Combatting Money Laundering: A New Law for Financial Institutions in Saudi Arabia

Introduction

A new law has been issued in Saudi Arabia requiring financial and non-financial institutions to establish precautionary measures and internal monitoring systems to detect and prevent money laundering and terrorist financing.

Key Provisions of the Law

• Financial institutions must take immediate action if they suspect a transaction is related to money laundering or terrorism.
• Institutions must report such transactions to the Financial Investigation Unit and provide detailed information about the transactions and parties involved.
• Financial institutions must introduce programs for combating money laundering, including:
  • Developing policies and procedures
  • Conducting internal audits
  • Providing training for employees

The Financial Investigation Unit

The law establishes a unit for combating money laundering, known as the Financial Investigation Unit, which will be responsible for:

• Receiving notifications of suspicious transactions
• Analyzing such transactions
• Preparing reports regarding suspicious transactions

Penalties for Non-Compliance

• Chairmen of boards of directors, board members, owners, employees, and authorized representatives who violate the law can face imprisonment for up to two years and a fine of up to 500,000 riyals.
• Financial institutions found guilty of violating the law can be fined up to the value of the funds involved in the transaction.
• Directors and executives of non-compliant financial institutions can face criminal prosecution.

International Cooperation

The law provides for international cooperation in combating money laundering and terrorist financing. Financial institutions and authorities may share information with foreign counterparts in accordance with established legal procedures and without violating business confidentiality.

Implementation

• The Minister of Interior and the Minister of Finance will issue implementing regulations for the law within 90 days.
• The law comes into effect 60 days after its publication in the Official Gazette.
• Financial institutions and authorities are urged to familiarize themselves with the new law and take immediate action to comply with its provisions.

By complying with this new law, financial institutions in Saudi Arabia can play a crucial role in preventing money laundering and terrorist financing, and ensuring the integrity of the country’s financial system.