Financial Crime World

Saudi Arabia Takes a Leap Forward in Anti-Financial Crime Regulation Amidst Digital Boom

As Saudi Arabia continues its ambitious quest to become a leader in the digital economy, the Kingdom is also taking significant steps to combat financial crime and ensure a safe and secure environment for investors, entrepreneurs, and innovators. In this article, we delve into the recent regulatory developments aimed at preventing anti-financial crime in Saudi Arabia.

Vision 2030: A Key Driver of Change

One of the key drivers behind Saudi Arabia’s push towards a cashless economy is its Vision 2030 plan, which aims to increase non-oil revenue and reduce reliance on oil exports. To achieve this goal, the Kingdom has set an ambitious target of reducing cash transactions to just 30% by 2030. This vision is already being realized with the emergence of financial technology (FinTech) companies in the country.

Licensing of Digital Banks

The recent licensing of two digital banks in Saudi Arabia is a testament to the Kingdom’s commitment to fostering innovation and entrepreneurship in the FinTech sector. The first license was awarded to STC Pay, which will become a local digital bank with a capital of SAR 2.5 billion. The second license was granted to Abdul Rahman Bin Saad Al-Rashed & Sons Company, which plans to establish a local digital bank with a capital of SAR 1.5 billion.

Risks and Challenges

However, the rapid growth of FinTech in Saudi Arabia also presents new risks and challenges related to financial crime prevention. With the increasing diversity of actors involved in the digital economy, including e-commerce merchants and financial institutions processing payments, regulatory gaps and loopholes can arise, potentially leading to new opportunities for financial-criminal activities.

Regulatory Measures

In response to these concerns, Saudi authorities have been taking a proactive approach to anti-financial crime regulation. The Saudi Central Bank (SAMA) has issued regulations and guidelines aimed at preventing money laundering and counter-terrorism financing (AML/CTF). For instance:

  • Payment Services Provider Regulations: Payment service providers must comply with the AML Law and applicable rules and regulations on AML/CTF.
  • Licensing Guidelines and Criteria for Digital-Only Banks: Applicants must demonstrate compliance with AML/CTF regulations in a fully digitalized environment.

The Financial Fraud Law

Furthermore, Saudi authorities have recently issued the Law for Combating Financial Fraud and Breach of Trust (Financial Fraud Law), which defines fraud as any act involving deceit to obtain a direct or indirect financial benefit. The law provides for punishment of up to seven years in prison and maximum fines of SAR 5 million for those who appropriate funds by engaging in fraud.

Conclusion

As Saudi Arabia continues to develop its digital economy, it is essential for FinTech companies operating in the Kingdom to stay ahead of the curve when it comes to anti-financial crime compliance. With the increasing complexity of financial transactions and the growing threat of financial crime, companies must ensure that they are compliant with all relevant regulations and guidelines.

By staying informed about the latest regulatory developments and seeking expert legal advice when it comes to financial crime compliance measures, FinTech companies can play a vital role in creating a safe and secure environment for investors, entrepreneurs, and innovators in Saudi Arabia.