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