Secure Fundholding: Your Options in the UAE
International businesses entering the dynamic Falcon Economy are sometimes surprised to discover that banking in the UAE can present unique challenges, particularly for off-shore entities operating in free zones. While solutions exist, not all fundholding options suit all companies or individuals.
Below, we set out the most common methods for holding funds in the UAE and the pros and cons of each.
Custody Account
A special-purpose custody account allows international businesses to hold operating funds in a local, on-shore bank account administered by a designated agent. Withdrawals occur on an as-needed basis and require the written authorization of a designated company representative. Businesses offering custody services are required to undergo licensing from a Financial Services Regulatory Authority.
Pros
Security. Funds are held in an on-shore bank account or with a licensed financial institution. At Titanium, client funds are held by Emirates NBD, a Tier-1 financial institution rated AA by Moody’s.
Transparency. Licensed and regulated by a Financial Services Regulatory Authority, a custodian must abide by specific accounting and regulatory practices.
Neutrality. Your custodian cannot, by law, have a financial interest in the success of your venture and is, therefore, an impartial source of information and business assistance.
Cons
Less flexible. Your custodian can only withdraw funds for specific purposes and at particular times outlined in your Custody Agreement
Local Agents
lnternational companies sometimes partner with local agents, such as managed funds or family wealth offices, to temporarily hold and disburse funds while waiting for a local bank account.
Pros
Insider knowledge. Local institutions will necessarily have a better understanding of the regulatory landscape and can provide valuable insights into processes and procedures.
Flexibility. Because you deposit funds directly into the partner’s account, he or she can withdraw and transfer money whenever and however you need.
Cons
High risk. Unlike licensed custodians, agents are not required to seek your approval before withdrawing funds or to provide reports on their activity.
Limited control. Once you voluntarily transfer funds into the agent’s account, you lose a great deal of control.
Offshore Accounts
An offshore account in a friendly jurisdiction can provide a temporary solution for international businesses that require the security of fundholding with a bank and have the budget to accommodate forex fees and transaction costs.
Pros
Security. An offshore account with a licensed financial institution ensures that your funds enjoy the security and transparency of a traditional corporate bank account.
Tax efficiency. Your business may be able to benefit from favorable tax treatment for the funds held abroad than it would receive with a local bank account.
Cons
Complexity. In addition to UAE regulations, you’ll need to spend time and resources navigating the requirements of the jurisdiction where you’ve chosen to store funds.
Cost. Transferring funds between an offshore account and local business partners and vendors can entail indirect costs like forex fees and transaction costs.
Corporate Service Providers
Many free zones maintain a directory of authorized service providers who specialize in helping new businesses navigate the setup process. Think of them as a concierge for your new UAE business.
Pros
Expertise. Service providers have experience assisting a wide range of organizations and business entities and may have creative solutions for operational issues.
Speed. Working with a corporate service provider can save time throughout the process of setting up your business, as they’re already familiar with the government entities involved and may have connections in specific offices.
Cons
Expense. Corporate service providers come at a significant cost that not all new businesses can afford.
Not financial services providers. In this respect, Corporate Service Providers don’t differ from local agents and other workarounds. You won’t benefit from the security and transparency that comes with FSRA regulation
FAQs
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Yes, international businesses can open local bank accounts after receiving a business license. Individual banks may have other documentation requirements as part of the AML/KYC process.
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Opening a corporate bank account in the UAE can take between one week and several months, depending on the specifics of your business and its ownership.
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You can open a custody account with Titanium in two to three business days.
