Banking Business means the business of accepting deposits of money which may be withdrawn, or that are repayable on demand or after a fixed period, or after notice, by cheque or otherwise, and the use of such deposits, either in whole or in part, in:
- the making or giving of loans, advances, overdrafts, guarantees or similar facilities; or
- the making of investments
for the account and at the risk of the Licensee
Core Income Generating Activities
• Raising funds, managing risk including credit, currency and interest risk
• Providing loans, credit or other financial services to customers
• Taking hedging positions
• Managing capital and preparing reports to investors or any government authority with functions relating to the supervision or regulation of such business
Special points to consider
- Out of scope: A Licensee that is part of a banking group and only provides advisory, arranging and other services to clients of the banking group (although such Licensee should consider whether it undertakes another Relevant Activity).
- Out of scope: UAE businesses engaged in exchanging foreign currency and remitting money, and financial intermediaries in the sale and purchase of domestic and foreign stocks and bonds, currencies and commodities and money market transactions, are not considered a Banking Business.
- Licensees engaged in a Banking Business may also provide other relevant services as a normal part of their business operations. To prevent duplicate reporting, such Licensees are not also considered engaged in a separate Distribution and Service Centre Business or Lease-Finance Business and will not need to separately demonstrate economic substance in respect of such ancillary Relevant Activities.
- Central Bank
- Competent Authority in Financial Free Zone
What licensee has to do?
- File notification with the regulatory authority before due date.
- Only Licensees that earn Relevant income during the relevant financial period and that are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an economic substance return. Economic substance returns must be filed within 12 months from the end of the relevant financial period.
Who has to file the notification?
The provisions shall apply to a Licensee that carries out any Relevant Activity. However, the notification form will be the way to confirm to the “Regulatory Authority” whether your company has carried out any relevant activity during the reportable financial year or not.
Hence, filing of Notification is mandatory for all the Licensees and Exempted Licensees.
Consequences due to Failure to Comply with Regulations
- Penalties between AED 20,000 to 400,000
- Exchange of information with foreign competent authority
- Suspension or withdrawal or cancellation of license