The Kingdom of Saudi Arabia is committed to detecting and preventing laundering of proceeds of ML/FT crimes as well as to punish perpetrators in accordance with the Anti-Money Laundering Law, the Law on Terrorism Crimes and Financing, and their Implementing Regulations. Saudi Arabia had previously ratified and signed agreements at the international level. It signed the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances in Vienna in 1988 and the United Nations Convention against Corruption in January 2004. It also ratified the International Convention for the Suppression of the Financing of Terrorism in New York in 1999 and the United Nations Convention against Organized Crime in Palermo in 2000. Saudi Arabia joined the Financial Action Task Force (FATF) in June 2019 to be the 1st Arab country and the 37th country in the world to obtain the membership. At the regional level, Saudi Arabia ratified the Arab AntiTerrorism Agreement under the auspices of the Arab League at a conference held in April 1998. It also signed and ratified the Organization of Islamic Conference (OIC) Agreement for the suppression of international terrorism in July 1999 as well as the GCC Anti-Terrorism Agreement in May 2004. Saudi Arabia is a founding member of the Middle East and North Africa Financial Action Task Force (MENAFATF), which created in November 2004. Furthermore, many developments in the international financial sector have been witnessed in the recent years, including the efforts made for combating ML/TF. SAMA has adopted various initiatives that include measures and other criteria in response to international developments in this field. This includes the issuance of a guide for the implementation of Security Council Resolutions relevant to combating terrorism and its financing to ensure optimal application of updated procedures and mechanisms relating to such resolutions. SAMA also issued a guide for the implementation of Security Council Resolutions relevant to preventing proliferation of weapons of mass destruction and their financing to ensure that financial institutions optimally apply the relevant procedures and mechanisms. Due to the importance of financial institutions in detecting and preventing ML/TF transactions, SAMA has prepared this Guide to help financial institutions abide by the minimum regulatory requirements and to protect these institutions from being used as a conduit for illegal transactions arising from ML/TF activities and other crimes. This can contribute to enhancing and maintaining confidence in the integrity and reputation of the financial system in Saudi Arabia.

• - The purpose of this Guide is to help financial institutions operating in Saudi Arabia and licensed by SAMA to develop and adopt a risk-based approach for conducting their business to meet the requirements of the Anti-Money Laundering Law, issued by Royal Decree No. (M/20) dated 05/02/1439H, and its Implementing Regulations, issued under the Decision of the Presidency of State Security No. (14525) dated 19/02/1439H, as well as the Law on Combating Terrorism Crimes and Financing, issued by Royal Decree No. (M/21) dated 12/02/1439H, and its Implementing Regulations, issued pursuant to the Council of Ministers’ Resolution No. (228) dated 02/05/1440H.

• - The requirements mentioned in this Guide reflect the obligations stated in the Anti-Money Laundering Law, the Law on Terrorism Crimes and Financing, and their Implementing Regulations. Such requirements do not impose any additional obligations on financial institutions supervised by SAMA.

• - The requirements stated in this Guide are obligatory and are the minimum requirements to be complied with by financial institutions. Moreover, a financial institution should put in place additional appropriate measures as required by the results of its approved risk assessment

•  Anti-Money Laundering Law: The Anti-Money Laundering Law issued by Royal Decree No. (M/20) dated 5/2/1439 AH.

•  Anti-Terrorism Crimes and Financing Law: The Anti-Terrorism Crimes and Financing Law issued by Royal Decree No. (M/21) dated 12/2/1439 AH.

• Implementing Regulation for the Anti-Money Laundering Law: The Implementing Regulation for the Anti-Money Laundering Law issued by the decision of the Presidency of State Security No. (14525) dated 19/2/1439 AH.

• Implementing Regulation for the Anti-Terrorism Crimes and Financing Law: The Implementing Regulation for the Anti-Terrorism Crimes and Financing Law issued by the decision of the Council of Ministers No. (228) dated 2/5/1440 AH.

