Financial Crime World

Saudi Arabia’s Financial Sector Braces for Updated SAMA Mandate Against Rampant Fraud

Saudi Arabia, known for its digital transformation initiatives like Open Banking, is facing an unintended consequence: a surge in financial fraud. In this article, we’ll discuss the impact of these reforms on the threat landscape and SAMA’s new Counter Fraud Framework aimed at combating fraud.

Unintended Consequences: A Surge in Financial Fraud

  • Saudi Arabia’s digital transformation initiatives expanding the threat landscape [1]
  • Staggering rise in unverified remote account openings: 4.84 million in 2021 [1]
  • Total financial loss in 2021: Approx. SAR765 million ($204 million) [1]
  • Recorded fraud cases: 4,377 [1]
  • Increase in fraud cases from 2019: 34.1% [1]

SAMA, the Saudi Arabian Monetary Authority, reported these figures highlighting the growing problem of financial fraud in the digital age. With the economy growing, access to credit, and convenience, financial scammers have seen an opportunity.

The Counter Fraud Framework: A New Approach to Combat Fraud

To counter the growing tide of fraud, SAMA introduced the Counter Fraud Framework in October 2022. The framework outlines the following objectives:

  1. Creating a unified approach: Developing a consistent and effective strategy to counter fraud across financial institutions.
  2. Achieving an appropriate maturity level: Establishing a formalized approach to counter-fraud controls and implementing fraud detection systems.
  3. Managing risks: Identifying, assessing, and mitigating fraud risks to financial institutions.
  4. Effective reporting and remediation: Creating a culture of transparency and accountability within financial institutions.

Meeting the Deadline and Consequences of Non-Compliance

All financial institutions in Saudi Arabia must comply with the updated regulations by the end of June 2023. Failure to meet the deadline could result in:

  • Severe penalties [3]
  • Loss of reputation [3]
  • Potential revocation or suspension of operating licenses

New Expectations: Reaching a Minimum Maturity Level of Three

SAMA’s new mandate demands financial institutions reach a minimum maturity level of three. This entails:

  1. Structured and formalized approach to counter-fraud controls.
  2. Implementation of fraud detection systems.
  3. Reporting channels to monitor performance.

Adapting to Modern, Intelligent Solutions

To remain competitive, financial institutions must evolve beyond traditional rules-based fraud management solutions. Modern, intelligent solutions like:

  1. Device intelligence: Detecting abnormal behavior on devices used for financial transactions.
  2. Behavioral biometrics: Continuous analysis of user behavior to detect anomalous patterns.

These solutions help institutions adapt to sophisticated scams and fraud schemes.

Addressing the Range of Fraudulent Activities

SAMA’s mandate targets various types of fraudulent activities, including:

  • Money laundering
  • Terrorist financing
  • Identity-based fraud: account takeovers, credential stuffing, impersonation attacks, application fraud, and banking and payment fraud.

As fraudsters continually innovate, financial institutions must adopt adaptive solutions to ensure effective fraud prevention and detection.

Conclusion

With the SAMA deadline approaching, financial institutions in Saudi Arabia must invest in modern, intelligent fraud detection and prevention solutions to stay competitive and meet the regulations. By taking a proactive approach to fraud prevention, these institutions can protect their businesses, secure their assets, and maintain trust with their customers.

Sources: [1] Saudi Arabian Monetary Authority publications [2] SAMA press releases [3] SAMA regulatory documents.