Financial Crime World

Saudi Arabia’s Digital Economy: FinTech Boom and the Role of Financial Institutions in Crime Prevention

Saudi Arabia is making strides towards becoming a global leader in the digital economy as part of its Vision 2030 plan. In this article, we provide an update on the Saudi Arabian regulatory landscape as it pertains to anti-financial crime in the context of the digital economy.

A Cashless Society and FinTech Boom

The Saudi Arabian government aims to increase the usage of cashless payments to 70% in the wake of the digital transformation and the COVID-19 pandemic. This push towards a cashless society, compounded by the young and tech-savy population, has given rise to a FinTech boom in the Kingdom.

  • First digital banks granted licenses: STC Pay (STC Bank) and a consortium led by Abdul Rahman Bin Saad Al-Rashed & Sons Company – Saudi Digital Bank

Financial Crime in the Digital Economy

The digital transformation of Saudi Arabia presents new challenges and potential risks, particularly in the realm of financial crime prevention. With the proliferation of FinTech solutions, regulatory gaps and loopholes may emerge, potentially attracting criminal activities. The complexity of the digital economy necessitates robust anti-financial crime measures.

Regulatory Framework: SAMA’s Approach

Saudi Arabia is taking a proactive stance by implementing stringent regulations to combat financial crime. The Saudi Arabian Monetary Authority (SAMA) has:

  • Implemented Payment Services Provider Regulations (January 2020). These regulations require compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws, as well as SAMA’s AML/CTF regulations.
  • Issued Licensing Guidelines and Criteria for Digital-Only Banks (February 2020), opening the door for RegTech use in e-KYC processes.

Open Banking: Balancing Innovation and Risk

SAMA is set to introduce open banking, allowing third-party financial service providers access to customer banking and transaction data. This initiative brings significant opportunities for FinTech companies but also poses risks, including new fraud risks.

Saudi Arabia’s New Financial Fraud Law

Saudi Arabia has criminalized financial fraud and breach of trust with prison sentences and fines, reinforcing the commitment to combating financial crimes.

Looking Ahead:

  • Stay tuned for further regulatory developments.
  • FinTech companies entering or operating in the Kingdom must seek expert legal advice to navigate the complex regulatory landscape.