Article 9 of the Saudi Anti-Money Laundering Law
المادة 9 من نظام مكافحة غسل الأموال · الفصل الثالث: التدابير الوقائية
The article requires financial institutions to take appropriate measures before entering into correspondent relationships with institutions outside the Kingdom, and bars dealings with a shell bank or anyone who lets it use their accounts.
Official text (Arabic)
This article has not been amended since the law was issued.
1- على المؤسسات المالية قبل دخولها في علاقة مراسلة مع مؤسسات مالية خارج المملكة؛ التقيّد بالتدابير المناسبة للحد من المخاطر المحتمل وقوعها من هذه العلاقة وفقاً لما تحدده اللائحة، وأن تتأكّد من أن هذه المؤسسات لا تسمح بأن يستخدم حساباتها بنك صوري.
2- على المؤسسات المالية الامتناع عن الدخول -أو الاستمرار- في علاقات مراسلة مع بنك صوري، أو مع مؤسسة مالية خارج المملكة تسمح بأن يستخدم حساباتها بنك صوري.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 9 explained in plain English
This article regulates correspondent relationships between financial institutions in the Kingdom and financial institutions outside it, which are relationships in which one institution provides financial services to another institution in a different country.
Paragraph 1 requires a financial institution, before entering into a correspondent relationship with an institution outside the Kingdom, to do two things:
- Comply with the appropriate measures to limit the potential risks of this relationship, as specified by the Implementing Regulations.
- Make sure the foreign institution does not allow a shell bank to use its accounts.
Paragraph 2 sets an express prohibition; financial institutions must refrain from entering into or continuing correspondent relationships with:
- A shell bank.
- A financial institution outside the Kingdom that allows a shell bank to use its accounts.
Under the definition in Article 1, a shell bank is a bank registered or licensed in a country in which it has no physical presence, and which is not affiliated with a regulated and supervised financial group. The danger is that it is hard to verify its business and who is behind it.
The prohibition covers continuing as well as entering; if it later becomes clear that a foreign institution with which a relationship exists allows a shell bank to use its accounts, the institution must refrain from continuing the relationship. Institutions can consult a lawyer who specializes in banking and finance when assessing their foreign relationships.
Practical example
A Saudi bank received a request from a financial institution abroad to open a correspondent relationship, and the review showed that this institution makes its accounts available to a bank licensed in a country where it has no office or physical presence and which does not belong to a supervised group. Here the Saudi bank must refrain from entering into this relationship.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 9 of the Saudi Anti-Money Laundering Law
What is a shell bank?
A bank registered or licensed in a country in which it has no physical presence, and which is not affiliated with a regulated and supervised financial group.
May a Saudi bank deal with a shell bank?
No. Financial institutions must refrain from entering into or continuing correspondent relationships with a shell bank or with a foreign institution that allows it to use its accounts.
What measures are required before a correspondent relationship?
The appropriate measures to limit risks as specified by the Implementing Regulations, together with making sure the foreign institution does not allow a shell bank to use its accounts.
More articles on Correspondent Relationships and Wire Transfers
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.