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Legal Update: Establishment of the Dubai Economic Security Centre – Dubai Law No. 4/2016

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Published July 2016

The UAE and the Emirate of Dubai has made significant efforts to improve its status as an international financial and economic hub. In this regard, the maintenance of financial stability and protection of investments from criminal activities is critical. In order to enhance these aims, the Governmental of Dubai has established the Dubai Economic Security Centre (the “Centre”) pursuant to the Dubai Economic Security Law No. (4) of 2016 (the “Law”). The Centre’s primary function is to protect investors and the markets from financial instability and to limit illegal activities which could threaten the stability of Dubai’s economy. The Centre will further aim to ensure the application of best global practices in the capital markets of Dubai and strengthen the confidence of investors in Dubai.

The Law has wide application and applies to governmental and private bodies, charitable societies and any other entity which the Centre is authorised to monitor. The broad application of the Law can also be appreciated by the fact that the Centre’s authority will apply to all private companies and organisations established in Dubai, including companies established in various free zones in the Emirate and most notably private companies and organisations established in the Dubai International Financial Centre.

In order to implement and exercise its powers, the Centre has several salient features, some of which have been highlighted below:

  1. Monitoring financial transactions to ensure financial stability and market integrity

The Centre is entitled to take actions to monitor and combat crimes which are likely to jeopardise Dubai’s financial stability such as fraud, bribery, embezzlement, destruction of public property, forgery, counterfeiting, money laundering and financing of terrorism.

In order to achieve its objectives, the Centre has been granted the power to introduce specific financial stability measures from time to time. This can be done by reviewing existing legislation or by proposing new legislation to govern the financial and economic affairs of Dubai.

In addition to the power to create new rules and regulations, the Centre has been provided with broad powers and authority to implement its objectives and secure the cooperation of other governmental bodies, including judicial authorities.

  1. Investigative procedures, implementation powers and financial disclosure

The Centre has been authorised to control, investigate and collect information by “all available means” and to take preventive actions and measures to audit, detect crimes and engage in information exchange with local and international authorities. In exceptional circumstances, the Centre has the right to temporarily suspend trading in the securities market and the offer of shares of any company.

The Centre has the authority to request details of account, balances and bank movements and to require financial disclosure of any physical or legal person in coordination with concerned entities. All concerned entities are obligated under the Law to fully cooperate with the Centre in implementing its powers.

  1. Protection of whistle-blowers

The Law has, for the first time in Dubai, introduced comprehensive whistle-blower protections both within the public and private sectors. 

A whistle-blower being a person who collaborates with the Centre and reports to the Centre any matter which prejudices the national security of the UAE will be guaranteed certain protections under the Law. These safeguards will include providing necessary protection to the whistle-blower at his or her place of residence, keeping information relating to the whistle-blower confidential and ensuring that the whistle-blower is not subject to discrimination or mistreatment at the workplace.

Any report or information provided by a whistle-blower to the Centre shall not be considered as a violation of legislation and agreements restricting any disclosure of confidential information by the whistle-blower and the freedom, security and protection of the whistle-blower shall be considered guaranteed.

  1. International operations

The Law provides that the Centre can coordinate with international institutions in order to access and monitor information and data relating to matters which are being investigated by the Centre for the purposes of national security. The Centre could, therefore, potentially monitor and discipline Dubai companies and organisations who contravene provisions of the Law when operating outside Dubai.

  1. Penalties

Any person who violates the Law and the resolutions issued by the Centre is liable to be penalised, for each offence, with a fine between AED10,000 and AED500,000. Any person who discloses information which is considered confidential under the Law shall be punished by imprisonment for a period between 3 months and 1 year and a fine not exceeding AED50,000.

  1. Other functions

In addition to functions discussed above:

  • designated employees of the Centre will have powers of judicial officers in investigations carried out under the Law and for issuing the necessary fines under the Law;
  • the Centre will monitor and regulate charitable donations;
  • the Centre will control trading of currencies, commodities, precious metals and listed and unlisted securities;
  • the Centre will provide support and advice on economic security to entities.

With its wide ranging objectives and extensive regulatory powers, the Centre has been established as an important new regulator. The establishment of the Centre and the new Law is an additional step in Dubai’s efforts to confirm its position as an international financial hub.

If you are interested in discussing the content of this article, please contact: Adil Shafi, Partner (ashafi@ach-legal.com).

 

Author:


Adil Shafi
Partner
ashafi@ach-legal.com

 

 

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