What to confirm before using a custody account in the UAE

International businesses entering the UAE are sometimes surprised to find that opening a local operating account can be difficult, particularly for offshore entities and newly formed vehicles. A custody arrangement may be appropriate where money must be held for a documented purpose and released under agreed instructions.

The useful comparison is not between provider categories. It is between the transaction’s requirements and the authority the proposed arrangement actually gives the custodian.

Custody account

A special-purpose custody account allows an international business to hold funds in a local account administered by an authorised firm. Releases occur under the mechanism documented in the applicable agreement. That mechanism may require valid instructions from authorised parties or documentary evidence expressly specified in the agreement.

• Security. Funds sit with an authorised financial institution rather than with an individual or an unregulated intermediary.
• Transparency. The custodian is subject to the accounting, client money and reporting requirements of its regime.
• Neutrality. The custodian has no commercial interest in the outcome of the venture.
• Defined authority. Releases are limited to the purposes and mechanics set out in the agreement. That constraint is the point of the arrangement.

Questions to settle before instruction

Who is the contracting party? Confirm the legal entity, regulator, permission number and public-register entry.

Where are the funds held? The agreement should identify the client-money arrangement and distinguish client funds from the firm’s operating funds.

Who can instruct release? Name the authorised parties, permitted instruction channels and any documentary evidence that forms part of the release mechanism.

What does the custodian decide? A non-discretionary custodian acts on the documented release mechanism. It does not determine whether a commercial obligation, milestone or warranty claim has been satisfied unless the agreement expressly and lawfully gives it that role.

Who must complete onboarding? Identify every party who will send or receive funds, its ownership chain, source-of-funds requirements and the jurisdictions involved. This is often the main timetable dependency.

What happens if instructions conflict? The agreement should state the holding position and escalation route without requiring the custodian to adjudicate the underlying dispute.

Practical timing

Timing depends on the parties, ownership structures, jurisdictions, source of funds, number of payees and completeness of the submitted information. An indicative timetable should be confirmed only after the initial transaction and onboarding review.