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By Joanna Frendo, Chief Risk and Compliance Officer, Deriv

Earlier this year, after an intensive regulatory process, Deriv received its SCA license to operate in the UAE. As we launch operations in one of the world's most sophisticated fintech markets, we're approaching it with the fundamentals where compliance builds systems that understand and serve the region from day one. I want to share what we learned about the gap between global compliance frameworks and regional realities, and why that gap matters for the future of fintech.

When global experience meets local complexity

Operating across several global markets since 1999 provides perspective, but the UAE demands fresh thinking. Take, for example, during peak summer months when many UAE residents trade from abroad while escaping the heat. Multiple location logins aren't fraud, they're family holidays. Effective compliance systems need to recognise these seasonal patterns without creating friction for legitimate users.

The UAE has built something remarkable in a regulatory framework that encourages innovation. Federal oversight via the SCA, specialised virtual asset rules through VARA, and ADGM's common-law alternative complement each other. This ecosystem allows different financial activities to thrive under appropriate governance, creating a model other emerging economies are studying closely.

The country's removal from the Financial Action Task Force (FATF) grey list in 2024 signaled financial integrity and enhanced the nation's credibility on the international stage. This market doesn’t just appear to be open for business, it's setting the standard for how emerging economies can build Innovation-enabling legislative frameworks.

Building cultural intelligence into compliance

The UAE's young, tech-savvy population shows growing interest in digital trading. This appetite coincides with the country's push to build the region's most advanced regulatory framework, creating opportunity but also responsibility for market participants.

This regulatory clarity enables practical innovations. AI-powered compliance systems can now understand regional context, from festive trading patterns to cultural preferences around certain asset classes. They recognise that a spike in precious metals trading before Diwali represents cultural preference, not market manipulation. But achieving this cultural intelligence requires extensive local data and continuous refinement. It's the difference between generic global platforms and those genuinely built for the region.

Why AI changes the compliance game

Today’s compliance teams face vast, complex datasets. AI cuts through the noise, analysing information at scale and turning that data into clear, actionable insights. But here's what most people misunderstand: AI in compliance does not replace human judgment but amplifies human capability.

At Deriv, AI handles the repetitive heavy lifting such as transaction monitoring and trade surveillance. This frees our compliance officers to do what machines cannot handle i.e. understand context, exercise judgment, and build client relationships. When our system flags an unusual pattern, it's our people who determine whether it's a celebratory trading spike during Eid or something requiring investigation.

The real power comes from continuous learning. AI improves daily, understanding regional nuances and cultural patterns that generic systems miss. It knows that trading behaviors in the Gulf differ from Southeast Asia, and it adapts accordingly. This localised intelligence is what transforms compliance from a barrier into an enabler. AI only builds trust when paired with human expertise.

The privacy paradox

Enhanced AI capabilities create a fundamental tension: effective compliance requires extensive data analysis, while client privacy demands strict adherence to comprehensive data protection obligations, including data minimisation and purpose limitations.

The UAE's data protection laws provide clear frameworks, but implementation requires constant vigilance. One wrong move can destroy years of trust-building.

Deriv therefore aims to ensure that the deployment of advanced AI compliance tools is balanced with data protection obligations by embedding privacy-by-design principles, maintaining lawful and transparent data use, limiting processing, and implementing safeguards that uphold individuals’ rights and regulatory standards.

Why this moment matters

Here’s where AI-driven compliance becomes essential. Although virtual assets are not currently part of our UAE onshore offering, global developments in tokenisation and digital markets point to a potential future where such instruments expand access to market exposure and liquidity. With that opportunity comes new governance, operational, and smart-contract risks. This makes strong, forward-looking compliance frameworks critical from the outset.

That is why we embed compliance thinking from conception: phased rollouts, transparent disclosures, and clear safeguards. Whilst AI helps enhance our innovation in the compliance space, education and accountability make this innovation durable. The most sophisticated compliance system means nothing if clients don't understand the products they're trading. That's why we invest heavily in multilingual education to help ensure risk disclosures aren't just legally sufficient but genuinely understood.

The UAE is proving that sophisticated regulation can enable innovation rather than restrict it. This model comprising clear frameworks, and innovation encouragement, may likely become the global template.

For established firms like Deriv, entering new markets usually means minor adaptations. The UAE demands fundamental rethinking of how global expertise serves local needs. Success requires building regional platforms, not adapting global ones.

As the market evolves, the winners won't be those who move fastest, but those who understand the deepest. In the age of instant global platforms and AI-driven everything, compliance becomes more than a regulatory requirement. It becomes the mechanism that protects clients, enables innovation, and ensures fintech growth is built on trust, integrity, and technology.

Deriv serves 3 million traders globally. In the UAE, the company operates through SCA-licensed Deriv Capital Contracts & Currencies L.L.C. as a Category 1 Trading Broker for Over-the-Counter Derivatives Contracts & Spot Markets, a Financial Products Dealer (ESCA licence 20200000243), and a Category 5 Financial Consultant (ESCA licence 20200000199), offering multi-asset derivatives trading including on forex, commodities, indices, and cryptocurrencies.

Source: Finance Magnates