Financial Crime World

Saudi Arabia’s Crackdown on Money Laundering: An Overview of Laws, Regulations, and Penalties

The Kingdom of Saudi Arabia (KSA) has taken significant strides in combating Money Laundering (ML) and Terrorist Financing (TF) through the implementation of stringent laws and regulations. In this article, we provide an overview of the key aspects of Saudi Arabia’s anti-money laundering (AML) framework.

1. Key Saudi Arabian Laws and Regulations

  • Saudi Arabia’s Anti-Money Laundering Law (AML): Saudi Arabia’s primary AML law is Saudi Arabia Cabinet Decision No. 80/1439. It came into effect in 2017 and replaced the older Anti-Money Laundering Royal Decree.
  • Definitions: The AML law does not offer a clear definition of money laundering. Instead, it outlines various offenses deemed to be money laundering.

2. Defining Money Laundering

Money laundering offenses under Saudi Arabia’s AML law include:

  • Converting, transferring, or conducting transactions with criminal funds
  • Acquiring, possessing, or using criminal funds or from illegal sources
  • Concealing or disguising the true nature of criminal funds
  • Attempting to launder money or collaborating, abetting, counseling, or facilitating such activities

3. Similarities and Differences with Global Standards

  • Compliance with international conventions: Saudi Arabia’s AML laws are largely compliant with international conventions and resolutions, such as the Financial Action Task Force (FATF) 40 Recommendations and 9 Special Recommendations.
  • Specific regulations: Certain differences include specific regulations issued by Saudi agencies targeting specific industries and professions.

4. Secondary Regulations and Guidelines

  • CMA’s Anti-Money Laundering and Counter-Terrorist Financing Rules: These rules set out the requirements for financial institutions to implement AML/CFT policies and procedures.
  • FATF’s 40 Recommendations and 9 Special Recommendations: These recommendations offer guidance on AML/CFT practices.
  • SAMA’s rules governing the opening of bank accounts and general operation guidelines: These rules govern the process of opening bank accounts and the general operation of banks in Saudi Arabia.
  • SAMA’s Manual for Combating Embezzlement & Fraudulent Transactions: This manual provides guidance to banks and financial institutions regarding the identification and reporting of embezzlement and fraudulent transactions.
  • The Guidelines Manual for Banks: These guidelines provide a systematic approach for banks to identify, assess, and manage ML/TF risks.
  • The Manual of Compliance with Regulations for Banks: This manual outlines the required processes and procedures for banks to comply with the SAMA guidelines.
  • The Rules of Electronic Banking Services: These rules govern the use and operation of electronic banking services in Saudi Arabia.
  • Risk Based On-site Inspections Policy Framework & Procedures: These procedures outline the approach for SAMA’s risk-based supervisory inspections of financial institutions.
  • Risk Based Approach for AML/CFT Supervision: This approach outlines the risks that financial institutions and designated non-financial businesses and professions (DNFBPs) face and how they should manage those risks.

5. Targeted Industries and Professions

Beyond the financial sector, the following industries and professions are subject to Saudi Arabia’s AML/CFT regulations:

  • Real Estate: Real estate transactions present unique ML/TF risks due to their complexity and the large amounts of cash involved.
  • Precious metals and stones: The trade in precious metals and stones can be used for ML/TF, making it a high-risk sector.
  • Legal services: Legal professionals can be used to facilitate ML/TF by their clients.
  • Accountancy: Accountants have access to financial information, making them valuable targets for ML/TF criminals.
  • Trust/company services: Trust and company service providers facilitate the formation and management of legal entities, making them prime targets for ML/TF.

6. Penalties and Sanctions

Penalties for ML under Saudi Arabian law include:

  • Individuals: up to ten years in prison and a fine of up to five million riyals.
  • Organizations: a fine of up to 50 million riyals and potential prohibition from specific business activities.

The severity of the penalties can escalate depending on the circumstances of the offense, such as involvement in an organized crime syndicate or connection to corruption. In addition, the competent court can issue orders to confiscate laundered funds and proceeds of crime.

Authored by Marc Saroufim and Dario Najm.