Can GCC Financial Passporting Unlock the Region's Next Growth Phase?

Fragmented Regulatory Landscape in the UAE and GCC

The financial sector in the United Arab Emirates (UAE) and the wider Gulf Cooperation Council (GCC) region is experiencing significant growth. In the latest Global Financial Centres Index published by Z/Yen, Dubai is ranked 9th globally with Abu Dhabi 13th.

However, this growth is hampered by a fragmented regulatory landscape that varies from one country to another. The UAE is by the far the most fragmented: 4 financial regulators, 3 legal jurisdictions for a population of 11 million! Such fragmentation creates challenges for financial institutions and impedes the ability to scale operations effectively across borders. A recent example includes enforcement action taken by DFSA (Dubai Financial Services Authority) against a firm licensed by the FRSA in Abu Dhabi for operating in DIFC without an appropriate regulatory license.

Challenges of Fragmentation

• Diverse Regulations: Each GCC member state has its own regulatory framework, which can lead to inconsistencies and confusion for financial institutions operating in multiple jurisdictions.

• Increased Compliance and Operational Costs: The need to comply with different regulations in each country raises operational costs, diverting resources away from innovation and growth.

• Limited Market Access: Fragmentation restricts the ability of financial services firms to enter new markets, limiting their growth potential and the overall development of the sector.

• Inhibited Cross-Border Collaboration: Variations in regulations hinder collaboration between financial institutions in different countries, reducing the potential for shared expertise and resources.

  
  

The Need for a Single Market Approach

During my 20 years involvement with financial sector development and regulation in the region, the need for reducing regulatory and cost barriers across the GCC to present the widest possible opportunity for international firms was well understood and appreciated. However, it sat at the difficult supranational level (the GCC has had a committee looking at the subject for several years) and viewed as something beyond the influence of such bodies as the DIFC, which has done so much to drive the development of the regional financial sector.

There is an Arabic saying: 'Act when the moment is active, not when it settles,' إذا هبّت رياحك فاغتنمها . Despite the geopolitical developments this year, the push factors of talent and wealth migration to the region and specifically Dubai and the UAE remain strong.

I would argue now is the time to address the challenges, for governments in the UAE and the GCC to commit to a single market approach. This strategy does not necessarily mean full harmonisation of regulations at the outset, it could be phased across financial sector segments on a mutual recognition basis leading to the creation of a unified framework that facilitates seamless operation across borders.

Institutional and private interests in the status quo should be overcome for the pie would surely grow overall - the fear or concern of losing out to rival locations doesn't appeared to have played out in Europe for example - firms still have a local presence in multiple locations across its geography.

Benefits of a Unified Regulatory Framework

• Enhanced Efficiency: A single market would streamline compliance processes, reducing costs and allowing financial institutions to focus on growth and innovation.

• Increased Investment: A more predictable regulatory environment would attract both domestic and foreign investment, fostering a more robust financial sector and feed into the wider economy.

• Greater Market Opportunities: Financial institutions would have easier access to a larger market, enabling them to scale their operations and increase their market share. The pie would grow for all.

• Improved Financial Stability: Harmonized regulations can lead to better risk management practices across the region, contributing to overall financial stability.

Passporting of Funds in the GCC, First Steps or a Stumble?

In 2025, the GCC implemented a fund passporting regime - this allows for an investment fund licensed in one member state to be marketed and distributed across the wider GCC (it is unclear whether the intermediary doing the marketing or distributing still requires separate licenses). The UAE has had a domestic fund passporting regime in place for a while - to be marketed to retail in the UAE, a fund must be a 'UAE domiciled fund' and such a vehicle includes those domiciled in the DIFC and ADGM.

However, what is odd in the GCC initiative is no recognition of the DIFC and ADGM, as the passporting regime is an agreement between national regulators in the GCC. Surely for this to work and be meaningful, firms and funds domiciled in the two leading financial services hubs of the region, should be included?

Conclusion

The fragmented regulatory landscape in the UAE and wider GCC is a significant barrier to the growth and development of the financial sector. By adopting a single market approach, governments can create an environment that fosters collaboration, innovation, and investment. Ultimately, this will not only benefit individual financial institutions, regional financial centres and consumers but will also contribute to the overall economic growth of the region.

The GCC, and the UAE in particular, have seen unprecedented growth in financial services over the last 20 years or so. To accelerate and build on this legacy should be a priority.

How I Can Help

Firms looking to enter or expand across GCC markets need more than a high-level understanding of the rules. They need practical guidance on jurisdictional choice, licensing requirements, operating models and stakeholder engagement.

Drawing on two decades of experience in regional financial-sector development and regulation, I help firms navigate the regional regulatory landscape, identify market-entry barriers and build credible, commercially effective routes to expansion. I can also provide connections to trusted service providers, helping firms access reliable legal, compliance, tax, corporate-services and other specialist support where needed.