Saudi Arabia
Last updated: 17/02/2009
CENTRAL AUTHORITY FOR REPORTING
The Saudi Arabian Financial Intelligence Unit (FIU) was established under Article 11 of the Anti-Money Laundering Law, as enacted by Royal Decree No. M/39 dated 25/6/14124 H/24/8/2003 (Anti-Money Laundering Law). The FIU is responsible for receiving and analysing reports and the preparation of reports on all suspicious transactions and operations from all Financial and Non-Financial Institutions, such as lawyers.
The Saudi Arabian FIU is a member of Money Laundering and Terrorist Financing to countries in the Middle East and North Africa Region (MENAFATF).
FURTHER ANTI-MONEY LAUNDERING REGULATOR(S) AND SUPERVISORY BODIES
Article 1(9) of the Anti-Money Laundering Law suggests that in addition to the Saudi Arabian FIU, specified Government authorities are charged with the task of combating money laundering within its own specific jurisdiction.
The most prominent example of this can be seen via the Minister of Commerce and Industry. On 21 March 2004, the Minister established an independent administrative unit and the Ministry for Anti-Money Laundering. The unit must report to the head office of Anti-Commercial Fraud under the Secretariat of the Ministry Branch of Domestic Trading.
According to Saudi Arabian Monetary Agency (the central Bank of Saudi Arabia) the following are supervisory bodies:
Saudi Arabian Monetary Agency (SAMA)
Ministry of Interior
Ministry of Foreign Affairs
Ministry of Justice
Ministry of Commerce and Industrial
Ministry of Finance
Department of Customs
Commission for Investigation and Prosecution
Capital Market Authority
The Saudi Arabian Monetary Agency.
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
Yes, according to Article 1 (5) of the Anti-Money Laundering Law, the law applies to Financial and Non- Financial Institutions, which are defined as: “any establishment in the kingdom engaged in any one or more financial, commercial or economic activity such as banks, money- exchangers, investment companies, insurance companies, commercial companies, establishments, professional firms or any other similar activities set forth in the Implementation Rules.” It is clear from the definition that lawyers apply under the term “professional firms”.
NAME THE LAWS REGARDING ANTI-MONEY LAUNDERING PROCEDURES
*These rules are implementing regulations of the Anti-Money Laundering law and not separated legislation.
IN ADDITION TO THESE LAWS, IS THERE ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS CURRENTLY IN PLACE?
The Saudi Ministry of Justice in November 2008 issued circular NO 13/C/3493, which outlines the duties bequeathed to lawyers and arbitrators, in relation to reporting suspicion of anti-money laundering activity.
UNDER WHAT CIRCUMSTANCES IS A LAWYER UNDER THE OBLIGATION TO REPORT?
Article 7 of the Anti-Money Laundering Law
Article 7 of the Law provides that upon gathering sufficient indications and evidence regarding unusually large, complex, or suspicious transactions or operations related to money laundering, terrorist acts, or terrorist organisations, Financial and Non-Financial Institutions must take the following measures:
- Inform the Financial Intelligence Unit immediately as provided for in Article 11 of the Law; and
- Prepare and submit to the Financial Intelligence Unit a detailed report including all available data and information on the parties involved therein.
Article 8 of the Implementing regulations of Anti-Money Laundering Law
Under Article 8, an exception to the Legal Professional Privilege rules exists whereby Financial and Non-Financial Institutions, including lawyers, must provide the FIU, judiciary or concerned authority with all documents, records and information in accordance with the applicable transaction when requested.
Under Article 8 (3): Financial and non-financial institutions may not use the principle of confidentiality of accounts, identity of clients or information recorded pursuant to any other law as a pretext for withholding information. Arguably, in light of this provision the conventional concept of legal professional privilege is denied
Article 9 of the Anti-Money Laundering Law
Furthermore, a Financial or Non-Financial Institution, including lawyers, must not “tip off” (alert or permit to be alerted) a client, or other related third parties that they have reported the suspicious transaction involving them to the relevant authorities and an investigation may be subsequently conducted.
LAWYER RESPONSIBILITY/LIABILITY
Responsibility
Article 6 of the Anti-Money Laundering Law
In addition to the latter mentioned client identification and verification requirements, lawyers must, under Article 6 of the Anti-Money Laundering Law, have in place internal precautionary and supervisory measures to detect and foil any of the offences stated herein, and comply with all instructions issued by the concerned supervisory authorities in this area.
Article 10 of the Anti-Money Laundering Law
Moreover, all Financial and Non-Financial Institutions, including lawyers, must develop programs to combat money- laundering, covering, as a minimum, the following:
- Developing and implementing policies, plans, procedures and internal controls, including the appointment of qualified employees at the level of senior management to implement same;
- Developing internal accounting and auditing systems to supervise the availability of basic requirements to combat money- laundering;
- Developing ongoing training programs for specialized employees to keep them informed about new technologies in combating money- laundering and to upgrade their activities to identify such operations, their patterns and the method of combating them.
