What is the Difference Between DFSA and DIFC?

Difference Between DFSA and DIFC

You may know that Dubai has become a significant financial center in the Middle East as global investors and corporations are being lured into the United Arab Emirates (UAE). Do you know who the key players are that make Dubai a financial hub? In that case, you might be shocked to know that the Dubai International Financial Centre (DIFC) and Dubai Financial Services Authority (DFSA) are the key players in Dubai. However, both terms are connected. Still, there is a significant difference between the DIFC and DFSA. Today, we are going to discuss the difference between DFSA vs DIFC.

Importance of DIFC in Global Finance

The DIFC is not merely an office complex or business district. Consider it a small financial city that brings together banks, investment companies, insurance companies, and fintech startups. What makes DIFC so special is that it follows English Common Law.

That gives confidence to global investors and companies operating in the zone that they are competing in a fair environment. DIFC is also a bridge connecting East and West. It connects the areas of the Middle East, Africa, South Asia, Europe, and Asia. So it is very well suited for companies with global ambitions.

Role of DFSA in Simple Terms

If DIFC is the place where the financial companies work. The Dubai Financial Services Authority (DFSA) keeps an eye on the companies. DFSA makes sure that the companies in DIFC follow the international rules and work properly. It regulates many areas such as:

Banking
Insurance
Assent and fund management
Islamic finance
Trading in securities and derivatives

Dubai International Financial Centre (DIFC)

Basic Difference between DIFC and DFSA

Before we dive into the comparison between the Dubai International Financial Centre (DIFC) and Dubai Financial Services Authority (DFSA), we recommend you understand the overview between DIFC and DFSA:

Dubai International Financial Centre (DIFC) - Overview

You may understand Dubai International Financial Centre (DIFC) was developed in 2004. However, this center gained a reputation as an esteemed financial hub in the region. The DIFC is more than just a physical location as it is a thriving financial ecosystem developed to attract global businesses and boost economic growth. Do you want to learn more about the DIFC? In that case, you might feel happy after knowing that the DIFC is the leading global financial center in the Middle East, South Asia, and Africa (MEASA) region. This area has a close-to 20-year track record in order to boost trade and investment flows within MEASA.

You might be surprised to know that the center links the fastest-growing market of the MEASA region with the Asian, Middle Eastern, and African economies via Dubai. You may feel happy after reading that the DIFC operates within the recognized and independent regulatory framework based on English Common Law. Indeed, you have read it right! This is a separate entity in the UAE that comes with its own regulatory framework and legal system. The DIFC is home to over 2000 companies, including banks, insurance companies, asset management, and more. We hope you understand the Dubai International Financial Centre (DIFC) overview. So, it's high time to dive into the overview of the Dubai Financial Services Authority (DFSA).

Dubai Financial Services Authority (DFSA) - Overview

As we have discussed before, the Dubai Financial Services Authority (DFSA) and Dubai International Financial Centre (DIFC) are linked. Don’t you know how? In that case, you might be shocked to know that the DFSA regulates the DIFC. You must know that the Dubai Financial Services Authority (DFSA) serves as the guardian of financial integrity under the DIFC. It operates as the autonomous regulator of financial services in the DIFC. Indeed, you have read it right! This entity is an independent regulator of financial operations and market activities operated in or from the DIFC. However, this authority also has a principal function of becoming a policymaker, enforcer, and regulator. We understand some of you might still looking for information about the role of this entity.

In that case, you might feel better to learn that the DFSA’s role is to make sure that a financial service company operates transparently in the DIFC, abiding by international standards and regulations. Do you know what the vision of DFSA is? In that case, you could experience satisfaction in recognizing that it's imaginative and prescient to convert this vicinity right into a leading financial center within the Middle East, Africa, and South Asia area. The mission of the DFSA is to protect and increase the reputation of the DIFC as the safe and well-regulated financial center in Dubai.

