AML/CFT compliance in Saudi Arabia

In Saudi Arabia, reporting entities, including financial institutions and designated non-financial businesses and professions (DNFBPs), have several key obligations under the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) laws. These obligations are designed to ensure compliance with legal requirements and to prevent money laundering and terrorism financing activities. Here are the primary obligations:

• Customer Due Diligence (CDD): Reporting entities are required to establish and verify the identity of their customers before establishing a business relationship. This process, known as Know Your Customer (KYC), includes obtaining relevant identification documents and verifying their authenticity. Additionally, entities must continuously monitor customer transactions and relationships to identify any suspicious activities or changes in customer behavior.
• Suspicious Transaction Reporting (STR): Reporting entities must report any suspicious transactions or activities to the Saudi Financial Intelligence Unit (FIU). This includes transactions that appear unusual or inconsistent with the customer’s known activities. Reports must be submitted promptly, typically within a specified timeframe after identifying suspicious activity.
• Record Keeping: Reporting entities are required to maintain comprehensive records of customer identification, transactions, and STRs for a minimum period, usually five years, after the termination of the business relationship. These records must be easily accessible for review by regulatory authorities.
• Risk Assessment: Entities must assess the risks of money laundering and terrorism financing associated with their operations, customers, and geographic locations. Based on the risk assessment, reporting entities are required to implement appropriate measures to mitigate identified risks, including enhanced due diligence for high-risk customers.
• Training and Awareness: Reporting entities must provide regular training to their employees on AML/CFT policies, procedures, and the identification of suspicious activities. Organizations are also expected to promote awareness of AML/CFT obligations among employees to foster a culture of compliance.
• Compliance Program: Reporting entities must develop and implement an effective AML/CFT compliance program that includes internal controls, policies, and procedures to detect and prevent money laundering and terrorism financing. A designated compliance officer should be appointed to oversee the implementation of the AML/CFT program and ensure adherence to legal obligations.
• Collaboration with Authorities: Reporting entities are required to cooperate with relevant authorities in investigations related to money laundering and terrorism financing. They must be prepared to provide information and documentation requested by regulatory authorities during audits or investigations.
• Monitoring Transactions: Reporting entities should implement systems and controls to monitor transactions for suspicious patterns or behaviors that may indicate money laundering or terrorism financing. Utilizing automated systems can help identify unusual transactions and flag them for further review.

These obligations are critical for creating a robust framework to combat money laundering and terrorism financing in Saudi Arabia. By adhering to these requirements, reporting entities play a vital role in maintaining the integrity of the financial system and ensuring compliance with national and international standards.