Financial Crime World

Saudi Central Bank Introduces New Counter-Fraud Framework to Combat Financial Fraud in the Kingdom’s Financial Institutions by 2023

The Saudi Central Bank (SCB), previously known as SAMA, has introduced a new Counter-Fraud Framework to address financial fraud in financial institutions (FIs) operating within the Kingdom. This comes in response to the increasing number of financial fraud cases, particularly in the rapidly evolving financial space.

Prevalence of Financial Fraud in the Saudi Region

A recent report reveals common modes of financial fraud in the Saudi region:

  • Impersonation
  • Fictitious recruitment
  • Phantom investments
  • Fake web pages or platforms
  • Internal fraud

Approximately 55% of the remotely opened online accounts (4.84 million accounts) show an identity mismatch, leading to issues with process control systems, insufficient anti-fraud systems infrastructure, lack of AI and customer behavior studies, and bypassed identity checks.

Objectives of the Counter-Fraud Framework

The primary objectives of the Framework are:

  1. Developing a common approach to tackle fraud risks within member organizations
  2. Achieving an appropriate maturity level of fraud controls within member organizations
  3. Properly managing fraud risks across all member organizations

The Framework covers the following domains:

  1. Fraud Governance
  2. Prevention
  3. Detection and Response

Assessing the Maturity Levels of Fraud Controls

Member institutions will undergo periodic self-assessment against a predefined maturity model to assess the maturity levels of their fraud controls. The Counter-Fraud Maturity Model includes the following 6 levels:

  1. Initiating
  2. Managed
  3. Defined
  4. Quantitatively Managed
  5. Predictive
  6. Optimizing

The expectation for organizations to meet at maturity level 3 or higher is set by the deadline. Organizations at level 3 include:

  1. Defined, approved, and implemented fraud controls in accordance with the framework
  2. Implementation of a fraud detection system to prevent and detect fraud
  3. Compliance monitoring with Counter-Fraud documentation and procedures

Scope of the Framework

The mandate applies to internal and external frauds, as well as covering all digital and non-digital channels and products. It includes combating:

  • Money laundering
  • Terrorist financing
  • Identity-based frauds
  • Application frauds
  • Account takeovers
  • Employee frauds
  • Other financial crimes

Helping Saudi Arabia’s FIs Comply with the Mandate

Clari5, a leading provider of fraud detection solutions, can help Saudi Arabia’s FIs swiftly comply with the SCB’s mandate through the implementation of a fraud detection system capability before the deadline. This system can prevent and proactively detect fraud across all products and channels.

The new Counter-Fraud Framework from the SCB is a significant step that will enhance the overall security and efficiency of the financial sector in the Kingdom.