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Chapter IV: Definitions

No: 18318/486 Date(g): 17/11/2019 | Date(h): 20/3/1441

Effective from 2019-11-17 - Nov 16 2019
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Anti-Money Laundering Law: The Anti-Money Laundering Law issued by Royal Decree No. (M/20) dated 05/02/1439H.
 
Law on Combating Terrorism Crimes and Financing: The Law on Terrorism Crimes and Financing issued by Royal Decree No. (M/21) dated 12/02/1439H.
 
Implementing Regulations of the Anti-Money Laundering Law: The Implementing Regulations issued by the Decision of the Presidency of State Security No. (14525) dated 19/02/1439H.
 
Implementing Regulations of the Law on Combating Terrorism Crimes and Financing: the Implementing Regulations of the Law on Combating Terrorism Crimes Financing issued under the Council of Ministers Resolution No. (228) dated 02/05/1440H. 
 
SAMA: The Saudi Central Bank*.
 
Saudi Arabia Financial Intelligence Unit (SAFIU): A national center that receives information and reports related to crimes of money laundering, terrorist financing, predicate offenses, or proceeds of crime according to the Anti-Money Laundering Law, the Law on Combating Terrorism Crimes and Financing, and their Implementing Regulations. The SAFIU analyzes and investigates such reports and information before submitting related results to the competent authorities, promptly or upon request. The SAFIU reports to the President of State Security and has sufficient operational independence, and the President of State Security determines the organizational structure of the SAFIU.
 
Financial Action Task Force (FATF): An inter-government organization (established in 1989 in Paris by the G7) whose tasks include setting standards and promoting effective implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing, and proliferation financing as well as other threats to the integrity of the international financial system.
 
Designated Non-Financial Businesses or Professions (DNFBPs):
 
This includes any of the following commercial or professional activities: 
 
a)Real estate brokerage when entering into business relationships for buying and selling real estate of all kinds.
 
b)Dealing in gold, precious stones or precious metals when engaging in cash transactions with a customer equal to or over SAR 50 thousand or more, whether the transaction is carried out in a single operation or in several operations, which appear to be linked, whether through sole proprietorships or commercial companies.
 
c)Lawyers and anyone who provides legal or accounting services in the exercise of their professional activities when they prepare, execute or conduct transactions in relation to any of the following activities:
 
 i.Purchase or sale of real estate.
 
 ii.Management of a customer’s funds, including bank accounts and other assets.
 
 iii.Establishment, operation, or management of legal persons or legal arrangements, or the organization of related subscriptions.
 
 iv.Sale or purchase of commercial companies.
 
Financial group: A local group consisting of a company or any other type of legal or natural persons that exercises control and coordinating functions over the rest of the group to implement group supervision, together with branches or subsidiaries that are subject to AML/CTF policies and procedures at the group level.
 
 a)Financial institution: An entity conducting, for or on behalf of a customer, one (or more) of the following financial activities or operations: Acceptance of deposits and other funds payable by the public, including private banking services1.
 
 b)Lending, financial leasing, or any other financing activities.
 
 c)Money or value transfer services.
 
 d)Issuance and management of payment instruments (such as credit cards, debit cards, prepaid cards, checks, traveler’s checks, payment orders, bank transfers, and digital currency).
 
 e)Issuance of letters of guarantee or other financial guarantees.
 
 f)Trading in the following:
 
 i.Checks, bills of exchange and other instruments.
 
 ii.Currencies.
 
 iii.Currency exchange, interest rate and financial index instruments.
 
 iv.Negotiable securities and derivatives.
 
 v.Commodity futures.
 
 g)Foreign exchange transactions.
 
 h)Participation in issuing securities and providing financial services.
 
 i)Safekeeping and managing of cash or securities on behalf of another person.
 
 j)Concluding protection and/or savings insurance contracts and other types of investment-related insurance as a provider, an agent or a broker of the insurance contract or any other insurance products stipulated in the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations.
 
 k)Investment, management or operation of funds on behalf of another person.
 
Shell bank: A bank or a financial institution that is incorporated or licensed in a country where it has no physical presence and that is unaffiliated with a financial group subject to regulation and supervision.
 
Senior management: It includes the managing director, the chief executive officer, the general manager, their designates, the chief financial officer, and directors of key departments in charge of functions of risk management, internal audit, compliance, AML/CFT in a financial institution as well as those equivalent and any other positions specified by SAMA.
 
Senior management position: It includes the managing director, the chief executive officer, the general manager, their deputies, the chief operating officer, the chief financial officer, or the chief actuarial officer.
 
Financial institution staff: Members of the board of directors and its committees, executives, employees ( permanent and contracted), advisors and staff of a third party.
 
Customer: Any person who conducts, or intends to conduct, any of the following activities with the financial institution:
 
 a)Arranging or undertaking a transaction, establishing a business relationship, or opening an account.
 
 b)Signing a transaction, business relationship or account.
 
 c)Assigning an account according to a transaction.
 
 d)Transferring an account, rights or obligations according to a transaction.
 
 e)Obtaining permission to conduct a transaction or to control a business relationship or an account.
 
Occasional customer: A person who does not have an existing business  relationship with the financial institution but wishes to conduct a transaction through it.
 
