Saudi Arabia’s Digital Economy: A Promising Landscape for FinTech and Anti-Financial Crime Regulation

The digital economy in Saudi Arabia is rapidly growing, with the government’s focus on shifting transactions from cash to cashless payments. This is driven by the young and digitally literate population and the necessity brought about by the COVID-19 pandemic.

Growth of the FinTech Sector

• Two digital banks, STC Bank and Saudi Digital Bank, have been licensed by the Saudi Arabian Monetary Authority (SAMA)
• Increasing number of e-commerce merchants and financial institutions involved in the digital economy
• Anonymous nature of cross-border transactions poses challenges in financial crime prevention

Challenges and Risks

• Complexities in preventing financial crime in the digital economy
• Proactive approach by SAMA in addressing these challenges

Compliance with Anti-Money Laundering and Counter-Terrorism Financing Regulations

• Saudi AML law and SAMA regulations apply to FinTech companies and RegTech providers
• January 2020: Payment Services Provider Regulations issued
• February 2020: Licensing Guidelines and Criteria for Digital-Only Banks issued

Open Banking and Financial Crime Risks

• Access to customer banking and transaction data for third-party financial service providers
• New opportunities for FinTech companies, but also new financial crime risks for banks
• Potential to enhance banks’ anti-money laundering and KYC capabilities

New Financial Fraud Law

• Targets deceitful practices that cause financial loss to others
• Penalties include up to seven years in prison and fines of up to SAR 5 million

Conclusion

Saudi Arabia is committed to providing an effective anti-financial crime regulatory environment. FinTech companies entering or already operating in the Saudi market should seek expert legal advice regarding their financial crime compliance measures to navigate the evolving regulatory landscape.