Financial Crime World

Terrorism Financing Regulations and Enforcement in Saudi Arabia Falls Short

A recent report by the Middle East and North Africa Financial Action Task Force (MENAFATF) and the Financial Action Task Force (FATF) has revealed significant shortcomings in Saudi Arabia’s efforts to combat terrorism financing.

  • While Saudi Arabia has made progress in establishing an anti-money laundering framework, its efforts to combat terrorist financing are lagging behind.
  • The country was encouraged by the FATF in 2004 to enact a freestanding terrorist financing offense in line with the United Nations (UN) Terrorist Financing Convention, but this has still not been done.

Insufficient Enforcement

  • Saudi Arabia’s enforcement mechanisms are insufficient to combat terrorist financing.
  • The country’s Financial Intelligence Unit (SAFIU) is well-equipped and resourced, but it faces a backlog of suspicious transaction reports that need to be analyzed and made available to law enforcement entities.

Non-Profit Sector Vulnerabilities

  • The non-profit sector in Saudi Arabia is vulnerable to terrorist financing risks.
  • While non-profit organizations are licensed, registered, supervised, and sanctioned, they lack periodic reviews and reassessments to identify potential risks.

Financial Institutions Face Challenges

  • Financial institutions in Saudi Arabia face challenges in implementing effective anti-money laundering and combating the financing of terrorism (AML/CFT) measures.
  • The country has a comprehensive framework for preventive measures, but the rules for the insurance and securities sectors were only issued shortly before the onsite visit.

Supervisory Agencies Underperform

  • Saudi Arabia’s supervisory agencies face challenges in effectively covering all types of financial institutions subject to their supervision.
  • The agencies have adequate powers and resources, but low levels of corrective measures have been applied.

Designated Non-Financial Businesses and Professions Face Challenges

  • Designated non-financial businesses and professions in Saudi Arabia lack experience and awareness of AML/CFT risks and obligations.

In conclusion, the report has identified significant shortcomings in Saudi Arabia’s efforts to combat terrorism financing. The country must take concrete steps to address these challenges and ensure that its legal framework, enforcement mechanisms, and supervisory agencies are effective in preventing and detecting terrorist financing activities.