Financial Crime World

Saudi Arabia Imposes Strict Penalties for Money Laundering and Financial Crimes

August 23, 2003

In a determined effort to combat money laundering and financial crimes, the Saudi Arabian government has issued a new decree - Royal Decree No. M/39. This decree, effective since August 23, 2003, aims to strengthen penalties and regulations against such activities.

Definition of Terms

The decree defines several key terms:

  • Money laundering: concealing or falsifying the true origin of illegally acquired funds to make them seem legitimate
  • Funds or proceeds: refers to any currency, cheque, draft, or any other act or instrument that can be converted into currency or monetary value
  • Means: refers to anything that can be used in committing or facilitating money laundering
  • Financial and non-financial institutions: banks, financial corporations, insurance companies, real estate firms, etc.
  • Transaction: any act involving the transfer or conversion of funds
  • Criminal activity: any act that is a criminal offense as per the Saudi Arabian Penal Code

Prohibited Activities

According to article two of the decree, anyone engaging in the following activities is committing money laundering:

  1. Conducting transactions involving funds or proceeds from criminal activities
  2. Transporting, acquiring, using, keeping, or transferring funds or proceeds from criminal activities
  3. Concealing or falsifying the nature of funds or proceeds

Reporting and Record-keeping Obligations

Financial and non-financial institutions, their staff, and others bound by the decree must:

  1. Verify clients’ identities
  2. Maintain records for ten years
  3. Report any suspicious transactions to the Financial Investigation Unit

Penalties

Individuals committing money laundering may face the following penalties:

  • Imprisonment for up to ten years
  • Fines up to five million riyals
  • Confiscation of the funds, proceeds, and means involved

These penalties increase if the crime is committed through an organized syndicate, using violence or weapons, exploiting public office, or if there are previous convictions in similar crimes.

Violating the provisions of this law without prejudice to other laws carries the following penalties:

  • Imprisonment for up to six months
  • Fines up to one hundred thousand riyals

However, those acting in good faith are exempted from the penalties.

Implementing Regulations

The implementing regulations of this law, including the formation and powers of the Financial Investigation Unit, will be issued by the Minister of Interior within 90 days from the decree’s issuance. This decree goes into effect 60 days from its publication in the Official Gazette.

This royal decree represents Saudi Arabia’s ongoing commitment to combating money laundering and financial crimes in accordance with international best practices.