Banking Regulations in ADGM: Complete Guide
Activities are defined by what a firm actually does, so a family office or group treasury vehicle can be carrying on a regulated activity without calling itself one.
ADGM applies English common law directly and runs its own courts, registrar, financial regulator and data protection regime. This guide separates what the Registration Authority does from what the FSRA does, explains how a Financial Services Permission is scoped and why its conditions matter more than the activity headings, and sets out the duties that follow: client money segregation, approved individuals, prior approval for change of control, and prudential returns. It also covers the federal rules that still reach ADGM firms, including anti-money laundering, corporate tax and VAT.
Abu Dhabi Global Market is a financial free zone, and that changes the questions a business needs to answer. ADGM has its own courts, its own regulator in the Financial Services Regulatory Authority, its own registrar, and its own data protection regime. Unusually, it applies English common law directly, so contract, tort, trusts and equity are read the way an English lawyer would read them rather than through a codified civil framework.
The practical consequence is that the permission, not the trade licence, defines the business. Anyone planning to take deposits, lend, arrange or manage investments, advise, hold client assets, run a fund, provide payment services or deal in virtual assets from ADGM has to work out where the activity sits before the structure is fixed.
The two authorities
The Registration Authority incorporates and registers entities under ADGM companies legislation rather than the federal Commercial Companies Law (Federal Decree-Law No. 32 of 2021), maintains the register, and issues the commercial licence. The FSRA regulates financial services: it grants the Financial Services Permission, approves individuals for controlled functions, sets prudential and conduct requirements, supervises firms and takes enforcement action.
Federal law still applies where it is not displaced. Criminal law, the anti-money laundering and counter-terrorist financing regime, immigration, corporate tax and VAT all reach ADGM entities. What ADGM supplies in place of federal civil law is the commercial framework — companies, insolvency, security interests, employment, data protection — administered by its own courts.
Scoping the permission
A Financial Services Permission lists the regulated activities the firm may carry on and attaches conditions to them. The application is assessed on the regulatory business plan, the ownership and group structure, the source of capital, governance and reporting lines, systems and controls, outsourcing, and the fitness of the individuals proposed for controlled functions. Each category of activity carries its own capital and prudential requirements.
Two points are worth settling early. First, activities are defined functionally: a family office, a group treasury vehicle or a technology company that moves customer funds may be carrying on a regulated activity without describing itself as a financial firm. Second, the conditions on the permission govern day-to-day operations more tightly than the activity headings, so a firm that reads only the headings will misjudge what it is allowed to do.
Ongoing obligations
- Client money and client assets. Firms holding or controlling client funds must segregate them, reconcile them and be able to show whose money is whose at any time.
- Approved and recognised individuals. Senior functions must be held by individuals the FSRA has approved, and changes of role, resignations and dismissals must be notified.
- Change of control. Acquiring or increasing control of a regulated firm requires prior approval. A share purchase agreement that does not condition completion on it is not safe to sign.
- Returns and notifications. Prudential returns, audited accounts and notifications of material events are due within the periods the rules specify; filing late is itself a breach.
- Conduct. Client classification, suitability, disclosure, conflicts and complaints are rule-driven, and the evidence has to be created at the time, not reconstructed during a review.
Anti-money laundering
The FSRA supervises ADGM firms for anti-money laundering, but the duties themselves derive from the federal regime that applies across the UAE. Firms need a business risk assessment, risk-based customer due diligence, identification of beneficial owners behind corporate clients, sanctions screening, enhanced measures for high-risk relationships and politically exposed persons, a money laundering reporting officer, training and record retention for the period the law prescribes. Reports of suspicion go to the UAE Financial Intelligence Unit through the goAML platform. Designated non-financial businesses and professions registered in ADGM, including corporate service providers and auditors, carry equivalent obligations even though they hold no financial services permission.
Tax, substance and data
Corporate tax under Federal Decree-Law No. 47 of 2022 applies for financial years starting on or after 1 June 2023, at 0% on taxable income up to AED 375,000 and 9% above. ADGM entities fall within that law and have registration and filing duties. Whether free zone relief is available depends on rules that must be tested against the entity's real income streams and activities; it does not follow from being registered in ADGM. VAT applies at 5% under Federal Decree-Law No. 8 of 2017 as amended by Federal Decree-Law No. 18 of 2022, and the treatment of a financial service depends on how the fee or margin is charged.
The Economic Substance Regulations were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024. Obligations remain only for the financial years FY2019 to FY2022, which still matters where filings or penalties from those years are unresolved.
Data protection in ADGM is governed by ADGM's own regime, not the federal Personal Data Protection Law (Federal Decree-Law No. 45 of 2021) that applies in the mainland and the non-financial free zones. Firms need a lawful basis for processing, records of processing, controls on transfers out of the jurisdiction, written terms with processors and a breach response procedure. Groups running one policy across mainland, ADGM and DIFC entities usually satisfy none of the three properly.
Courts, arbitration and enforcement
The ADGM Courts hear civil and commercial disputes connected with the jurisdiction, apply English common law, and operate in English. Parties without an ADGM connection can opt in by written agreement. Arbitration seated in ADGM is available, and arbitration in the UAE generally is governed by Federal Law No. 6 of 2018 as amended in 2023. Institutional clauses drafted years ago should be checked: the DIFC-LCIA was abolished by Dubai Decree No. 34 of 2021 with its caseload moving to DIAC, and Abu Dhabi's ADCCAC was restructured as arbitrateAD from 2024, so clauses naming either need to be reviewed before a dispute arises rather than after.
Regulatory enforcement runs separately from commercial litigation. The FSRA can impose fines, restrict or withdraw a permission, prohibit individuals and publish its decisions, and it expects firms to self-report and to cooperate. How a firm handles the first information request often shapes the outcome, and it usually needs to be coordinated with any financial dispute resolution proceeding at the same time with clients or counterparties.
Before you apply
- Map every revenue line to a regulated activity, or establish that it is outside the regime.
- Fix the group structure and the source of capital before filing; both will be examined.
- Identify the individuals for controlled functions early, and check they can be approved.
- Build client money, reporting and record-keeping systems before the permission is granted.
- Set the corporate tax and VAT positions in writing rather than assuming free zone treatment.
- Draft the jurisdiction or arbitration clause to name a forum that currently exists.
Conclusion
ADGM offers a common-law environment with a regulator that reads its own rulebook closely. Firms that treat authorisation as the end of the work tend to meet the regime again through enforcement: a permission exceeded, an approval not obtained, client money not segregated, a return filed late. Firms that build the operating processes first find supervision unremarkable.
For advice on an FSRA permission, a change of control or an ongoing compliance question in ADGM, speak to the Nour Attorneys team.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
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