VZCZCXRO0474
PP RUEHDE RUEHDIR
DE RUEHDO #0135/01 0381218
ZNR UUUUU ZZH
P 071218Z FEB 07
FM AMEMBASSY DOHA
TO RUEHC/SECSTATE WASHDC PRIORITY 6147
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 DOHA 000135 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN QA KTFN
SUBJECT: QATAR FINANCIAL CENTRE: SOLID REGULATIONS, 
MODERATE GROWTH 
 
REF: A. 05 DOHA 880 
     ¶B. 06 DOHA 480 
 
¶1. Summary. On 28 January Qatar Financial Centre (QFC) 
regulatory officials told EmbOffs that the Authority has 
licensed 17 financial services firms and focuses on corporate 
governance as the primary risk in evaluating applications. 
The Authority, which regulates the QFC as a sort of financial 
free zone within Qatar,  has substantial independence from 
the government and plans to be self-sufficient financially. 
Officials plan to regulate Islamic finance but don't see the 
QFC as a major hub for it.  End Summary. 
 
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QFCRA AND THE FINANCIAL CENTRE OPERATIONS 
----------------------------------------- 
¶2. (U) On 28 January visitors from Treasury's Office of the 
Comptroller of the Currency and Embassy EconOffs met with 
Qatar Financial Centre Regulatory Authority (QFCRA) senior 
management to discuss the development of the Qatar Financial 
Centre (QFC) and the QFCRA's role in managing the risks of 
operating in the region.  The financial centre has been open 
since 2005 (ref A) and currently has 33 companies licensed 
for operation, 17 of which are financial service firms.  The 
other companies in the QFC are businesses related to 
financial services such as law and accounting firms. While 
they are also licensed to operate within the financial 
centre, they are not regulated by QFCRA. 
 
¶3. (SBU) According to QFCRA officials, the Qatar Financial 
Centre is different from other regional financial free zones 
because the Qatari government has allowed the operators 
considerably more freedom in country.  The QFC can create its 
own laws, labor and immigration rules (including visa 
sponsorship) and has limited direct financial oversight from 
the government. Currently, the financial centre receives its 
budget directly from the Council of Ministers and reports to 
them annually. QFCRA officials stated that the centre plans 
to be fully independent in the coming years with revenue 
generated from the fees collected from businesses operating 
in centre.  QFCRA officials stated the Qatari government has 
given them a strong financial commitment for the future but 
should funding be interrupted the QFC could maintain 
operations for "quite a while." Firms are also not limited to 
just offices in the QFC building; eventually other areas will 
also be designated as financial free zones where firms can 
locate. 
 
¶4. (U) While the former Minister of Economy and Commerce (ref 
B) was the initial driver behind establishing the QFC,  the 
centre enjoys strong support from the Finance Minister and 
acting Minister of Economy and Commerce, Yousef Kamal, who 
watches the purse strings in Qatar.  QFCRA officials stated 
that they believe the former Minister got the idea started as 
a way to attract top foreign financial companies to work in 
Qatar without opening the domestic banking sector to foreign 
investment.  Most of the firms were involved in project 
finance when QFC first opened, but more are moving into 
investment/asset management and developing capital market 
products.  Insurance services are emerging as another key 
offering of QFC firms and the QFCRA aims to license companies 
to offer retail insurance in Q2/Q3 this year. At this time 
the QFCRA does not allow retail banking. 
 
----------------------- 
CHALLENGES TO THE QFCRA 
----------------------- 
¶5. (SBU) The QFCRA does a risk assessment for each individual 
institution it licenses.  For firms that it deems high-risk, 
they are developing a close and continuous relationship to 
help bring the firms up to their standards.  Corporate 
governance is their primary risk concern so they focus more 
on structure and oversight standards for licensing firms. 
All firms are required to report annually to the QFC Board on 
money laundering as well. When asked about potential 
downfalls in energy prices effect on their operations, QFCRA 
officials seem very positive about their future growth 
prospects.  They told EmbOffs that the Qatari government is 
doing a good job spending their current wealth, has active 
plans to sustain it for future generations, and are even 
looking at scenario models to help plan for unforeseen 
occurrences. 
 
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AML CONTROLS 
------------ 
¶6. (SBU) The QFCRA officials say they have a good working 
relationship with the Qatar Central Bank; they are not in 
competition and often share information.  They met with the 
Qatar Financial Intelligence Unit (FIU) early in their 
 
DOHA 00000135  002.2 OF 002 
 
 
operational development to synchronize their efforts against 
money laundering.  When suspicious cases do arise for firms 
within the QFC, the firm reports directly to the FIU and the 
QFCRA is informed. The QFCRA has its own set of anti-money 
laundering laws which are based off of the Central Bank's 
with more detail. The QFCRA also has a formal information 
sharing relationship with the Federal Reserve. 
 
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ISLAMIC FINANCE 
--------------- 
7 (SBU) QFCRA officials cite transparency as their major 
challenge in regulating Islamic finance services.  Islamic 
banks are licensed according to the same criteria as other 
banks, including corporate governance.  The QFCRA does not 
have its own sharia' board and makes it the firms' 
responsibility to ensure that their offered services are 
sharia' compliant. QFCRA officials highlighted that they have 
a disclosure-based system to regulate Islamic finance.  All 
firms offering any facet of Islamic banking are required to 
report the identity of the sharia' board members, what 
products they are authorizing, do the necessary financial 
accounting and submit to a QFCRA audit.  QFCRA wants to 
integrate Islamic banking into the QFC without having to take 
a position on the fatwas issued by various sharia' boards in 
the Islamic banking community.  Officials highlighted the 
lack of consistency with fatwas a primary reason for the 
QFCRA to leave the actual operation of Islamic finance to the 
licensed firms. 
 
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COMPETITION 
----------- 
¶8. (SBU) All QFC officials were adamant that Qatar is not in 
competition with Dubai or Bahrain for business and 
preeminence.  They told EmbOffs that while some countries 
were starting financial centres without a well-defined plan, 
they believed that Qatar carefully thought out the process of 
what was needed for the country and how to best set up the 
centre.  They view the Dubai International Financial Center 
as focused more on its own securities exchange (DIFX) and 
Bahrain as the Islamic finance hub.  They said that in this 
economic environment there are more than enough opportunities 
for financial services, particularly as Arab investors want 
to keep more of their money within the region.  They also 
stated that Qatar is not experiencing some of the 
restrictions found elsewhere because the country's political 
power structure is more centralized and the leadership is 
more open to inviting foreign development. 
 
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COMMENT 
------- 
¶9. (SBU) After two years of operation the QFC appears to be 
off to a good start.  There is a long way to go with only 33 
licensed companies, but some major players are trickling in, 
including Citibank.  The regulatory framework looks solid 
with the QFCRA trying to be as transparent as possible and 
welcoming information sharing with Washington.  End Comment. 
RATNEY