The Saudi Arabian Anti-Money Laundering Act of 2003 created the Saudi Financial Investigation Unit (FIU), which coordinates efforts of government ministries and other public bodies to combat money laundering. Private institutions are required to implement anti-money laundering measures and to report suspicious transactions to the FIU, which compiles information for enforcement bodies.
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The 2003 Saudi Arabian Anti-Money Laundering Act, Royal Decree Number M/39, sought to tackle the evolution and spread of organized crime and its impact on security and the economy.
Under Article 1, money laundering consists of committing or attempting to commit any act for the purpose of concealing or falsifying the true origin of funds acquired by means contrary to Shari’ah or law, thus making them appear as if they came from a legitimate source.
The legal system of Saudi Arabia is based on Shari'ah which prohibits fraud (jahala) and theft (sariqah). Successful prosecutions of money laundering and terrorist financing have been brought in the Shari'ah courts. Enforcement involves a muhtasib (inspector) in the hisbah, the Sharia’ah institution designed to achieve business accountability. Hisbah is a civic institution which began under Caliph Umar (circa the year 717), intended to supervise the course of economic and commercial affairs as well as the legality of contracts. Its foundation is the principle of “enjoining the good and forbidding the evil - amr bil ma’ruf wannahi’anil munkar” and a verse from the 6th chapter of the Qur’an "give measure and weight with justice" (Sura Al-An-'am 6, ayah 152).
Article 2 of the Act prohibits:
(a) conducting transactions knowing that they involve the proceeds of crime;
(b) transferring such funds;
(c) concealing or falsifying the nature of funds or their source;
(d) the financing of terrorism; and
(e) participation in any of the above.
Under Article 7, institutions are required to report to the Saudi Arabian Financial Intelligence Unit (FIU) all complex, large or unusual deals, suspicion of money laundering, or the funding of terrorism.
The FIU was established under Article 11 of the Act to receive, analyze and distribute reports from institutions to the competent authorities. It coordinates measures with specified supervisory bodies charged with the task of combating money laundering (Article 1(9)) including the Interior, Foreign Affairs, Justice, and Finance Ministries, the Department of Customs, as well as the Saudi Arabian Monetary Agency (the Central Bank of Saudi Arabia: SAMA); the Commission for Investigation and Prosecution, and the Capital Market Authority.
Under the Act, anti-money laundering units were established in SAMA and in local Saudi banks.
The FIU Guidance Manual 2009 (1430 H.) for institutions is available online from the Interior Ministry Website. Institutions are required to establish precautionary measures, internal monitoring (Article 6) and programs for combating money laundering (Article 10). The identity of clients must be verified (Article 4). Responsibility extends to company officers (Article 3). To prove compliance, and trace offenders, institutions are required to keep all records for ten years (Article 5).
The Financial Action Task Force, (FATF), the inter-governmental body to combat money laundering, produced a report in February 2004 that concluded that the systems and legislation in place in Saudi Arabia met the general obligations of the FATF 40 + 8 Recommendations.
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Ira Piltz, Greenpoint Technologies