DIFC SIGNS MOU WITH FDIC, FEDERAL RESERVE AND OTHER US

UNCLAS DUBAI 000001 SIPDIS SIPDIS E.O. 12958: N/A TAGS: ECON EFIN EINV TC AE SUBJECT: DIFC SIGNS MOU WITH FDIC, FEDERAL RESERVE AND OTHER US FINANCIAL REGULATING AUTHORITIES ¶1. (U) On October 23 the Dubai Financial Services Authority (the DFSA is the regulating authority for the Dubai's self-governing financial "free zone" the Dubai International Financial Center, DIFC) entered into a comprehensive Statement of Cooperation with key U.S. federal banking supervision authorities: the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS). While there are currently less than ten banks and banking organizations chartered in the US with corresponding operations in the DIFC that would fall under the agreement, the memorandum of understanding opens the door to unprecedented cooperation between Dubai and US financial regulators. ¶2. (U) Under the agreement, the DIFC, Fed, OCC, FDIC and OTS agree to cooperate with each other during the authorization of a financial institution in the other's jurisdiction, as well as in supervision of ongoing activities of cross-border banking businesses. In a nutshell, if a financial institution is chartered in either the US or in the DIFC, and wants to open and maintain corresponding operations in the other location, the regulatory authorities of both locations agree to share information about the financial institution. Thus, the initiative reflects each agency's commitment to cooperation in relation to prudent oversight and inspections. It adopts the model for information sharing developed by the Basel Committee on Banking Supervision and follows similar arrangements the DFSA has with other significant banking bupervisors (such as the UK Financial Services Authority, FSA, and the German Financial Supervisory Authority, BaFin). ¶3. (SBU) Comment: While the launch of the DIFC, initially triggered concerns that the center could become a haven for money laundering and other illicit financial dealings, their ongoing recruitment of talent from established US, UK, EU and Australian regulators, their internal jurisprudence system (predicted on UK common law and not subject to existing UAE commercial law) and their agreements with top international regulators (such as this one) only serve to visibly demonstrate the DIFC's commitment to becoming a world class financial center. JP Morgan/Chase, Bank of New York, Merrill Lynch and AIG have established operations within the DIFC and with the pending joint venture between NASDAQ and Dubai International Financial Exchange (the DIFC based stock exchange),we anticipate the attraction of the DIFC as the domicile of choice for U.S. financial institutions in the Middle East will be further enhanced. End Comment. SUTPHIN