The European Supervisory Authorities' (ESA) Joint Board of Appeal has confirmed the decision of the European Securities and Markets Authority (ESMA) to withdraw the recognition of Dubai Commodities Clearing Corporation (DCCC).

The withdrawal results from the European Commission's inclusion of the United Arab Emirates (UAE) on the list of high-risk third countries with deficiencies in their anti-money laundering and counter-financing of terrorism regulations.

Impact of the Decision

The decision to withdraw recognition affects DCCC's status as a tier 1 third-country central counterparty (CCP). It followed an appeal brought by DCCC against ESMA's withdrawal.

With the Joint Board of Appeal's unanimous dismissal of DCCC's appeal, ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term's withdrawal decision has been implemented. Despite DCCC's efforts, the suspension of ESMA's decision, which was initiated in October 2023, pending the outcome of an appeal, has expired.

The confirmation of withdrawal necessitates strategic reassessment and potential adjustments to align with EU regulatory requirements by DCCC.

🧑‍⚖️ ESAs Joint Board of Appeal ✅ confirms #ESMA decision to withdraw the recognition of Dubai Commodities Clearing Corporation as third-country #CCPs.

👀 Why? UAE is on the @EU_Commission list of high-risk countries with #AML/CFT deficiencies.https://t.co/sChGRqC2rL pic.twitter.com/0dYiPXAuMv

— ESMA - EU Securities Markets Regulator 🇪🇺 (@ESMAComms) February 6, 2024

Future Considerations

The regulator mentioned that as the regulatory landscape evolves, entities operating as CCPs and third-country entities must remain vigilant in addressing compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term obligations to mitigate regulatory risks and ensure continued market access.

In 2022, ESMA took enforcement action against 225 securities issuers, highlighting significant deficiencies in their financial statements. The actions resulted from reviewing 640 financial statements compliant with International Financial Reporting Standards (IFRS). This highlighted a thorough examination of financial practices in European regulated markets.

The regulator highlighted shortcomings related to accounting for financial instruments, impairment of non-financial assets, presentation of financial statements, and revenue recognition. Representing 16% of all issuers, these enforcement actions underscored the imperative for adherence to the IFRS guidelines, which are essential for maintaining transparency and trust in financial reporting.

The regulator emphasized the assessment of material departures from IFRS concerning recognition, measurement, and presentation of assets and liabilities, along with related disclosures.