Financial Crime World

Saudi Arabia’s Battle Against Money Laundering and Terrorist Financing: An In-Depth Look at Its Regulatory Framework and KYC Procedures

Saudi Arabia, fueled by its vast oil wealth and strategic location, has emerged as a global economic powerhouse. However, alongside impressive economic growth comes the threat of illicit money flowing through its financial system. In this report, we delve into the money laundering (ML) challenges of Saudi Arabia’s vibrant economy, its anti-money laundering (AML) regulations, and the measures taken to mitigate financial crime risks.

Saudi Arabia’s Economic Landscape

  • GDP exceeding $1 trillion in 2023
  • Largest economy in the Middle East
  • Dominated by the oil and gas sector
  • Rapid economic growth over the past decade

Money Laundering Challenges

  • Around $10 billion laundered annually within Saudi Arabia’s borders
  • Vulnerable sectors: real estate, precious metals, luxury goods
  • Significant proceeds of crime estimated to flow out of the country

Regulatory Framework

  • Aligned with international AML/CFT standards (FATF)
  • Key regulations:
    • Anti-Money Laundering Law of 2003
    • Implementing Regulations to the Anti-Money Laundering Law of 2017
    • Anti-Money Laundering and Counter-Terrorist Financing Rules (AML/CTF)
    • Saudi FATF’s Recommendations
    • Rules Governing the Opening of Bank Accounts & General Operation Guidelines
    • Manual for Combating Embezzlement & Fraudulent Transactions
    • The Rules of Electronic Banking Services
    • The Risk-Based On-Site Inspection “Policy Framework & Procedures”
    • The Guidelines Manual for Banks in Saudi Arabia for Regulating Audit Committees

Institutional Support: Saudi Arabia’s AML/CFT Institutions

  • Ministry of Anti-Money Laundering
  • Saudi Arabian Monetary Agency (SAMA)
  • Capital Markets Authority (CMA)
  • Communications and Information Technology Commission (CITC)
  • Saudi Central Bank (SAMA)
  • Saudi Arabia Financial Intelligence Unit (SAFIU)

Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD)

Natural Persons

  • Full Name
  • Address
  • Date and place of birth
  • Nationality

Identification Documents

  • National ID cards
  • Residence permits
  • Passports

Politically Exposed Persons (PEPs) or Higher ML/TF Risks

  • Extended due diligence measures
  • Obtaining and verifying the client’s job, activity, or profession
  • Tracing the source of funds
  • Identifying the size of assets and transactions
  • Conducting on-site visits
  • Obtaining additional documents/information
  • Approval from senior management

Record Keeping and Reporting of Suspicious Transactions

  • Client due diligence data retention for at least ten years
  • Institutional obligations: continuous transaction monitoring and oversight

Penalties and Enforcement Actions

  • Harsh penalties for ML and TF: fines up to 7 million riyals ($1.8 million) and imprisonment for up to 15 years
  • Recent enforcement actions underscore the importance of robust AML/CFT compliance

By addressing vulnerabilities, enhancing regulatory oversight, and promoting international cooperation, Saudi Arabia remains committed to contributing to global efforts against financial crime.