Tight regulation in Qatar ensures stability

A convergence of factors is ensuring stability, growth and, most importantly for oil-dependent nations, sustainable diversification of the economy.This will help not only the six GCC countries, but the rest of the world shake off the effects of crisis and drive prosperity for all, says Qatar Central Bank (QCB) Governor, Sheikh Abdulla bin Saoud Al-Thani.  

“The steady growth and solid economic and financial fundamentals of the GCC region will aid in global recovery with the on-going economic diversification strategy pursued in the region creating not only opportunities for domestic private investors but also enhance scope for foreign investment,” he says.

But it is not only investors who will benefit. Remittances from the hundreds of thousands of foreign workers employed in the Gulf region help other economies, as does overseas aid and foreign investments by GCC governments and private individuals.

“Moreover, the GCC region will continue to benefit the global economy by supplying adequate oil and gas, thereby helping maintain stability in the global petroleum market,” the Central Bank chief says.

Qatar, as a principal player in all of these areas, is keeping its economy and banking and financial sectors healthy through sound steps such as strict regulatory controls and other measures.

“QCB has launched initiatives to promote the effectiveness of the financial sector in developing capital markets and increasing financial stability with other ministries,” the governor told a recent economic conference in Doha.

One of those initiatives is a six-point strategic plan with the goals of strengthening market infrastructure and protecting consumers and investors, he explains.

“Our aim is to enhance consumer and investor protection by developing standards and codes of conduct, protecting credit information and raising public awareness,” notes Mr Al-Thani.

This is good news for foreign investors who have shied away from the region according to the World Investment Report 2014, which said that foreign direct investment (FDI) flows to the GCC states maintained a downward trend from 2009, and persistent tensions in the region continued to hold off foreign direct investors in 2013.

Nevertheless, the GCC countries, including Qatar, are making significant strides to facilitate FDI flows into the region by improving their business environments and such progress is reflected in the gains made by the Gulf members in the World Bank’s Doing Business rankings.

“For Qatar, the favourable tax regime coupled with strong macroeconomic fundamentals and robust growth outlook supported by growing non-hydrocarbon sectors and large infrastructure investments have aroused much interest from international investors,” Mr Al-Thani says.

Other developments have also encouraged investors, such as the upgrading of the Qatar Stock Exchange by leading rating agencies to emerging market status, and a new law increasing foreign investor ownership in listed Qatari companies to 49 per cent.

More recently, the establishment of Qatar as the first renminbi clearing and settlement centre in the region and the two-way line of currency swap agreement between the QCB and the People’s Bank of China are expected to facilitate trade and investment.

Also, the QCB’s financial regulatory agenda is now conforming to stricter international standards. “Since January 2014, all banks in Qatar are mandated to accomplish new capital requirements based on Basel III standards, and guidelines on liquidity coverage ratios and liquidity risk monitoring tools have also been in effect,” the governor emphasises.

The QCB is also working with other regulatory authorities to ensure that financial services firms put in place processes that help them better understand customers’ needs, as well as adequate systems to resolve disputes constructively and in a timely manner. Future endeavours in this regard include the introduction of a deposit insurance mechanism to enhance consumer and investor protection.
 

“This is a crucial element of a financial safety net that promotes financial stability. Consumers and investors will also be protected from unauthorised and unlicensed financial service providers through strict enforcement of the law. Confidentiality of customer information also needs to be maintained and the rules of information sharing will be clearly spelt out,” Mr Al-Thani promises.

Money laundering, terrorism funding and cyber crime

Because of its geographic location and extensive role in world political, financial and economic affairs, Qatar must also keep an eye out for international malfeasance, whether it’s common cross-border crime, sophisticated and cyber-based criminal activity such as money laundering, or support for regional terrorism. And this especially applies to the financial sector, which can be used by those involved in all these evils to channel their funds and mask the sources.

Qatar has taken the lead in fighting these scourges, not only at home but also throughout the regional and globally, calling for close collaboration in tackling organised crime in all of its manifestations: money laundering, terrorism, narcotics, smuggling of goods and people and cyber crime.

Those engaging in these activities face stiff prison sentences and fines. But the law goes further, requiring all financial institutions operating in the emirate to report all suspicious transactions to the QCB and to maintain and store records of the transactions for up to 15 years.

In 2004, the Qatari Financial Intelligence Unit was created to review all financial transaction reports, identify suspicious activity and guarantee that all government ministries and agencies have oversight of financial transactions. Aiding this ambitious endeavour is a rulebook that calls for all bank employees to be trained so they can understand the vulnerabilities of their bank’s products and services and spot suspicious transactions.

In response to growing concern about the rise in terrorism, five years ago the Qatar Financial Regulatory Authority issued a series of rules to combat terrorism funding. In addition, Qatari officials point out that the country carefully regulates and scrutinises foreign charities which receive contributions from local institutions and that the public prosecutor has the power to freeze the funds of terrorist organisations designated by the UN Security Council and the names of those entities are distributed to all financial institutions.

Qatar also became a member of the Financial Action Task Force (FATF), which is an international organisation that sets standards to promote the implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. Its members include major financial centres including, the UK, Germany and the USA.  

“Through these efforts, Qatar will be better able to identify individuals who may be trying to channel funds to terrorist groups,” says Prime Minister Sheikh Abdullah bin Nasser Al Thani.

This action exemplifies Qatar’s commitment to working hand in hand with universal allies to tackle the spread of illegal financial activity and the fight against terror.