Law Blog Categories

more

Overview : Licensing and Monitoring of Exchange Business

Published on : July 2018
Author(s):Several

Licensing and Monitoring of Exchange Business – UAE

Lawyers in DubaiMoney does buy satisfaction if you spend it the right way,” while the creation and development of currency seem elusive, money is the way we get the things we need and want. Money is the medium of exchange that is used to facilitate transactions globally that allows people to trade goods, services, etc. The currency differs from country to country, and therefore the importance of currency exchange or money exchange companies are vital means in the enactment of trade tourism services that are practical, rapid, easy and efficient. To understand the importance of exchange business let us think about your local farmers market where you are shopping for your favorite organic coffee on a Sunday morning. The coffee is imported from Brazil, which means that the farmers in Columbia are paid in the Columbian peso, and someone between the farmer and the importer needs to convert the peso in UAE Dirhams to sell it in the local market in UAE. It is where the exchange businesses come into place. This article takes into consideration laws and regulations by UAE Central Bank and does not take into account regulations by ADGM, DIFC, Fintech, etc. concerning monitoring and licensing of exchange businesses.

Central Bank issued Regulations regarding the Licensing and Monitoring of Exchange Business (the Exchange Business Regulations) in January 2014, with the aim of improving the regulation of exchange businesses, supporting the geographical development of exchange businesses and facilitating the provision of exchange services throughout the UAE. 

The Exchange Business Regulations define exchange businesses as

  1. dealing with sale and purchase of foreign currencies and travelers’ cheques;
  2. executing payment operations in local and foreign currencies;
  3. paying employees’ wages through an established link to the UAE Wages Protection System; and
  4. Other businesses licensed by the Central Bank. Under the Exchange Business Regulations, no person or corporation may carry out an exchange business in the UAE without receiving a license from the Central Bank. Commercial banks, as defined in the Banking Law, are exempt from this requirement.

How to obtain a license under the Exchange Business Regulations?

Law Firms in DubaiPersonal reliability refers to the applicant or any of the founding members to be in ethical behavior and conduct and should not have a criminal record for any offense involving dishonesty or violence and should have a good background with banks and creditors.  One shall not be declared bankrupt or settled with his creditors nor has been ruled to attachment of his belongings or put under judicial receivership.

Professional Qualifications: The candidate or the person who is or shall be the manager of the exchange business shall have the appropriate theoretical knowledge of exchange business and the necessary management experience. Central bank requires resumes for managers and controllers to review their professional qualification.

  1. The candidate must meet the paid-up capital conditions specified in the Exchange Business Regulations. The paid-up capital requirements differ depending on the type of exchange business that the candidate intends to carry out.
  2. In the case of individual candidates, the candidate must be a UAE national who is at least 21 years old with sufficient mental capacity on account of corporate candidates, UAE nationals should hold no less than 60% of the shares in the corporation.
  3. To gain a license, an applicant must portray personal reliability and professional qualifications as required by the Central Bank.

    Personal reliability refers to the applicant or any of the founding members to be in ethical behavior and conduct and should not have a criminal record for any offense involving dishonesty or violence and should have a good background with banks and creditors.  One shall not be declared bankrupt or settled with his creditors nor has been ruled to attachment of his belongings or put under judicial receivership.

    Professional Qualifications: The candidate or the person who is or shall be the manager of the exchange business shall have the appropriate theoretical knowledge of exchange business and the necessary management experience. Central bank requires resumes for managers and controllers to review their professional qualification.

  4. The paid-up capital requirements are as follows:

    •    The paid-up capital should be not less than AED 2,000,000 for purchasing, selling and exchanging of foreign currencies in the form of bank notes, coins and travelers’ cheques.

    •    The paid-up capital should not be limited to AED 5,000,000 for bringing on exchange market within and outside the UAE in addition to selling and purchase of foreign currencies and travelers’ cheques.

    •    The paid-up capital should not be less than AED 10,000,000 for carrying on payment of wages by involving the Central bank's system in addition to remittance business and buying and selling of foreign currencies.

    •    If the company is a Limited Liability Company (LLC) regardless of the activity, the paid-up capital should not be less than AED 50,000,000 and shall increase by 10% for opening each additional branch.

  5. After getting the license, the authorized individual may not transfer the ownership of the permit, for profit or compensation to any third party. If such individual holds the post of Chief Executive Officer of the applicable exchange business, he or she should not be qualified to hold the given position at any another establishment. The authorized individual should likewise agree to the proceeding with obligations under Article 9 of the Exchange Business Regulations.

Scope of License

Article (6) of the Exchange Business Regulation mentions the Scope of Licence where the license published by the Central Bank the following shall be observed:

  •  It is for one year and renewable
  •  It should contain such requirements as the Central Bank may deem appropriate.

Terminating the License

Lawyers in Abu DhabiArticle (7) of Exchange Business Regulation gives the right to the Central Bank by a resolution of its Board to revoke, vary, limit or withdraw any condition imposed on any license after receiving the comments of the licensed person on the reasons calling for such cancellation, variation, restriction or withdrawal at any time. The Central Bank by a decision of its Board shall have the right to revoke the license if:

  • The licensed person is in breach of the Exchange Business Regulations or Federal Law Number (10) of 1980 or any instructions or circulars issued by the Central Bank or if any of the conditions of the license is not fulfilled or is incapable of fulfillment;
  • The Central Bank has been given with dishonest, deceptive or incorrect data by or on behalf of the licensed person or any of its manager or controller.
  • The interests of customers or potential customers of the authorized person are threatened, whether by the manner in which the licensed person is conducting or intends to administer its business or for any other reason;
  • Any authorized person or any of its shareholders apply for the liquidation of the company by the competent judicial authority
  • A judicial receiver or manager or any similar officer of the licensed person's undertaking has been appointed;
  • The authorized person has a bankruptcy order or judgment against him
  • The authorized person did not commence its exchange business within six months from the date of the license.

Application of Exchange Business Regulations

Article 12 of the Exchange Business Regulation mentions that these provisions shall apply to all entities exercising exchange business in the UAE and licensed by these Regulations. Exchange companies permitted by Central Bank’s Board of Directors Resolution No. 123/7/92 issued on 29/11/1992 shall be required to resolve their areas with the requirements of these Regulations, within two years from its issue date. If you need more information or assistance on money exchanges in Dubai or UAE, please get in touch with our team of lawyers in Dubai or other offices across the UAE.

Related Articles