Saudi Arabia Cracks Down on Financial Crimes: New Penalties Announced for Money Laundering and Terrorism Financing

Background

In a bid to further strengthen its commitment to combating financial crimes, the Saudi Arabian government has issued a new royal decree (Royal Decree No. M/39) to amplify penalties for money laundering and terrorist financing offenses. The decree was issued on August 23, 2003.

Definitions and Consequences

The decree begins by detailing the terms used in the law, such as money laundering, criminal activity, and proceeds, among others. Money laundering is defined as concealing or falsifying the origin of funds acquired illegally.

Targeted Institutions

Financial and non-financial institutions, including banks, exchange bureaus, investment companies, commercial organizations, and sole proprietors, are targeted in the decree. The regulations require these institutions to maintain records and documents of clients’ transactions for ten years and establish internal monitoring systems to detect and stop criminal activities.

Penalties for Money Laundering

Those who commit money laundering crimes can be punished by:

Imprisonment for up to ten years
A fine of up to five million riyals

The severity of the penalties is amped up if the crime is committed through an organized crime syndicate or perpetrators occupy a public post or use violence or weapons.

Penalties for Violating the Law

Imprisonment for up to two years and a fine of up to half a million riyals can be imposed on those who violate the law without obtaining a license. Financial and non-financial institutions could face a fine of up to the value of the funds related to the criminal offense if their liability is proven.

To deter and prevent financial crimes, the decree encourages information sharing between financial and non-financial institutions and competent authorities. Instances of suspicious funds or transactions must be reported promptly to the Financial Investigation Unit.

Reporting Requirements for Cash and Precious Metals

The implementing regulations of this law will dictate the procedures for disclosing cash and precious metals entering or leaving the Kingdom. Cash and precious metals exceeding specific thresholds will need to be reported. The compulsory reporting of funds applies to all persons, not only institutions.

Conclusion

The new decree complements Saudi Arabia’s efforts to bolster its financial system’s integrity and adhere to international standards, including the Financial Action Task Force (FATF). The provisions will be published in the Official Gazette sixty days after its issuance.