Liability
Article 2 of the Anti-Money Laundering Law
A lawyer, like any other Saudi Arabian citizen may commit an offence under the Anti-Money Laundering Law if he/ she is found to be:
- Conducting any transaction involving property or proceeds with the knowledge that such property or proceeds came as a result of a criminal activity or from an illegal or illegitimate source;
- Carrying, earning, using, keeping, receiving or transferring any property or proceeds with the knowledge that such property or proceeds came as a result of a criminal activity or from an illegal or illegitimate source;
- Concealing or camouflaging the nature, movement, source, ownership or place and method of disposition with property or proceeds with the knowledge that such property or proceeds came as a result of a criminal activity or from an illegal or illegitimate source;
- Financing terrorism, terrorist acts and terrorist organizations;
- Participating by way of agreement, assistance, incitement, advice, counsel, facilitation, collaboration, covering or attempt in committing a crime listed hereunder.
The particularly relevant paragraphs of Article 2 to lawyers when dealing with client transactions are (b), (c), and (e).
Article 16 of the Anti-Money Laundering Law
Any individual found guilty of an offence under Article 2 of the Anti-Money Laundering Law is liable to imprisonment for up to ten years and/or a financial penalty of up to SR 5,000,000. All property, proceeds and instrumentalities (anything use or meant to be used in anyway in committing an offence under Article 2), being confiscated. This will be even the case when the illegitimate property, proceeds or instrumentalities are mixed up with legitimate property, proceeds and instrumentalities.
Article 17 of the Anti-Money Laundering Law
The perpetrator of a money laundering offence shall be subject either to a jail penalty up to less than fifteen years and a financial fine up to less than SR 7,000,000 if the offence takes place under the following circumstances:
- Involvement in a crime committed by an organized gang with which the perpetrator is affiliated;
- If violence or arms are used in the crime;
- If the perpetrator was a public servant and the crime is connected with such position, or if the perpetrator used his influence and powers in the crime;
- In case minors were lured or exploited;
- If the offence was committed through a reform, charitable or educational institution or through a social service facility;
- If the perpetrator was subject to previous local or foreign sanctions, specifically for similar offences.
Article 18 of the Anti-Money Laundering Law
Furthermore, any chairman or member of board of directors of Financial and Non- Financial Institution, including lawyers, their owners, managers, employees, authorised representatives or anyone acting in such capacity shall be subject either to a jail penalty up to two years or a fine up to SR 500,000 if she/he violates any of the obligations stated in Articles 4, 5, 6, 7, 8, 9 and 10 hereof. The penalties apply to anyone who practices the activity without a license.
Article 19 of the Anti-Money Laundering Law
Also, any Financial or Non-Financial Institution found to have violated Articles 2 or 3 of the Anti-Money Laundering Law may be subjected to a financial penalty ranging from SR 100,000 up to the value of the transaction involved.
Article 21 of the Anti-Money Laundering Law
As a reprieve, the above mentioned liability will not apply to those who have acted in good faith.
CLIENTS IDENTIFICATION AND VERIFICATION
Article 4 of the Anti-Money Laundering Law
Article 4 of the Anti-Money Laundering Law provides that Financial and Non- Financial Institutions, including lawyers, must verify the identity of the client, on the basis of official documents, at the start of dealing with such client or upon concluding commercial transactions therewith in person or in proxy. They must further verify the official documents of juristic person that indicate the name of the entity, its address, name of its owners, managing directors and other data stated in the Implementation Rules.
Article 5 of the Anti-Money Laundering Law
Under Article 5 of the Anti-Money Laundering Law, Financial and Non-Financial Institutions, including lawyers, must retain and maintain all data collated whilst conducting, concluding or closing a client account, all records and documents that explain the financial, commercial and monetary transactions, whether national or international, the files of commercial accounts and correspondence and copies of client identification.
LAWYERS PROSECUTED FOR MONEY LAUNDERING OFFENCES
No information available.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) OR RELEVANT SUB REGIONAL ORGANISATION CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
The FATF produced a report in February 2004 which concluded that the systems and legislation in place in Saudi Arabia met the general obligations of the FATF 40 + 8 Recommendations.
Information supplied by:
Al-Shareef Law Firm
P.O. BOX 3091 Postcode 31952
Al Muhamadya tower, King Abdulla Road
Alkhobar, Saudi Arabia
Tel: +966 (3) 899 55 11
Fax: +966(3) 899 55 22
ms@mslf.com.sa
Dr. Saleh Al-Tayar & Associates
Saudi Business Center
Office NR. 713 - Medina Road
P.O. BOX:9396
Jeddah 21 413 - KSA
Tel : (966)(2) 6530086 / 6530332
Fax: (966)(2) 6531418
advisor@altayar-consultants.com