• The Institution: The Saudi Arabian Monetary Authority.

• The General Administration for Financial Investigations: A national center that receives reports, information, and documents related to money laundering and the financing of terrorism or predicate crimes or proceeds of crime in accordance with the Anti-Money Laundering Law and its Implementing Regulation, and the Anti-Terrorism Crimes and Financing Law and its Implementing Regulation, analyzes and studies these reports and information, and refers the results of its analysis to the competent authorities, either automatically or upon request. The General Administration for Financial Investigations is linked to the President of State Security and enjoys sufficient operational independence, with the organizational structure of the General Administration for Financial Investigations determined by the President of State Security.

• Financial Action Task Force (FATF): An international governmental organization (established in 1989 in Paris by the G7 countries), whose tasks include setting standards and promoting the effective implementation of legal, regulatory, and operational measures to combat money laundering, terrorist financing, the proliferation of weapons, and other threats related to the integrity of the international financial system.

• Designated Non-Financial Businesses and Professions: Anyone engaged in any of the following commercial or professional activities:

• (a) Real estate brokerage when entering into buying and selling relationships for real estate of all types.

• (b) Trading in gold, precious stones, or precious metals when entering into cash transactions with a client valued at 50,000 Saudi Riyals or more, whether the transaction occurred as a single transaction or as several interconnected transactions, whether through individual institutions or commercial companies.

• (c) Lawyers and any person providing legal or accounting services in the course of their profession, when they prepare or execute transactions or engage in any of the following activities:

• 1. Buying or selling real estate;

• 2. Managing client funds, including their bank accounts or other assets;

• 3. Establishing, operating, or managing legal entities or arrangements, or organizing related subscriptions;

• 4. Selling or buying commercial companies.

• Financial Group: A local group consisting of a company or any other type of legal or natural persons who exercise control over the rest of the group, coordinating functions with the rest of the group to apply or implement oversight over the group, alongside branches or subsidiaries subject to anti-money laundering and terrorist financing policies and procedures at the group level.

• Financial Institution: Anyone who conducts on behalf of the client or in their name one (or more) of the following financial activities or operations:

(a) Accepting deposits and other funds payable from the public, including private banking services;

(b) Lending or leasing financing or any other financing activities;

(c) Cash or value transfer services;

(d) Issuing and managing payment instruments (such as credit cards, debit cards, prepaid cards, checks, traveler's checks, payment orders, bank transfers, and electronic currency);

(e) Issuing letters of guarantee or other financial guarantees;

(f) Trading in the following securities:

• 1. Checks, promissory notes, and other instruments;

• 2. Currencies;

• 3. Currency exchange instruments, interest rates, and financial indices;

• 4. Tradable securities and financial derivatives;

• 5. Futures contracts for commodities.

(g) Foreign currency exchange activities;

(h) Participating in the issuance of securities and providing financial services;

(i) Safekeeping and managing cash or securities on behalf of others;

(j) Entering into protection and/or savings contracts and other types of investment-related insurance as an insurer, broker, or agent for an insurance contract or any other insurance products stipulated in the Cooperative Insurance Companies Control Law and its Implementing Regulation;

(k) Investing, managing, or operating funds on behalf of another person.

• Shell Bank: A bank or financial institution registered or licensed in a country but having no physical presence there, and not belonging to a financial group subject to regulation and oversight.

• Senior Management: Includes the managing director, chief executive officer, general manager or their deputies, the chief financial officer, heads of major departments, and those responsible for risk management, internal audit, compliance, and anti-money laundering and terrorist financing in the financial institution, and others in similar positions as determined by the institution.

• Senior Management Position: Includes the managing director, chief executive officer, general manager, or their deputies, chief operating officer, chief financial officer, or chief actuary.

• Employees of the Financial Institution: Members of the board of directors and its committees, executive officials, employees (both official and contracted), consultants, and employees working through a third party.

