The sector in brief
A crowdfunding platform lets businesses or individuals raise money from many people, often through small contributions. Some platforms deal in loans, some in shares or other investments, and some in donations or rewards. The authorities supervise the investment and lending types in the DIFC and onshore.
Two groups of people use the platform, and both can be a risk. A raiser can be a fake business set up to collect money and move it on. A funder can be using the platform to put illicit money into a legitimate-looking investment and receive it back as returns.
The platform also serves as a place where money is held for a time, even briefly, between funders and raisers. Supervisors will expect the operator to control how that money moves and to be able to show who received what and why.
Where the risk sits
Fake or misleading campaigns
A project that is not what it claims, or does not exist, can collect funds from the public and send them elsewhere.
Funders using the platform to place money
A funder who invests money from an unclear source and later receives returns or repayments has converted it into something that looks clean.
Linked parties on both sides
Raisers and funders who are connected, and fund each other, can create the appearance of genuine activity.
Cross-border contributions
Funders in many countries make it harder to verify identities and sources, and to spot sanctions links.
Terrorist financing and misuse of donations
Where donations or small contributions are collected, the destination of the funds must be checked to avoid supporting prohibited groups.
Who supervises you
Crowdfunding firms in the DIFC are supervised by the DFSA. Crowdfunding operators onshore are supervised by the Capital Markets Authority. Check your licence for the activities you may carry out, because the rules differ for investment, lending and donation platforms.
The supervisor decides the detailed rules for your licence category, so always read its current guidance alongside this page.
What supervisors expect
- A compliance officer or MLRO with authority over onboarding of raisers and funders.
- A risk assessment that considers the type of crowdfunding, the platform's customers and the countries involved.
- Due diligence on raisers, including their owners, business, purpose and use of funds, and on funders in proportion to the amount.
- Source of funds checks for larger contributions and for funders who invest repeatedly.
- Screening of both sides against sanctions lists, with a process for handling matches.
- Monitoring of how money moves between funders, the platform and raisers, and of unusual patterns such as linked parties.
- Reporting through goAML, training, record keeping and independent testing.
Red flags to watch
- A campaign whose description is vague, or whose business cannot be verified.
- Funders who are connected to the raiser and fund their own campaign.
- A funder who invests a large sum and asks to withdraw quickly.
- Contributions from accounts that do not belong to the funder.
- A raiser who asks for funds to be paid to a different company or country.
- A sudden surge of contributions from unrelated people in the same location.
A worked example
A campaign funded by people close to the raiser
A new company launches a loan campaign and within days receives large contributions from several funders, all joined recently. Looking closer, the operator finds that they share an address and a device, and that one of the bank accounts used belongs to the raiser's director. The operator pauses the campaign, asks the parties to explain, and checks the source of the funds. If the pattern appears designed to give the campaign false momentum or to circulate money, the compliance officer considers a report.
How Adventant helps
Questions answered
Do we have to check every small funder?
You must apply a risk-based approach. Small contributions may need lighter checks, but you still need a way to spot repeated or linked small payments and to apply extra checks as amounts grow.
What checks should be done on a raiser?
Identity of the business and its owners, what it does, why it is raising money, how the funds will be used and whether the story is credible. Visit or verify where you can.
Who is responsible if a campaign turns out to be fake?
The operator has its own duties to check and monitor. Failure to do so can lead to supervisory action in addition to the harm to funders.
Does the platform hold the money?
Often, at least briefly. Where it does, the controls over that money are important, because it can be used to pass funds through the platform.
What about donation-based campaigns?
They carry their own risks, including diversion of funds and links to prohibited groups. Check the destination of the funds and the identity of the recipients.