(1) Specific Actions Related to 11 September 2001 Incident:
The Kingdom of Saudi Arabia has been at the forefront of international efforts in fighting terrorism and for combating money-laundering activities. Consequently, following the release of the names of the individuals and entities related to the suspected terrorist activities of 11 September 2001, the Saudi Arabian Monetary Agency (SAMA) took prompt action and required Saudi banks to identify and freeze all assets relating to these individuals and entities. Saudi banks have not only complied with the freeze requirements but have also commenced investigations of transactions, which the identified individuals and the entities may have undertaken during past several years.
Furthermore, on instructions from SAMA, Saudi banks have promptly established a Self-Supervisory Committee to closely monitor and fight against the threat posed by terrorism and to coordinate all efforts to freeze the assets of the identified individuals and entities. The Committee is composed of senior officers from banks responsible for Risk Control, Audit, Money-Laundering Units, Legal and Operations, and operates in the presence of SAMA officials. Several meetings have already taken place.
Saudi banks have undertaken, at the level of their Chief Executive Officers, as well as at the level of the Self-Supervisory Committee to respond to all relevant inquiries, both domestically and internationally. To ensure proper coordination and effective response, all Saudi banks route their responses and relevant information via SAMA.
(2) Other Initiatives Related to Fighting Terrorism:
Also in the past, Saudi Arabia has publicly supported and extended cooperation to various international efforts to combat terrorism. These include:
Saudi Arabia has signed a multilateral agreement under the auspices of the Arab League to fight terrorism.
The Kingdom has also signed various bilateral agreements with non-Arab countries.
The Kingdom has supported the requirements of various UN resolutions related to combating terrorism. It has also supported and implemented the most recent Resolution No. 1368 dated 12 September 2001 related to the financing of terrorist activities.
(3) Combating Money-Laundering Activities: Legal Framework:
The Kingdom has a strong regulatory and supervisory framework for banking and financial services, which ensures that banks and other financial service providers remain vigilant, but also have internal procedures to not only know the identity of their customers but also an awareness of their activities and transactions.
In this regard, during the past decade the Kingdom has taken several steps to strengthen its legislative framework. On 10 February 1990, the Kingdom ratified the 1988 United Nations Convention against illicit Traffic in Narcotics and Psychotropic Substances (Vienna Convention). Subsequently, on 30 November 1998, the Council of Ministers issued its decision #168, which approved and pronounced Executive Rules that include procedures and measures for implementing all of the provisions of the 1988 UN Convention.
Furthermore, on 3 May 1999, the Saudi Cabinet issued its decision #15 to fully endorse the implementation of the 40 recommendations related to the Prevention of Money Laundering issued by the Financial Action Task Force (FATF). It is worth noting that Money-Laundering is deemed to be a criminal offense punishable under Saudi Criminal Laws. Also, the government has established a permanent committee of representatives of seven ministries and government agencies to deal with all legal and other issues related to money laundering activities.
(4) Technical and Procedural Measures:
In 1995, the Saudi Arabian Monetary Agency issued “Guidelines for Prevention and Control Money Laundering Activities” to Saudi Banks. These Guidelines responded to the 40 recommendations of the FATF, and specifically require Saudi banks to implement “Know Your Customer Rules”, maintain records of suspicious transactions, report any suspected activities to law enforcement agencies, and inform SAMA. The guidelines are comprehensive and conform with the Basel Committee proposals that reflect the best practices of international banks and banking supervisors.
To further strengthen and implement the earlier Cabinet decision #15, on 5 August 2001, the Ministry of Commerce issued Regulation #1312 aimed at preventing and combating money-laundering in the non-financial sector. These regulations are aimed at manufacturing and trading sectors and also cover professional services encompassing accounting, legal and consultancy services.
(5) Institutional Framework:
Saudi Government has also taken concrete steps to create an institutional framework for combating money-laundering activities. This includes the establishment of an Anti-Money Laundering unit in SAMA, with trained and dedicated specialist staff. All Saudi banks are also required to have an Anti Money-Laundering unit with specialist staff to work with SAMA and the law enforcement agencies. SAMA has also encouraged the banks to bring Money-Laundering related experiences to the notice of various bank committees (Chief Operations Officers, Managing Directors, Fraud Committee, etc.) for exchange of information and joint actions.
Another major institutional initiative is the creation of a specialized Financial Intelligence Unit (FIU) in the Security and Drug Control Department of the Ministry of Interior. This Unit is specially tasked with handling money-laundering cases and to coordinate its activities with SAMA’s Anti Money-Laundering Unit.
(6) Administrative Measures and Initiatives:
There are also a number of administrative rules in place that contribute greatly in preventing money laundering. For example, one of the most important rules is that Saudi banks are not permitted to open bank accounts for non-resident individuals or corporates without specific approval of SAMA. Such approval is only granted in a few justified cases. Banks are required to apply strict “know your customer” rules and any non-customer business needs to be fully documented.
All banks are required to report any money laundering or suspicious activity to the law enforcement agencies and to inform SAMA. The Agency has collected information on money laundering cases for over a decade and created a useful database. Saudi banks and SAMA are currently in the process of computerizing the reporting of cases by the banks to SAMA and for collecting data and statistics.
(7) Compliance and Enforcement Activities:
There is close coordination of compliance and enforcement activities between banks, SAMA and the law enforcement agencies. Money laundering and other suspicious activities are targeted and anyone violating laws and regulations is subject to severe financial penalties and imprisonment. Money laundering is dealt with as a high-profile crime and all cases are referred to a senior court.
SAMA examination staff carry out regular inspection of banks to ensure compliance with laws and regulations. Any violation or non-compliance is a cause of serious actions that is referred to a bank’s senior management and the Board. Furthermore, SAMA has created a permanent Committee of Banks’ compliance officers to review SAMA regulations and Guidelines and recommend improvements, and to ensure all implementation issues are resolved.
Saudi authorities and SAMA have made significant efforts to impart relevant training to staff in SAMA, the Security and Investigation employees in the Ministry of Interior and others involved in compliance and law enforcement activities. Special training programs have been developed and delivered to bankers, prosecutors, judges, customs officers and other officials from government departments and agencies. Furthermore, training programs are offered by the Prince Naif Security Academy, King Fahd Security Faculty and Public Security Training City etc. Many sessions in these training programs are given by experts from SAMA with relevant knowledge and experience.
In addition, SAMA, banks and the Chambers of Commerce in Saudi Arabia have been cooperating in organizing seminars and conferences on the prevention of Money Laundering. Such activities have been held in cooperation with other international agencies. Examples include: in collaboration with FATF, SAMA held a conference in 1994 and in 1996, SAMA hosted a conference on Money Laundering for bankers and staff from other GCC supervisors. Another conference on money laundering that was planned for October 2001 has been temporarily postponed.
(9) International Cooperation:
Personnel from SAMA, other Saudi government departments and banks are encouraged to participate in international seminars, conferences and symposia on Prevention of Money Laundering and more recently for combating Terrorist Financing activities. As a member country of the Gulf Cooperation Council, Saudi Arabia is also a member of the Financial Action Task Force. In this regard relevant staff from SAMA and government departments have for many years worked closely with the FATF and have had regular meetings.
SAMA exchanges information on money laundering related activities with other banking supervisory authorities and with law enforcement agencies. SAMA has also created a Committee to carry out a self-assessment for compliance with the 40 recommendations of the FATF. It is anticipated that a formal independent assessment by FATF will be carried out in the near future.
Saudi Arabian Government authorities, SAMA and Saudi Banks have been and continue to be committed, vigilant and proactive in their