Financial Crime World

Saudi Arabia’s Battle Against Money Laundering: Key Laws and Penalties

Saudi Arabia, as a major player in the global economy, has enacted stringent laws to combat money laundering and terrorist financing within its jurisdiction. Here are the essentials of the Kingdom’s anti-money laundering (AML) framework:

1. Key Money Laundering Laws and Regulations

Saudi Arabia’s primary AML legislation includes:

  • Cabinet Decision No. 80/1439, approving the Anti-Money Laundering Law (AML) and its Implementing Regulations, both enacted in 2017.
  • Saudi Arabia Royal Decree No. M31/1433 (old AML regulations).

2. Definition of Money Laundering

While the AML law does not explicitly define money laundering, it lists offenses considered money laundering:

  • Disguising the source or movement of criminal funds.
  • Using or possessing funds from illegal sources.
  • Providing assistance to commit money laundering.

3. Interjurisdictional Differences and Saudi Regulations

Saudi Arabia’s AML legislation complies with most international conventions and UN Security Council Resolutions on combating terrorist financing:

  • Several secondary regulations cover AML issued by Saudi agencies, such as:
    • Anti-Money Laundering and Counter-Terrorist Financing Rules by the Capital Market Authority.
    • Saudi Financial Action Task Force’s 40 Recommendations.

4. Profession-Specific Duties and Regulations

The Financial Action Task Force (FATF) regulates non-financial businesses and professions (DNFBPs) in Saudi Arabia:

  • Real estate agents.
  • Lawyers.
  • Accountants.
  • Trust & company services providers.

These entities must adhere to the FATF’s regulations and follow strict due diligence and customer identification procedures.

5. Penalties for Money Laundering

Penalties for money laundering in Saudi Arabia include imprisonment and substantial fines:

  • Individuals face potential sentences of two to ten years and fines up to SAR 5 million.
  • Legal entities may be fined up to SAR 50 million, along with potential punishment like closure or a prohibition from engaging in certain licensed activities.

Criminal property is defined in the AML law, encompassing funds derived from criminal activities such as:

  • Drug trafficking.
  • Cybercrime.
  • Tax evasion.
  • Fraud.
  • Terrorism financing.

The confiscation of the laundered funds is a common penalty under these regulations.

7. Common Defenses for Money Laundering

Common defenses against money laundering charges include:

  • Insufficient evidence.
  • Absence of intent.
  • Duress or threat.

8. Practical Checks to Prevent Money Laundering

Businesses can protect themselves from money laundering by maintaining diligent due diligence on customers and transactions and implementing a risk-based approach to AML compliance.

9. Money Laundering and Amounts Involved

Money laundering transactions in larger amounts are subject to stricter scrutiny per international conventions and AML regulations. Financial institutions are expected to detect such activities, report them, or raise suspicions when appropriate.

10. Targeted Jurisdictions and Customer Due Diligence

Each business may have specific customer due diligence requirements based on their risks, including jurisdictional risks. Businesses should consult their internal policies, control frameworks, and identify sources of clients to minimize money laundering risks effectively.