The Dubai International Financial Centre (DIFC) issued a consultation paper on a Payment Systems Settlement Finality (PSSF) law that will help pave the way for the creation of a regional transaction-processing hub at the DIFC for the provision of payment systems and other ancillary services. The law means that the DIFC will follow global best practices in ensuring finality of designated payments.
The PSSF law is particularly important when payments under processing involve participants from multiple jurisdictions. For example, the European equivalent, the Settlement Finality Directive, was introduced as a critical underpinning of the European currency union. This will be the first such settlement finality law in the GCC.
The law will provide the legal foundation for the launch of the Real-time Automated Payments in DIFC (RAPID) service. RAPID provides payments and other ancillary transactions processing services from within the DIFC to banks and their customers within the DIFC and in the wider MENA region. The first deliverable is a DIFC – based Euro and US dollar Real Time Gross Settlement (RTGS) system that settles legally and operationally outside of the United States and Europe, respectively. However, the benefits of the PSSF law will not be restricted to RAPID; it will be available for all payment systems designated under the conditions of the law.
Commenting on the DIFC’s role as a regional catalyst for growth, development, diversification, and best practices, His Excellency Dr Omar Bin Sulaiman, Governor of the DIFC, said, “This law is part of the process of building a world-class financial infrastructure within the region. The PSSF law, in conjunction with RAPID, will assist companies in the region in being able to effect payments within the region with legally robust finality, rather than having to use systems based outside the region which often do not settle during the GCC’s business hours.” The solution is modeled on, and is planned to be interoperable with, the offshore US dollar and Euro RTGS solution in Hong Kong. The Central Bank of the UAE has agreed to be the lead regulator of RAPID’s payment services.
The law will assure participants in a designated payments system that the rules of such a payment system would be upheld in the DIFC Courts, even in the event of an insolvency. This helps ensure that each payment system has a well-founded legal basis, as required by the Core Principles for Systemically Important Payment Systems, as promulgated by the Bank for International Settlements.