• Client: Anyone who engages or intends to engage with the financial institution in any of the following activities:

(a) Arranging or conducting a transaction or business relationship or opening an account for themselves;

(b) Signing a transaction or business relationship or account;

(c) Allocating an account under a transaction;

(d) Transferring an account or rights or obligations under a transaction;

(e) Authorizing them to conduct a transaction or control a business relationship or account.

• Occasional Client: One who does not have an existing business relationship with the financial institution and wishes to conduct a transaction through it.

• Business Relationship: The ongoing or specific relationship that arises between the client and the financial institution, related to the activities and services provided to them.

• Beneficiary: The natural or legal person who benefits from the business relationship with the financial institution.

• Ultimate Beneficial Owner: The natural person who owns or exercises actual ultimate control, directly or indirectly, over the client or the natural person on whose behalf the transaction is conducted, or over the financial institution or any other legal person.

• Person Acting on Behalf of the Client: The person legally authorized to perform or initiate any of the actions that the client may undertake, such as an authorized person or legal agent.

• Politically Exposed Person: A person entrusted with prominent public functions in the Kingdom or a foreign country or holding senior administrative positions or a position in an international organization, including the following positions or functions:

(a) Heads of state or government, senior politicians, or government, judicial, or military officials, senior executives of state-owned enterprises, and prominent officials of political parties;

(b) Heads and directors of international organizations, their deputies, and board members, or any similar position.

• Family Members of the Politically Exposed Person: Any natural person related to the politically exposed person by blood or marriage up to the second degree of kinship.

• Close Associate of the Politically Exposed Person: Any natural person who shares in the benefits with a politically exposed person through a genuine partnership in a legal entity or legal arrangement or has a close business relationship with them, or is an ultimate beneficial owner of a legal entity or legal arrangement owned or effectively controlled by a politically exposed person.

• Preventive Measures: All measures, procedures, and controls taken by the financial institution to mitigate the risks of money laundering, terrorist financing, and the proliferation of weapons.

• Due Diligence Measures: The process of identifying or verifying the information of the client or ultimate beneficial owner, enabling the financial institution to assess its exposure to risks.

• Simplified Measures: The application of preventive measures in a mitigated and simplified manner that corresponds to the money laundering and terrorist financing risks posed by the client or ultimate beneficial owner or business relationship, including taking simplified due diligence measures to identify and verify the client, and applying a simplified monitoring approach and taking any other simplified measures or procedures determined by the financial institution in its policies and procedures.

• Enhanced Measures: The financial institution taking additional measures when the risks of money laundering and terrorist financing are high, including taking enhanced due diligence measures to identify and verify the client or ultimate beneficial owner, taking additional monitoring actions, and taking any other measures or procedures determined by the financial institution in its policies and procedures.

• Transaction: Includes any act involving funds or property or cash or in-kind proceeds. This includes, but is not limited to: deposits, withdrawals, transfers, sales, purchases, lending, exchanges, or loans or extensions of credit or mortgages or gifts or financing or transfers of funds in any currency, whether in cash or by checks, payment orders, shares, bonds, or any other financial instruments, or the use of safes and other forms of secure deposits, or any other act involving funds.

• Funds: Assets or economic resources or property of any value or type or method of ownership - whether tangible or intangible, movable or immovable, concrete or abstract - and documents, instruments, papers, transfers, letters of credit in any form; whether within the Kingdom or outside it. This includes electronic or digital systems, bank credits indicating ownership or interest therein, as well as all types of commercial and financial papers, or any benefits, profits, or other income generated from these funds.

• Monitoring Process: Monitoring all transactions conducted by clients of the financial institution or the occasional client (transient client) or employees of the financial institution, with the aim of detecting and identifying any unusual transactions.

•Suspicious Transaction: A transaction for which the financial institution has reasonable grounds to suspect its connection to a money laundering crime, terrorist financing, predicate crime, or proceeds of crime, including attempts to conduct the transaction.

