are part of senior management and play a significant role in ensuring compliance and risk management.In an ideal world, having strong Control Functions would mean that the firm has a robust compliance and risk management culture (top-down approach), a solid foundation for timely compliance obligations, and strong internal controls.
Before appointing an individual to perform the above functions, the firm’s senior management are expected to assess the fitness and propriety of such individual to perform the function. Such assessment includes the individual’s integrity, competence and capability, financial soundness, etc.
Generally, the DFSA also interviews such individual before approving the proposed candidate for the role.
Considering the sweeping changes in the regulatory framework including AML, compliance and risk and novel business concepts, it is important for the Control Function to be up to date with the latest regulatory requirements, as there is a higher risk of failing to meet the compliance obligations and potential breaches and fines.
When it comes to filling Control Function positions, a critical decision arises – should the regulated firm choose for in-house recruitment, outsource the function or a mix of the two?
To help senior management with the process of identifying the right options for your Firm, we have summarised the key areas for you to consider.
Other potential option can include the appointment of an inhouse person with an access to high-level advisory in relation to Control Functions. This entails:
- Appointment of an inhouse Control Function (e.g., a mid-level / manager to perform the appointed function)
- Access to a senior compliance professional providing direction on strategic matters, guidance on technical aspects of compliance, finance, risk, governance, etc.
- Provides the firms with a combination of a full-time in-house person (mid-level instead of C-Suite), and senior professional as advisor instead of hiring a full time senior professional for the appointed role.
- Boosts confidence of the Board and Stakeholders
- Provides comfort to the regulator to approve the in-house hire, who may be the right fit for implementing the framework but may lack confidence in providing strategic inputs and navigating the already complex regulatory environment.
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[1] DIFC Website https://www.difc.ae/[2] One can consider appointing the same individual to perform Compliance Officer & MLRO role.
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Authors
Nisha Shah
Director – Regulatory & Compliance
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Re/think is a boutique accounting, regulatory and compliance, Tax advisory, audit, HR consultancy, recruitment and business advisory firm. We specialize in assisting SME clients with cost-effective, high quality services and solutions. We create value by investing in highly qualified and motivated people and working closely with leading industry partners to provide our clients a one-stop shop for all of your business requirements.
Our Regulatory and Compliance Team is recognised by Regulators in DIFC (DFSA) and ADGM (FSRA) as expert consultants. Our compliance skills are further supported by the excellent work of our Finance team, together allowing to provide full support to authorised firms.
