Saudi Arabia’s Digital Economy: A New Frontier for Financial Crime Prevention

Saudi Arabia is making significant strides in digital transformation with a goal to move towards a cashless economy and become a global leader in Fintech. This shift brings new opportunities but also poses challenges, particularly in financial crime prevention.

Digital Transformation in Saudi Arabia

With a population mostly under the age of 30, the Kingdom is experiencing impressive growth in digital payments. The FinTech boom, exemplified by the first billion-dollar valuation of a FinTech unicorn in the Middle East - STC pay - further fuels this growth. Recently, the Saudi Arabian Cabinet approved the licensing of two digital banks: STC Pay and Saudi Digital Bank.

- Population mostly under the age of 30
- Goal to move towards a cashless economy
- FinTech boom with the first billion-dollar valuation of STC pay
- Licensing of two digital banks: STC Pay and Saudi Digital Bank

Challenges in Financial Crime Prevention

The digital economy’s size and anonymity of cross-border transactions bring new threats, especially in terms of financial crime activities.

- New threats in terms of financial crime activities
- Size of the digital economy
- Anonymity of cross-border transactions

Regulatory Approach by SAMA

The Saudi Central Bank (SAMA) has taken a proactive approach to address financial crime prevention challenges.

### SAMA's Regulations

- Payment Services Provider Regulations require companies to comply with the Saudi AML law and SAMA's regulations on AML and CTF.
- The Licensing Guidelines and Criteria for Digital-Only Banks open opportunities for the use of RegTech for e-KYC processes.

### Compliance for FinTech Companies and RegTech Providers

- FinTech companies in the Saudi market and RegTech providers will need to stay informed about the regulatory landscape to ensure compliance.

Looking Ahead: Open Banking and New Financial Fraud Law

Saudi Arabia plans to issue a framework for open banking in early 2022, offering opportunities for FinTech companies in the Kingdom. However, effective financial crime prevention is a significant challenge in open banking systems.

### Open Banking

- Opportunities for FinTech companies in the Kingdom with access to customer data from banks and financial institutions.
- Significant challenges in financial crime prevention.

### New Financial Fraud Law

- Issued in 2021, the law criminalizes acts involving deceit to obtain financial benefits, gaining access to or obtaining information dishonestly.
- Penalties of up to seven years in prison and fines of up to SAR 5 million for those who appropriate funds by engaging in fraud and up to SAR 1 million for those who unlawfully appropriate entrusted funds.

Conclusion

Saudi Arabia’s proactive regulatory framework and strategic approach to financial crime prevention make its digital economy promising for FinTech growth while ensuring a safe and secure environment for investors, entrepreneurs, and financial institutions.