• Records: Documents, papers, and reports, whether paper or electronic, related to transactions and business relationships and commercial and cash dealings, whether domestic or foreign, including documents obtained under due diligence/simplified/enhanced measures and any documents that contribute to explaining financial, commercial, and cash transactions.

• National Address: The general residence of the natural person or legal entity, unless the person chooses a specific address for receiving notifications and communications, and the general or private residence address - as the case may be - prepared by the Saudi Post is considered an approved address that entails all legal consequences.

•Reliable Source: The source that generates the information or data relied upon by the financial institution to identify the client.

• Third Party: The entity that the financial institution relies on to implement due diligence measures, provided that it is another financial institution or any of the designated non-financial businesses and professions.

• Correspondent Relationship: The relationship between a correspondent financial institution and a receiving institution through an account or any other services related to it, such as cash management, international money transfers, check clearing, foreign exchange services, trade financing, liquidity management, and short-term lending. This includes the correspondent relationship arising for securities transactions or money transfers.

• Correspondent Payment Accounts: Demand deposit accounts opened by a foreign financial institution with a local financial institution to direct deposits and checks for its clients toward that account. Foreign clients have signing authority on the account, allowing them to conduct ordinary business activities internationally; financial institutions are prohibited from accepting this type of account.

• Wire Transfer: A financial transaction conducted by a financial institution on behalf of the transferor, through which a monetary amount is delivered to a beneficiary at another financial institution, regardless of whether the transferor and the beneficiary are the same person.

• A money laundering offence shall be deemed a separate offence from the predicate offense. A conviction for the predicate offense shall not be necessary for a conviction for money laundering or to establish that funds are proceeds of crime, whether the predicate offense was committed inside or outside Saudi Arabia. The intent, knowledge, or purpose of committing the money laundering offence shall be inferred from objective factual circumstances of the case. Anyone who commits any of the following acts shall be considered to have committed a money laundering offence:

  • 1. Transfer, transportation, or performing of any transaction with funds while knowing that they are proceeds of crime in order to conceal or disguise the illegitimate origin of those funds or to assist a person involved in the predicate offense that generated those funds to evade the consequences of committing such crime.

  • 2. Acquiring, possession or use of funds with the knowledge that they are proceeds of crime or from an illegal source.

  • 3. Concealment or disguise of the nature, source, movement, ownership, place, manner of disposition of, or rights associated with funds that the person knows are proceeds of crime.

  • 4. The attempt to commit any of the acts stated in Paragraphs (1, 2 and 3) above or participation in those acts by means of agreement, assistance, incitement, counseling, advice, facilitation, collusion, plotting, or concealment.

• A legal person shall be considered to have committed a money laundering offence if any of the acts mentioned above was committed in its name or for its account. Criminal liability of a legal person shall not exclude the criminal liability of its chairpersons, members of its boards of directors, its owners, employees, authorized representatives, auditors, or any other natural person who acts in its name or for its account.

• There are usually three stages of money laundering, explained as follows:

  • 1. Depositing or Placement: In this stage, illegally obtained funds are introduced into the financial system, with the aim of depositing cash resulting from illegal activities into the financial system in a manner that does not attract attention. This is usually achieved through financial institutions when a customer or a person acting on their behalf engages in any of the financial activities and transactions, including acceptance of cash deposits, currency exchange, purchase of shares, and conclusion of finance contracts or protection and/or savings insurance contracts, without taking sufficient preventive measures by the financial institution to protect itself from money laundering risks.

  • 2. Layering: It is the stage in which funds are transferred and moved with the purpose of concealing their origin. The aim is to disguise the illegal source of the funds introduced into the financial system. This stage may involve sending wire transfers to other financial institutions, purchase and sale of investments and financial instruments, cancellation of finance contracts or protection and/or savings insurance policies during the free look period2 , fraudulent investments, or business schemes.

