The Kingdom of Saudi Arabia (KSA) is at a transformative juncture as it balances the demands of opening its economy with the need for robust anti-money laundering (AML) and counter-terrorist financing (CTF) frameworks. KSA has adopted a flexible regulatory approach to attract global technology giants, while also keeping in step with exponential growth in digital payments. Saudi Arabia’s ambitions align with Vision 2030, the country’s strategic plan to diversify its economy, making it an international business hub. By 2024, this vision translated into a dramatic 70% of all payments occurring electronically—an indicator of Saudi Arabia’s rapid economic modernisation – but as payments evolve, so too should AML strategies.
Saudi Arabia’s Financial Action Task Force (FATF) compliance status reflects the country’s commitment to international AML standards. The FATF’s recommendations offer a global benchmark for AML and CTF compliance, and as of now, Saudi Arabia is fully compliant with 17 of FATF's 40 recommendations and largely compliant with 21 others, with only two areas deemed partially compliant. The country’s adoption of a risk-based approach, increased penalties, and accountability systems demonstrates a rigorous approach to fighting financial crime.
The regulatory framework in the KSA emphasises dual accountability, with oversight from the Saudi Arabian Monetary Authority (SAMA) and the Saudi Arabian Financial Investigation Unit, as well as from the international FATF. By evaluating financial crime risks in a targeted way, the KSA meets a key FATF recommendation, ensuring resources are directed where they are most effective.
Evolving, distinct money laundering typologies in the region
Saudi Arabia’s unique economy and regulatory landscape create distinct AML challenges, many of which are intensified by the rapid pace of growth and diversification.
- High-value real estate transactions, for example, present an attractive opportunity for money launderers who aim to launder large sums through property investments. Although electronic payments are on the rise, cash remains prevalent in the economy, particularly within informal sectors, which complicates efforts to trace illicit funds.
- The traditional Hawala system, a widely used informal money transfer network in the Middle East, adds another layer of complexity by offering unregulated channels for cross-border transfers.
- Furthermore, the KSA’s active trade landscape presents opportunities for trade-based money laundering, where financial crimes can be disguised through fraudulent invoicing or price manipulation.
Adoption of emerging technologies for AML in Saudi Arabia
Vision 2030’s efforts to diversify Saudi Arabia’s economy introduce new industries, each with unique AML considerations that require proactive regulatory oversight. Technological advancements, such as the growing use of artificial intelligence in financial services, digital payments and cryptocurrency, demand sophisticated AML strategies to combat evolving financial crime methods.
In September 2023, the Saudi Data and Artificial Intelligence Authority of Saudi Arabia (SDAIA) issued draft AI principles that reinforce the importance of transparency and explainability to any application of AI, and that AI innovations should bring benefit to citizens. As the KSA’s economic activity grows with technology, so does the risk of financial crime, necessitating enhanced AML safeguards to address the increased volume of financial transactions.
The path forward in AML
The Napier AI / AML Index 2024 – 25 found that Saudi Arabia loses 5.74% of its Gross Domestic Product (GDP) to financial crime, even after spending $1.10 billion as the cost of compliance. For compliance professionals, the challenge lies in maintaining tight controls over faster, frequent electronic transactions without compromising the customer experience. AI can help streamline the monitoring of large transaction volumes, identifying suspicious activity more accurately and efficiently than traditional methods, to prevent financial crime before it occurs. The index found that AI could potentially save around $0.57 billion, about half of what the country spends on compliance now, if financial institutions switch to AI powered financial crime compliance solutions.
Saudi Arabia’s AML framework is expected to strengthen in tandem with its economic ambitions. With the ambitious Vision 2030 driving economic transformation and diversification, the KSA is uniquely positioned to strengthen its regulatory compliance landscape further. The FATF has noted substantial progress in Saudi Arabia’s anti-financial crime efforts, and the Kingdom’s removal from the grey list in 2020 marks a significant step forward. Looking ahead, Saudi Arabia is poised to leverage AI for AML, fostering international cooperation and establishing robust intelligence-sharing mechanisms to emerge as a leader setting a high standard for the region in combating financial crime.
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