Financial Crime World

Saudi Arabia’s Digital Economy Boom and the Fight Against Financial Crime

Saudi Arabia is making significant strides towards becoming a global leader in the digital economy, creating a favorable environment for investors, entrepreneurs, and innovators.With a population predominantly under the age of 30, the Kingdom is perfectly positioned to shift its economy towards cashless payments and increase the use of digital financial solutions. This evolution, driven by Vision 2030 and the recent necessities brought on by the COVID-19 pandemic, has led to a FinTech boom and the licensing of the first two digital banks – STC Bank and Saudi Digital Bank.

Challenges in the Digital Economy

The digital economy comes with its unique challenges and risks, especially in the sphere of financial crime. As the use of digital platforms for financial transactions increases, so do the opportunities for regulatory gaps and loopholes that could be exploited. FinTech companies and e-commerce merchants, financial institutions, and various other actors in this ecosystem present new challenges in financial crime prevention.

Saudi Arabia’s Proactive Approach

Recognizing these challenges, Saudi Arabia is poised to become a leader not only in FinTech but also in anti-financial crime regulation.

The Saudi Central Bank (SAMA)

SAMA, the primary financial regulatory authority, is taking a proactive approach in setting regulations and guidelines for FinTech companies operating in the market.

  • Payment Services Provider Regulations: Issued in January 2020, these regulations mandate that providers comply with the Saudi Arabian Money Laundering Law and SAMA’s regulations on Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF).
  • Licensing Guidelines and Criteria for Digital-Only Banks: Released in February 2020, these guidelines allow the use of new regulatory technology (RegTech) for e-KYC processes in the digital banking environment.

Open banking

SAMA is planning to issue a framework for open banking in early 2022. This could lead to greater control for customers and businesses over their finances and access to innovative financial services. However, it’s crucial to strike a balance between enabling innovation and managing the risks of financial crime.

The Financial Fraud Law

Saudi Arabia’s approach to combating financial crime took a significant step forward with the issuance of the new Financial Fraud Law in 2021. This law, which covers acts involving deceit for financial gain and penalties up to seven years in prison and fines of up to SAR 5 million, underscores the importance of providing an effective anti-financial crime regulatory environment in the Kingdom.

As the Saudi digital economy continues to evolve and expand, FinTech companies looking to enter or currently operating in the market should seek expert legal advice on their financial crime compliance measures. The government’s unwavering commitment to regulatory reforms and a focus on combating financial crime ensures a promising future for the Saudi digital economy.