4-1-2) External Correspondent Banks

The relationships between Money exchange centers and correspondent banks, established for the purpose of providing services from one bank or money exchange center (the sender) to another (the recipient) through correspondent accounts, are regulated. Through these accounts, financial institutions can perform transactions for themselves and their clients in countries where they do not have a physical presence. Correspondent services include cash management, international wire transfers, cheque collection, and services related to foreign currencies, often involving large amounts of money and numerous transactions.

Money exchange centers seeking to establish banking correspondent relationships must take organized measures to prevent the misuse of correspondent accounts, including the following:

1. Deal only with licensed money exchange centers and banks under the supervision of a central bank or a similar regulatory authority.
2. Rely on reliable information sources to verify the legitimacy of the correspondent bank or money exchange center and gather sufficient information about the banks or money exchange centers with which financial transactions are desired, including details about the management and nature of their operations, and document this information.
3. Limit financial transactions in correspondent accounts to currency exchange activities (buying and selling currencies and transfers) as per the licensed activity, and prohibit engaging in any other commercial or personal activities in the name of the money exchange center.
4. Open correspondent bank accounts only after obtaining approval from senior management (CEO/General Manager).
5. Operate correspondent bank accounts directly by the account holder without involving third parties. Transactions should be limited to financial dealings related to correspondent activities, and the accounts should not be used for other purposes.
6. Ensure that the correspondent bank or money exchange center is not listed on any local or international sanctions or blacklist, including those issued by the United Nations.
7. Obtain a confirmation certificate of compliance with the Rules Governing Anti-Money Laundering & Combating Terrorist Financing for all correspondent bank and money exchange center relationships, including the following information:

8. Money exchange centers must implement adequate ongoing due diligence procedures concerning correspondent banking relationships and document the anti-money laundering and counter-terrorism financing responsibilities of both the correspondent and the recipient, including existing correspondent relationships.
9. Prepare separate agreements for using local bank accounts for currency transactions (buying and selling currencies, and financial transfers), and record these financial transactions in dedicated records with detailed information to be submitted to SAMA (Banking Supervision Department).
10. When reviewing a relationship with a correspondent and considering terminating it, alternative correspondent banks should be sought to avoid disrupting transfer services to the concerned country, unless continuing the relationship poses high risks.
11. Monitor relationships with correspondent banks to ensure their legitimacy and verify whether their activities and anti-money laundering and counter-terrorism financing controls align with those confirmed at the beginning of the relationship. Money exchange centers must continuously obtain anti-money laundering and counter-terrorism financing compliance certificates as per the the Rules Governing Anti-Money Laundering & Combating Terrorist Financing.
12. Ensure that information exchanged with correspondent banks is subject to banking confidentiality and is not used for unauthorized purposes.

4-2-2) Money Transfer Service Providers

SAMA instructions regarding financial transfer services require licensed money exchange centers to offer money transfer services to their clients efficiently and easily. They are encouraged to implement marketing programs to attract customers, introduce more competitive new money transfer channels, and some money exchange centers have contracted with money transfer service providers. Given the importance of adhering to contracting regulations with these companies, the following should be included:

1. The company to be contracted with must be internationally recognized and licensed by the regulatory authorities of its home country.
2. The money exchange center must request prior approval from SAMA to contract with money transfer service providers, submitting a request file that includes a draft of the final contract to be signed with the company, a company profile, and a certificate of compliance with anti-money laundering and counter-terrorism financing regulations.
3. The operations of the contracted money transfer service providers must be supervised and monitored by the money exchange center through which these companies operate.
4. Money transfer must be the core activity of the company.
5. The company must have adequate policies and procedures for combating money laundering, counter-terrorism financing, fraud, and financial embezzlement.
6. The contract with the money transfer service provider must include the following:

4-2-3) Relationship of the Money Exchange Center with Banks and Other Local Money Exchange Centers

Money exchange centers must record all financial transactions in accounting records with banks and other licensed money exchange centers within the Kingdom, retain receipts for these transactions, and establish banking relationship contracts for currency purchase and sale, as well as for financial transfers to local bank client accounts. Additionally, when money exchange centers licensed for transfer activities act as intermediaries between clients and banks, they must provide all accompanying information related to the transfer to the bank.

money exchange centers must open specific accounts for conducting banking operations in local banks according to the following procedures:

1. Use current accounts in local banks designated for the purposes for which they were opened.
2. A money exchange center is permitted to open one main account dedicated to its banking operations, with sub-accounts (one for expenses, another for financial transactions related to currency exchange, and a third sub-account for transfers to licensed  money exchange agents in any local banks).
3. Opening business accounts for the money exchange center in local banks is allowed from the general administration of the money exchange center and requires direct approval from the owner or general manager of the money exchange center.
4. Adhere to the account opening agreement with local banks and avoid breaching it.
5. Restrict the use of bank accounts to the purposes designated for the money exchange center's operations according to its license.
6. Money transfers within and outside the Kingdom for the money exchange center’s operations should be done only after verifying all data in the required forms. These accounts cannot be used for purposes other than the designated banking operations of the money exchange center.
7. Money transfers from business accounts are restricted to the owner of the money exchange center or executive managers directly or through Saudi representatives working at the money exchange center.
8. These accounts must be subject to dual and ongoing oversight by the owner(s) of the money exchange center and the general manager or compliance officer.
9. Restrict cheque issuance to the expense account and currency exchange account to the first beneficiary.
10. Transfers to local bank clients from the money exchange center's transfer accounts are allowed (for those licensed by SAMA for transfers), provided the source of funds and purpose of the transfer are clarified. In the case of processing an incoming transfer, full details of the transfer must be provided.
11. Acceptance of cash deposits, cash withdrawals, and cheque withdrawals is not allowed. Issuance of cheque books, ATM cards, or credit cards for transfer accounts is not allowed, and any previously issued cheques or cards must be canceled. Opening remittance membership accounts is entirely prohibited for such accounts.
12. Use the expense account solely for paying government bills or services for the money exchange center and its branches.
13. Cash deposits, remittances, and cheques issued and received for the expense account are permitted, provided they are used for the purposes of the money exchange center and in its name, and match the nature of the activity.