DFSA vs DIFC

We have learned only the overview of the Dubai International Financial Centre (DIFC) and Dubai Financial Services Authority (DFSA) till now. Apart from this, there are several key points you should know to understand the difference between DFSA vs DIFC. We have developed a table for you to let you understand the difference between DFSA and DIFC:

DIFC	DFSA
As we learned in the previous section, the Dubai International Financial Centre (DIFC) is an onshore financial center developed in 2004.	Dubai Financial Services Authority (DFSA) is the financial regulatory authority for the financial free zone in the DIFC.
You may be surprised to learn it has a mission to support the development of Dubai as a regional and international financial hub.	We are sure you are willing to know the mission of the DFSA after knowing the mission of the DIFC. In that case, you may feel satisfied after knowing that the DFSA’s objective is to contribute to the stability of the financial system by testing and supervising financial activities operating within the DIFC. In addition, the DFSA promotes a high standard of market conduct.
As we mentioned above, the DIFC offers a wide variety of services, including world-class office space, financial and legal services, and much more. Plus, if you want to establish your business in the region, you can also enjoy the regulatory framework aligned with international standards.	The DFSA supervises and looks over financial companies like yours under the DIFC and gives them licenses. Indeed, you have read it right! You must also obtain a license from DFSA to run your company in this area. Moreover, this authority also investigates within your company or other company to ensure your business complies with international standards.

Dubai International Financial Centre (DIFC)

How DIFC and DFSA Work Together?

Many browsers confuse DIFC with DFSA. However, it is quite easy when we think of them as a team. DIFC, as a site, provides a place and a business-friendly environment, whereas DFSA provides the laws and makes sure companies follow them.

For example:

If a bank has to open in DIFC, it has to register the office space with DIFC.
But before it can offer financial services, it must be licensed by the DFSA.
The DFSA then ensures that the bank follows proper rules, has solid systems, and can ensure the security of customers' funds.
This way, both DIFC and DFSA in tandem engender trust and safeguard it.

Benefits of Considering a Set-Up in DIFC

Companies go to DIFC because it offers many benefits, such as:

For 100% foreign ownership, you do not need a local partner.
Low tax for profits and capital gains for several years.
Access to skilled professionals from all corners of the world.
Good reputation at DIFC makes the businesses look credible before clients and investors.

Challenges to Keep in Mind

Though the DIFC will draw anyone in, businesses need to be aware of a few obstacles:

An applicant has to engage in documentation and approval for a DFSA license.
Companies must, therefore, incur costs for maintaining compliance with DFSA regulations.
Regular audits and checks by the DFSA are conducted to maintain the standards.

Future of DIFC and DFSA

Dubai has the ambition of emerging as a top financial hub in the world. DIFC is slowly making its entry into emerging areas such as fintech, blockchain, and digital assets. On the other hand, DFSA is amending its rules to encompass these new technologies and financial products.

DIFC continues to witness expansion, and the DFSA shall continue to protect investors as businesses are kept regulated and transparent.

How can Flyingcolour Business Setup help you?

As today we have learned, DIFC is a free zone financial center in Dubai that is regulated by the DFSA. In short, both terms are connected to each other. However, starting your business in the DIFC can be lucrative because this area offers several advantages. Flyingcolour Business Setup can help you start your company in this free zone. We can help you at each stage to begin your company in the DIFC in Dubai. Plus, our experts can clear all your doubts about DIFC and DFSA.

Frequently Asked Questions (FAQs) About What Is The Difference Between DfSA and DIFC

1. What is the main difference between DIFC and DFSA?

DIFC is a financial Free Zone in Dubai where companies can establish their offices. While DFSA is the authority that regulates and supervises the financial services within DIFC.

2. Is DIFC only for financial companies?

While DIFC is mainly focused on finance, it can also host legal firms, consultancies, and fintech startups. Additionally, other service companies support the financial ecosystem.

3. Why do businesses prefer setting up in DIFC?

Companies prefer the DIFC for benefits like 100% foreign ownership, tax benefits, an excellent infrastructure, and a dependable regulatory setup under DFSA.

4. How can DFSA protect investors?

DFSA makes sure that financial companies meet strict international standards. It supervises, audits, and monitors them to protect against fraud, money laundering, or other forms of financial misconduct.

To learn more about DFSA vs DIFC, book a free consultation with one of the Flyingcolour team advisors. Please note that this article was published on 26/06/2024 by the federal policies and updates at the time of writing. For the latest info please talk to our consultant.