Business relationship: A relationship of a continuing or temporary nature that is established between a financial institution and its customers related to the activities and services provided to them.
 
Beneficiary: A natural or legal person that benefits from a business relationship with a financial institution.
 
Beneficial owner: A natural person who ultimately owns or exercises direct or indirect control over a customer or a natural person on whose behalf a transaction is conducted, including over a financial institution or any other legal person.
 
Person acting on behalf of a customer: A person legally authorized to carry out or initiate any of the activities that a customer may conduct, such as an authorized person or a legal attorney.
 
Politically Exposed Persons (PEPs): Individuals who are entrusted with prominent public functions domestically or in a foreign country or who occupy senior management positions or positions in an international organization, including the following:
 
 a)Heads of states or governments, senior politicians, senior government, judicial or military officials, senior executives of state-owned companies, and high-ranking officials of political parties.
 
 b)Directors and deputy directors of international organizations, chairmen and members of the board of directors, and similar positions.
 
Family member of a PEP: Any natural person related to a PEP by virtue of blood or marriage until the second degree of kinship.
 
Person close to a PEP: Any natural person who is involved with a PEP by having a real partnership in a legal entity or a legal arrangement, who has a close business relationship with such PEP, or who is a beneficial owner of a legal entity or a legal arrangement ultimately owned or controlled by such PEP.
 
Preventive measures: All measures, procedures and controls adopted by a financial institution to mitigate the risks of ML/TF and proliferation.
 
Due diligence measures: The process of obtaining or verifying information of a customer or a beneficial owner to enable the financial institution to assess the extent to which the customer exposes it to risks.
 
Simplified measures: The application of preventive measures in a streamlined and simplified manner consistent with ML/TF risks posed by a customer, beneficial owner or business relationship. This includes taking simplified due diligence measures to identify and verify a customer, apply a simplified method of monitoring, and take any other simplified measures specified by the financial institution in its policy and procedures.
 
Enhanced measures: Additional measures are taken by a financial institution when the risks of ML/TF become high. These include enhanced due diligence measures to identify and verify a real customer or beneficial owner, additional control measures, and any other measures or procedures that the financial institution specifies in its policy.
 
Transaction: It includes all actions involving funds, properties or proceeds in cash or in kind. Examples of such actions include: Depositing, withdrawing, transferring, selling, purchasing, lending, swapping, extending of credit, mortgaging, gifting, financing and exchanging of funds in any currency, whether in cash or checks, payment orders, stocks, bonds, or any other financial instruments in addition to the use of safe deposit boxes or any other disposition of funds.
 
Funds: These are assets, economic resources and property of any value, type or ownership, whether material or immaterial, tangible or intangible, movable or immovable, as well as documents, deeds, instruments, transfers and letters of credit in any form, whether inside or outside Saudi Arabia. They also include electronic or digital systems, bank credits that indicate ownership or interest, and all types of commercial papers, securities, and any other interests, profits or incomes resulting from these funds.
 
Monitoring process: Follow-up of all transactions performed by customers of financial institutions, occasional customers, or the financial institution staff, with the aim of detecting any abnormal transactions.
 
Suspicious transaction: A transaction for which a financial institution has reasonable grounds to suspect its association with money laundering, terrorism financing, a predicate offense, or proceeds of a crime, including the attempt to conduct such transaction.
 
Records: Paper and electronic documents and reports related to transactions, business relationships, and commercial and monetary deals, whether local or external, including documents obtained under standard/enhanced/simplified due diligence measures and any documents that contribute to the interpretation of financial, commercial and cash transactions.
 
National address: The general place of residence of a natural or legal person unless such person chooses a specific address for receiving notifications. Each address (general or specific) prepared by the Saudi Post, as the case may be, is considered an approved address subject to all legal consequences.
 
Reliable source: The originating source of information or data on which a financial institution relies to identify a customer.
 
Third party: The entity on which a financial institution relies on implement the due diligence measures, provided that such entity is another financial institution or an owner of a DNFBP.
 
Correspondence relationship: It is a relationship between a correspondent financial institution and a respondent institution through an account or any other related services, such as cash management, international money transfers, check clearing, foreign exchange services, trade finance, liquidity management, and short-term lending. This includes correspondent relationships established for securities transactions or money transfers.
 
Correspondence payment accounts: These are demand deposit accounts opened by a foreign financial institution with a local financial institution to credit deposits and checks of its customers to those accounts. Foreign customers have the power to sign their account’s transactions, which enables them to carry out normal business activities at the international level. Financial institutions are prohibited from accepting this type of accounts.
 
Wire transfer: A financial transaction carried out by a financial institution on behalf of a wire transfer originator to make an amount of funds available to a beneficiary in another financial institution, regardless of whether the originator and the beneficiary are the same person.
 

1 Private banking services are provided to high net worth individuals. A financial institution assigns a certain officer or a relation manager for such clients to facilitate their use of a wide range of financial services and products that usually include sophisticated operations and huge amounts. Such clients require a high level of confidentiality and thus private services are more vulnerable to ML/FT activities or proliferation.

* The Saudi Arabian Monetary Agency was replaced by the name of Saudi Central Bank in accordance with The Saudi Central Bank Law No. (M/36), dated 11/04/1442H, corresponding 26/11/2020AD.