Whistleblowing in the UAE and Dubai

The Dubai Financial Supervisory Authority (DFSA), acting as the independent financial regulator of the Dubai International Financial Centre (DIFC), published Consultation Paper No. 141 (“CP 141”) on 7 July 2021, which proposed the introduction of measures to standardize the reporting and recording of misconduct.

 

Based on this, the DFSA introduced a scheme on 7 April 2022 to implement the so-called “Whistleblowing Regime”, which reflects the proposals made in CP 141. The regime is the first of its kind to be introduced by a financial services regulator in the UAE and applies to all entities regulated by the DFSA operating in or from the Dubai International Financial Centre (DIFC).

 

The content of the regulation is to amend the 2004 Regulatory Law with the aim of improving the Whistleblowing culture in companies by making it mandatory for all companies regulated by the DFSA to implement effective policies and procedures for reporting and assessing regulatory concerns. This is to encourage more frequent reporting of regulatory concerns, prevent misconduct and ensure effective compliance with those regulations.

For the purposes of section 68A of the Regulation Act, “Whistleblower” means anyone who makes a qualifying report to a specified recipient, although the report is made anonymously. A report is considered qualified for the purposes of the above regulation if it relates to a reasonable suspicion that a regulated entity or (senior) employee has contravened a provision of the Act or other legislation administered by the DFSA, committed money laundering, fraud or any other financial crime and the disclosure was made in good faith. The latter requires that the disclosure is made honestly and not with dishonest or malicious intent. The burden of proof regarding the existence of the above criteria is on the Whistleblower himself. Whether there is reasonable suspicion depends on the circumstances of the individual case. A sincere and honest suspicion based on objective facts or evidence may be considered reasonable even if it turns out to be unfounded after an investigation.

  

To obtain the protection of the scheme, the report must be made internally within the entity regulated by the DFSA or externally to its auditor, the DFSA or a law enforcement agency.

In general, the new legislation prohibits anyone who makes a qualified report within the scope of application described above from being subject to civil or contractual liability or from being held liable. However, criminal prosecution does not fall within the substantive scope of the provisions.

 

From an employment law perspective, dismissal based on such a disclosure is to be considered unjustified.

 

In the event of a breach, it is the responsibility of the Whistleblower to seek compensation from the DIFC Court for the damages suffered.

Since 7 April 2022, every company subject to the scope of application of the Regulatory Act is obliged to have written guidelines and procedural rules regarding whistleblower communications as well as their receipt, evaluation and forwarding. On the one hand, measures must be implemented to protect the identity of the whistleblower, the confidentiality of his acts of cooperation and his protection against disadvantages. On the other hand, measures are needed to regulate conflicts of interest and to ensure fair treatment of persons accused by a Whistleblower of having committed a violation.

 

The policies and procedures implemented shall be appropriate to the nature, scope and complexity of the company's business. A regular review shall be conducted to ensure effectiveness, adequacy and currency.

 

A DFSA regulated entity should inform all its officers and employees of the protections available to them as part of the implementation of these new requirements.

 

It is also obligatory to keep a written record of the facts reported by a whistleblower as well as the result of the assessment, sometimes as a basis for effective control by the DFSA.

 

Notwithstanding the internal whistleblowing capabilities of companies to be implemented, the DFSA has established a dedicated Whistleblowing email address for reporting supervisory concerns. It also announced that it will monitor compliance with the regulation presented here and evaluate the implementation and effectiveness of the measures by mid-2023.

As a further milestone towards comprehensive regulations for the protection of Whistleblowers and the establishment of compliance with international standards, the Federal Tax Authority has adopted the so-called Raqeeb program for the protection of Whistleblowers with regard to tax violations and tax evasion, which came into force on 15 April 2022.

 

A possible tax violation can be reported through the Raqeeb program, whereby the Whistleblower's data is treated as confidential by the authorities by entering into a confidentiality obligation. In addition, the whistleblower may receive compensation for the disclosure of the facts. The exact requirements for reporting and the resulting financial compensation, as well as the procedure itself, can be found on the website of the tax authority through which the report is to be filed.

 

The program, which makes it possible to report violations of tax laws, therefore logically only refers to value added tax (VAT) at this point in time. With the introduction of corporate income tax next year, it is expected that the program will gain further importance.