Financial Crime World

Saudi Arabia’s Digital Economy: A New Frontier with Challenges in Financial Crime Prevention

Saudi Arabia’s digital economy is booming under its Vision 2030 goal, resulting in new licences for digital banks and a FinTech sector surge. However, the rapid digital transformation brings challenges, particularly in the area of financial crime prevention.

Saudi Arabia’s Ambitious Digital Economy Goals

With a digitally-savvy population and the need for online solutions due to the COVID-19 pandemic, the Kingdom aims to move 70% of its economy away from cash to cashless transactions. This shift is provoking a FinTech boom, demonstrated by the first billion-dollar FinTech unicorn in the Middle East, STC pay.

New Risks and Regulatory Challenges in the Digital Economy

The swift growth of the digital economy poses new risks and challenges related to regulatory gaps and potential loopholes. The numerous actors involved, such as e-commerce merchants, financial institutions, and anonymous cross-border transactions, amplify the difficulties in preventing financial crime.

SAMA’s Proactive Regulatory Approach

The Saudi Central Bank (SAMA) is taking a proactive stance against these risks, implementing the Payment Services Provider Regulations in 2020, which mandate Payment Service Providers to follow the Saudi AML Law and SAMA’s anti-money laundering and counter-terrorism financing regulations. Additionally, SAMA’s licensing guidelines and criteria for digital-only banks enable Regulatory Technology (RegTech) like e-KYC.

Open Banking: Opportunities and Challenges

SAMA plans to issue an open banking framework in early 2022, allowing third-party developers access to customer data with their consent, advancing financial services and customer control. However, this also introduces new fraud risks, necessitating stringent financial crime prevention measures.

New Financial Fraud Law

To address these risks, Saudi Arabia enacted a Financial Fraud Law earlier this year, providing seven-year prison sentences and fines up to SAR 5 million for those engaging in fraud, including attempted fraud, collusion, or incitement.

Adhering to a Robust Regulatory Environment

Saudi Arabian authorities acknowledge the significance of a robust regulatory environment in maintaining a reputable financial system. FinTech companies operating in or entering the Saudi market must comply with these regulations. Consulting legal experts can help ensure full compliance.

Subheadings:

  • Saudi Arabia’s Digital Economy: Goals and Opportunities
  • New Risks and Regulatory Challenges
  • SAMA’s Proactive Regulatory Approach
  • Open Banking: Opportunities and Challenges
  • New Financial Fraud Law
  • Maintaining a Robust Regulatory Environment

Bullet points:

  • Over 70% of the economy to move away from cash towards cashless transactions
  • FinTech sector boost, including the first billion-dollar FinTech unicorn, STC pay
  • Regulatory gaps and potential loopholes from a variety of actors
  • SAMA’s Payment Services Provider Regulations and use of RegTech
  • Open banking framework to provide third-party developers access to customer data
  • Financial Fraud Law targeting specific fraud-related activities.