Saudi Arabia’s Digital Economy Bloom: A New Era of Anti-Financial Crime Regulation

Saudi Arabia’s digital economy is gaining momentum with the government making significant strides to create an enabling environment for investors, entrepreneurs, and innovators. The Kingdom’s ambition to transition towards a cashless society is not only ambitious but achievable. let’s explore how this digital transformation is shaping up in the context of the Saudi Arabian economy.

Driving the Digital Economy Forward: Digital Banks and FinTech Boom

The Saudi Arabian Cabinet has approved the licensing of two local digital banks - STC Pay, now known as STC Bank, and the Saudi Digital Bank - with a total capital investment of SAR 4 billion. This investment will bolster the Kingdom’s digital financial infrastructure, catalyzing a FinTech boom.

- Saudi Arabia's ambition to become a cashless society
- 70% usage of digital payments
- Strong digital literacy among young population
- COVID-19 and online solutions

Rising Challenges: Preventing Financial Crimes in a Digital Economy

The burgeoning digital economy brings new financial risks, particularly the potential for financial-crime activities. With a diverse range of actors in the digital landscape, from e-commerce merchants to financial institutions, and the anonymous nature of cross-border transactions, financial crime prevention challenges are intensified.

Proactive Regulatory Approach: SAMA’s Role

Saudi Arabia’s proactive stance on financial crime prevention offers hope for effective regulation. The Saudi Central Bank (SAMA) is at the forefront of these efforts, mandating that providers comply with the Saudi Anti-Money Laundering (AML) law and its rules. In February 2020, SAMA also open the doors to RegTech, which facilitates electronic KYC processes, making compliance in this fully digitalized environment more feasible.

saama's measures
- Payment Services Provider Regulations
- Licensing Guidelines and Criteria for Digital-Only Banks

Open Banking: Opportunities and Challenges

SAMA plans to issue an open banking framework in early 2022, enabling more control for customers over their finances and enabling bespoke financial services. Balancing innovation and financial crime risks will be crucial, as open banking’s access to multiple providers’ data can improve institutions’ abilities to conduct anti-money laundering and KYC.

open banking
- More control for customers
- Balancing innovation and financial crime risks

Combating Financial Crimes: The New Financial Fraud Law

To address these emerging risks, the Kingdom issued a new Financial Fraud Law this year, imposing penalties of up to 7 years in prison and fines of up to SAR 5 million, underscoring the country’s commitment to combating financial crime in its fast-evolving digital economy.

- New Financial Fraud Law
- Penalties and fines for non-compliance

Staying Compliant: A Must for FinTech Companies

FinTech companies intending to enter or operate within the Saudi market must keep a watchful eye on the evolving regulatory landscape, ensuring their financial crime compliance measures align with local laws and SAMA’s regulations.

- Keeping up with regulatory landscape
- Aligning financial crime compliance measures