The Kingdom of Saudi Arabia (KSA) is a growing financial center in the Gulf Region. Money laundering and terrorist financing are known to originate from Saudi criminal enterprises, private individuals, and Saudi-based charities. Based on media reports and discussions with Saudi officials, there is no indication of significant narcotics-related money laundering. Saudi bulk cash smuggling from individual donors and charities has reportedly been a major source of financing to extremist and terrorist groups over the past 25 years. With the advent of tighter bank regulations, funds are reportedly collected and illicitly transferred in cash, often via pilgrims performing Hajj and Umrah. Despite serious and effective efforts to counter the funding of terrorism originating from within its borders, entities in Saudi Arabia likely continue to serve as an important source of cash flowing to Sunni-based extremist groups. Saudi officials acknowledge difficulty in following the money trail with regard to illicit finance due to the preference for cash transactions in the country and the regulatory challenge posed by hawalas. The government does not regularly publish official criminal statistics.
KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs:
A PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably
- Foreign PEP: YES
- Domestic PEP: YES
Saudi Arabia – KYC covered entities
The following is a list of Know Your Customer entities covered by Saudi Law:
- Money exchangers
- Real estate agents
- Dealers in precious metals and stones
Saudi Arabia – Suspicious Transaction Reporting (STR) Requirements:
Number of STRs received and time frame: 1,368 in 2010
Number of CTRs received and time frame: Not publicly available
The following is a list of STR covered entities covered by Saudi Law:
- Insurance companies
- Exchange companies and institutions
- Investment and insurance companies
- Commercial companies
- Sole proprietorships
- Vocational activities
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: 237 (2004 – 2008)
Convictions: 162 (2004 – 2008)
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
Money-service businesses operating outside of banks and licensed money changers are illegal in Saudi Arabia. To help counteract the appeal of these types of unlicensed money services, particularly to many of the approximately eight million expatriates living in Saudi Arabia, Saudi banks have taken the initiative to create fast, efficient, high-quality, and cost-effective fund-transfer systems that have proven capable of attracting customers accustomed to using other, non-sanctioned methods.
Saudi Arabia’s Council of Senior Scholars (the Kingdom’s highest judicial body and equivalent to the U.S. Supreme Court) issued an edict (fatwa) declaring that financing terrorism, knowingly or unknowingly, was illegal and punishable under Islamic law. Nevertheless, Saudi Arabia should enact a full statutory criminalization of terrorist financing and structure it separately from the money-laundering offense to explicitly demonstrate that it has been criminalized.
Sweeping counter-terrorism operations have demonstrated Saudi Arabia’s effectiveness at disrupting financing within the Kingdom. Contributions to charities are subject to strict guidelines, including that they must be in Saudi riyals, adhere to enhanced identification requirements, and be made only by checks payable to the first beneficiary, which then must be deposited in a Saudi bank. Regulations also forbid charities from using ATMs and credit cards for charitable purposes, from making cash contributions, and from making money transfers outside of Saudi Arabia.
Saudi Arabia‘s capacity to monitor compliance with and enforce its banking rules has improved and helped to stem the flow of illicit funds through Saudi financial institutions. The Saudis‘ ability to stop bulk cash smuggling has also improved. However, cash illicitly collected and transferred via pilgrims on Hajj or Umrah continues to flow.
Saudi Arabia should become a party to the UN Convention against Corruption.