Overview of ADGM Category 5 License
An Islamic Financial Institution operates in strict adherence to Sharia principles and manages profit-sharing investment accounts received on an unrestricted basis. This license allows firms to provide a range of Islamic financial services while ensuring compliance with Sharia law.
Capital Requirements:
Base Capital: USD 10,000,000
Risk-Based Capital:
CET1: 6%
Tier 1: 8%
Branch Set-Up: The capital requirements do not apply to branches of existing regulated banks.
Capital Plan: Must be documented in the Internal Capital Adequacy Assessment Process (ICAAP) Report.
Additional Requirements: The FSRA may impose further capital requirements based on its review of the application.
Licensing Process for ADGM Category 5
To obtain an ADGM Category 5 License, applicants must submit a detailed application to the Financial Services Regulatory Authority (FSRA). The FSRA evaluates the applicant’s qualifications and the suitability of the requested license category.
The Application Process
Initial Review: The FSRA will conduct an informal review of the draft Regulatory Business Plan and projected financials. If the FSRA is satisfied with the initial review, the applicant will be invited to submit a full formal application, which must include a finalized Regulatory Business Plan.
MVG Dubai Office Support
Introduction to the Regulator: Our team at MVG Dubai facilitates introductions to the FSRA, ensuring a smooth engagement with the regulatory body and helping to address any preliminary questions or requirements.
Drafting the Regulatory Business Plan: MVG Dubai provides expert assistance in preparing a comprehensive Regulatory Business Plan (RBP). This includes developing application forms, business flow processes, and organizational charts tailored to the specific needs of an Islamic Financial Institution.
Financial Modeling and ICAAP: Our experienced consultants prepare a detailed three-year financial model, as well as draft the ICAAP and Internal Risk Assessment Process (IRAP) reports. This is crucial for demonstrating the institution’s financial stability and risk management capabilities.
Policy and Manual Preparation: MVG Dubai’s team helps draft essential policies and manuals, including:
Form Preparation and Submission:
Regulatory Application Drafting: MVG Dubai drafts the regulatory application for both the company and its key individuals, ensuring it meets all FSRA requirements and effectively communicates the firm's readiness.
Submission and Appointment Support:
Additional Support:
Office Lease: Assistance in finding and leasing appropriate office space that meets regulatory requirements.
Bank Introduction: Facilitating introductions to UAE banks for account opening and related services.
License Issuance: Support in obtaining the financial services license from the FSRA.
Regulatory Application Submission: We manage the submission of the application, including all necessary policies and appointments for key roles such as Senior Executive Officer (SEO), Finance Officer (FO), Risk Officer (RO), Money Laundering Reporting Officer (MLRO), and Compliance Officer (CO).
Provision of Full-Time Functions: MVG Dubai ensures the appointment of qualified individuals to essential roles, providing support in recruiting and training as needed.
AUT – CORE: This form, required for all applicants, provides detailed information about the applicant, its activities, prospective clients, and controllers.
AUT – IND: This form is for individuals in mandatory functions, including directors, senior executive officers, finance officers, compliance officers, and money laundering reporting officers.
AUT – AMS: This form must be submitted by firms applying to arrange credit or deals in investments, detailing the proposed activities.
Compliance: Ensuring adherence to all regulatory requirements.
Anti-Money Laundering (AML): Implementing procedures to prevent and detect money laundering activities.
Risk Management: Establishing frameworks to identify and mitigate financial risks.
Remuneration: Developing policies for fair and transparent compensation.
Governance: Structuring effective governance frameworks.
Conflicts of Interest: Creating policies to manage and disclose potential conflicts.
Business Continuity Planning: Preparing strategies to ensure operational continuity in various scenarios.
Post-Application Process
The FSRA will conduct a thorough review of the application and engage in an ongoing dialogue with the applicant, which may include interviews with nominated authorized individuals. Upon satisfactory review, the FSRA will issue an In-Principle approval, outlining conditions that must be fulfilled before the final license is granted. These conditions generally include:
Incorporation or Registration: Registering the entity with the ADGM Registrar of Companies.
Bank Account: Opening a local bank account and providing the FSRA with proof of capital remittance.
Office Space: Providing evidence of suitable office space for conducting financial activities.
Once these conditions are satisfied, the FSRA will issue the formal license.
Conclusion
The ADGM Category 5 License process is comprehensive and requires detailed planning and adherence to regulatory standards. MVG Dubai offers expert support throughout the entire licensing process, leveraging our deep knowledge and experience to ensure compliance with FSRA requirements and facilitating a successful establishment in the UAE financial sector. Our team’s expertise in regulatory affairs, financial modeling, and policy development provides a robust foundation for navigating the licensing process efficiently and effectively.