Saudi Arabia's updated AML rules offer greater clarity for firms on compliance obligations

Marie Chowdhry, financial regulation expert at Pinsent Masons, said: “They represent a significant evolution of the Kingdom's financial crime compliance framework and demonstrate its continued alignment with international standards and Financial Action Task Force expectations. The changes are likely to be of particular interest to banks, payment service providers, fintechs, insurers and investment firms operating in the Kingdom.”

Saudi Arabia recently issued Administrative Decision No. 266507/1447, updating the Implementing Regulation of the Anti-Money Laundering Law.

The updates include formal recognition of e-wallets within the AML framework. The regulations introduce specific references to opening and maintaining e-wallet relationships and expand the list of financial activities to include electronic money issuance and management. This provides additional regulatory clarity for payment institutions and other digital finance businesses operating in Saudi Arabia, according to Chowdhry.

Chowdhry said: “Perhaps the most significant feature of the new regulations is the level of operational detail they provide. Rather than introducing a completely new AML framework, the regulations give firms clearer direction on how Saudi authorities expect institutions to assess risk, identify beneficial owners, manage group-wide compliance programmes and share information across jurisdictions.”

For banks and other regulated financial institutions, the changes are likely to have particular significance in relation to customer due diligence, beneficial ownership verification, correspondent banking relationships and cross-border payment controls.

Seya Rahnema, finance expert at Pinsent Masons, said: “Financial institutions should review onboarding procedures, sanctions and transaction screening systems, wire transfer controls and group-wide information sharing arrangements to ensure they remain aligned with the increasingly detailed supervisory expectations reflected in the updated regulations. International banking groups may also need to revisit governance arrangements for branches and subsidiaries operating across multiple jurisdictions.”

 “For financial institutions, the practical impact of the updated regulations is likely to be felt most acutely in customer onboarding and transaction monitoring. Banks will need to ensure that beneficial ownership identification processes are sufficiently robust to deal with increasing expectations, ownership structures, while also reviewing payment and remittance controls to ensure that customer information, screening and monitoring processes meet heightened AML expectations”, he said.

The regulations also strengthen the role of the General Directorate of Financial Intelligence (FIU). In certain circumstances, the authority may direct that a suspicious transaction be suspended for up to seven working days while further analysis is undertaken. Financial institutions could therefore face more active engagement by the Saudi FIU following the submission of suspicious transaction reports, according to Rahnema.

The regulations also place greater emphasis on risk-based compliance programmes. Article 5 requires firms to identify, assess and document money laundering risks and to implement enhanced measures where higher risks are identified. In addition, Article 14 requires groups to implement group-wide AML policies, controls and information-sharing arrangements across branches and majority-owned subsidiaries.

Other developments include expanded requirements relating to politically exposed persons, correspondent banking relationships, wire transfers, suspicious transaction reporting and international information sharing. The changes are particularly relevant to financial service firms, multinational groups with Saudi operations and professional service providers subject to AML obligations.

Chowdhry said: “The regulations provide considerably more detail on how Saudi authorities expect AML controls to operate in practice. Firms should not assume that existing frameworks remain sufficient. Priority areas for review include beneficial ownership identification, onboarding and screening processes, wire transfer controls, suspicious transaction reporting procedures and the effectiveness of group-wide AML governance. Businesses that take a proactive approach now will be better placed to demonstrate compliance as supervisory expectations continue to evolve.”