  • 3. Integration: In this stage, funds are brought into the economy again so that it becomes difficult to distinguish them from funds of legitimate origin. The aim is to legitimize illegal funds and integrate them into the domestic or global economy, through the purchase of financial assets, shares, or luxury goods or the investment in real estate.

The term "terrorist crime" refers to any behavior carried out by the perpetrator in execution of an individual or collective criminal project, whether directly or indirectly, aimed at disrupting public order, undermining the security of society and the stability of the state, endangering its national unity, obstructing the fundamental system of governance or some of its provisions, causing harm to any state facilities or its natural or economic resources, attempting to coerce any of its authorities to perform a certain act or refrain from doing so, or harming any person or causing their death, when the purpose, by its nature or context, is to terrorize people or coerce a government or international organization to perform any act or refrain from doing so, or threatening to carry out acts that lead to the aforementioned objectives and purposes or inciting them. It also includes any behavior that constitutes a crime under the Kingdom's obligations in any of the international agreements or protocols related to terrorism or its financing, to which the Kingdom is a party, or any of the acts listed in the annex of the International Convention for the Suppression of the Financing of Terrorism. The crime of financing terrorism is established by providing funds to commit a terrorist crime or for the benefit of a terrorist entity or individual, including financing the travel and training of a terrorist.

What distinguishes operations related to the financing of terrorism from operations related to money laundering is as follows:

1. Small operations, including bank transfers and currency exchanges, can be used to finance terrorist activities;

2. It is possible to finance terrorists using funds obtained legally, making it difficult for the financial institution to determine the stage at which legitimate funds become funds used to finance terrorist operations, as a terrorist can obtain sources for financing terrorist operations from both legitimate and/or illegitimate sources.

Therefore, the financial institution must ensure that its internal monitoring and control systems do not focus solely on high-value transactions, and that it includes in its monitoring systems specific indicators for the financing of terrorism and searches for operations that do not have a clear economic purpose. In addition, effective controls and procedures for customer due diligence and verification should be continuously applied, and suspicious transactions should be reported; to ensure that the financial system in the Kingdom is not misused to finance terrorists, terrorist organizations, or terrorist acts.

The financial institution is responsible for the effective implementation of the AML/CTF requirements and adoption of a risk-based approach to mitigate the money laundering and terrorism financing risks it faces. The financial institution shall not consider combating money laundering and terrorism financing in isolation from other regulations and needs in the financial institution, but as part of its comprehensive risk management strategies. Therefore, the board of directors and senior management in the financial institution shall ensure that the policies, procedures and controls in place related to AML/CTF are based on the results of money laundering and terrorism financing risks. To ensure the effectiveness of the AML/CTF strategy at the level of the financial institution, the risk management process shall be reviewed continuously and updated periodically, and appropriate mechanisms, policies and procedures shall be developed to mitigate risks. The financial Institution must ensure that its employees are sufficiently aware of all the policy requirements, procedures and internal controls and are working to implement them.

• The board of directors of the financial institution is generally responsible for ensuring compliance with AML/CTF requirements. In this regard, the oversight exercised by the board concerning combating ML/TF shall be in line with international best practices, including SAMA Governance Guidelines. The board shall also ensure that there is documentation relevant to its oversight function, such as minutes of meetings of the board (or board committees). The main responsibilities of the board include, but are not limited to, the following:

  • a) Ensuring that the ML/TF risk assessment in the financial institution is conducted accurately and covers all risks facing the financial institution in order to develop appropriate policies to manage such risks.

  • b) Adopting an internal policy to mitigate ML/TF risks and ensure its effective implementation.

  • c) Providing sufficient budget and resources, including adequate and qualified employees as well as appropriate systems and tools in order to ensure that the application of internal policies, procedures and controls is effective and consistent with the ML/TF risks identified.

