Navigating Regulatory Challenges: The Sahem Case Study 

As we have seen earlier, understanding and complying with regulatory requirements can be a daunting task in the dynamic world of FinTech. 

I recently sat with Hadi Halabi, founder of Sahem, a platform revolutionising how entrepreneurs connect with investors and how investors find and invest in emerging businesses. Sahem has positioned itself as a key player in the private market investment space, offering a unique solution that bridges the gap between innovative startups and eager investors. 

Hadi’s journey through the regulatory landscape offers valuable lessons for anyone looking to navigate the complexities of launching a FinTech platform.

Sahem’s Regulatory Journey

Seeking a Category 4 Crowdfunding License to operate effectively within the UAE’s regulatory framework, Hadi started the process in 2023 by consulting with lawyers. However, the regulatory requirements were unclear, necessitating an extensive review of guidelines without prior legal expertise. So, after four months of research, Hadi’s team engaged with a compliance firm. 

Challenges and Setbacks

The compliance firm’s processing time extended over six months, leading to significant delays and complications. 

First, this phase required the submission of a comprehensive list of documents, including a business plan, financial details, operational framework, and capital information. 

Document List

• AML procedure

• Whistleblowing policy

• Business cessation plan

• Complaints policy

• Client money policy

• Risk management policy

• AML CTF policy

• Compliance Manual

• Business continuity plan

• Around 10 license-specific DFSA forms and supplements

Meanwhile, the costs were quickly adding up: $20,000 for compliance services and an additional $25,000 for the DFSA application fee.

The experience proved challenging enough that Hadi ultimately decided to terminate the firm’s services and manage the process independently.

Once the initial application was submitted to the regulator, it took up to 30 days to receive feedback and schedule a meeting. Following the submission of the full suite of documents, another 90 days were required to address further feedback and prepare for the final application stage.

Product Demo and Approval

After demonstrating the product, Sahem received an in-principle approval, which came with a list of additional requirements, including:

• Incorporation in DIFC: Sahem was required to establish an entity and rent an office as a regulated business within the Dubai International Financial Centre (DIFC), at a cost of more than $25,000 per year.

• Client money account (escrow account): The platform needed to set up an escrow account to manage funds between investors and startups, which proved to be a significant hurdle for a startup. Many banks refuse to do business with startups, and the ones that accept ask for a significant account opening fee.

Additional Costs and Funding

The journey to getting regulated was expensive due to compliance, legal, tech, capital requirements and operational expenses. To manage these regulatory expenses, Sahem had to raise pre-seed funds early on, which is tricky in today’s environment.

Current Status and Advice

After 18 months, the process now nears its conclusion and today, Hadi’s advice for others embarking on a similar journey is to surround themselves with individuals who have navigated the regulatory process before. This approach can potentially save a significant amount of time and streamline the experience.

Hadi Halabi’s experience underscores the complexities and costs associated with navigating the regulatory landscape in the FinTech sector. For entrepreneurs looking to venture into this space, his insights offer valuable guidance and highlight the importance of preparation, perseverance, and leveraging the expertise of those who have trodden this path before.