  • d) Following up on the implementation of the ongoing and annual training programs in the field of AML/CTF for all employees as well as members of the board of directors and senior management.

  • e) Ensuring that appropriate independent audit mechanisms are in place so that the board can monitor the ongoing effectiveness of internal controls.

  • Ensuring that the appropriate actions are promptly taken and that violations are not committed when a branch or subsidiary in a country or region is unable to implement the AML/CTF requirements as stated in the Anti-Money Laundering Law, the Law on Combating Terrorism Crimes and Financing, and their Implementing Regulations due to the weakness of laws, regulations, or other domestic measures in that country or the inability to implement the appropriate measures.

  • f) Ensuring the receipt of regular comprehensive reports on ML/TF risks facing the financial group or financial institution, including but not limited to:

    • - Corrective action plans, if any, to process the results of independent audits (whether internal or external), observations of the AML/CTF compliance department and inspection reports from SAMA regarding the evaluation of the financial institution’s compliance with AML/CTF requirements.

    • - Developments and updates in the laws and regulations for combating money laundering and terrorism financing as well as their implications on the financial institution, if any.

    • - Details of high ML/TF risks and potential effects on the financial institution.

    • - Details on the implementation of financial sanction procedures related to the UN Security Council resolutions regarding those on terrorist lists, combating proliferation, or the decisions communicated by SAMA.

• The senior management is responsible for the continuous implementation and monitoring of compliance with the AML/CTF requirements in the financial institution. The main responsibilities of the senior management include, but are not limited to, the following:

  • a) Identifying, assessing, and understanding ML/TF risks arising from new products or services, distribution channels, or customers.

  • b) Establishing a program for AML/CTF that includes setting up and developing policies, procedures, and controls in line with the latest means, techniques and methods of ML/TF.

  • c) Adopting internal procedures and controls to mitigate ML/TF risks.

  • d) Reviewing policies and procedures periodically (at least once a year) by establishing an appropriate mechanism for periodic review of the main AML/CTF policies and procedures to ensure that they are continuously effective and consistent with the changes in products and services of the financial institution and to address new and emerging risks from ML/TF activities.

  • e) Taking actions with regard to all important recommendations issued by the AML/CTF compliance department, the independent auditor, and supervisory authorities concerning the level of compliance with AML/CTF requirements.

  • f) Providing the board of directors with sufficient relevant information in a timely manner about matters relating to AML/CTF.

  • g) Providing appropriate specialized training for employees in the AML/CTF compliance department and those working in the same field on an annual basis to ensure effective performance of their duties and functions.

  • h) Creating a continuous training program for employees of the financial institution to enable them to obtain sufficient knowledge and understanding and fulfill their responsibilities related to AML/CTF.

  • i) Supporting the functions of AML/CTF compliance and independent audit appropriately in terms of staff, technical systems, information, and budget in order to effectively implement, manage and monitor the AML/CTF program requirements.

  • j) Following up on the implementation of the instructions and circulars issued by SAMA regarding AML/CTF.

• Employees of the financial institution are responsible for the implementation of policies, procedures, and controls of AML/CTF, including:

  • a) Following and implementing policies and procedures of AML/CTF and being aware of the need to comply with the laws, regulations, and guidelines applicable in this field.

  • b) Ensuring that no actions are taken on behalf of a customer when such actions are required to be taken by that customer in accordance with the internal instructions.

  • c) Performing daily tasks in accordance with the internal work procedures of the financial institution and in a manner consistent with the relevant laws and instructions.

  • d) Reporting immediately to the AML/CTF compliance officer when there are reasonable grounds for suspicion of a ML/TF transaction.

  • e) Refraining from disclosing or implying any information about suspicious transactions linked to a certain customer or that certain transactions are under investigation internally or externally.

  • f) Taking the appropriate measures to ensure that no clues are given when requesting information from a customer.

  • g) Providing full assistance in investigations related to ML/TF.