2-1-4) External Correspondent Banks

The relationships between exchange shops and correspondent banks, established for the purpose of providing services from one bank or exchange shop (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, check collection, and services related to foreign currencies, often involving large amounts of money and numerous transactions.

Exchange shops 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 exchange shops 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 exchange shop and gather sufficient information about the banks or exchange shops 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 exchange shop.
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 exchange shop 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 anti-money laundering and counter-terrorism financing regulations for all correspondent bank and exchange shop relationships, including the following information:

8. Exchange shops 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 the central bank (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. Exchange shops must continuously obtain anti-money laundering and counter-terrorism financing compliance certificates as per the relevant regulations.
12. Ensure that information exchanged with correspondent banks is subject to banking confidentiality and is not used for unauthorized purposes.

2-2-4) Money Transfer Service Providers

Central bank instructions regarding financial transfer services require licensed exchange shops 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 exchange shops 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 exchange shop must request prior approval from the central bank 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 exchange shop 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:

3-2-4) Relationship of the Exchange House with Banks and Other Local Exchange Houses

Exchange houses must record all financial transactions in accounting records with banks and other licensed exchange houses 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 exchange houses licensed for transfer activities act as intermediaries between clients and banks, they must provide all accompanying information related to the transfer to the bank.

Exchange houses 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. An exchange house 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 exchange agents in any local banks).
3. Opening business accounts for the exchange house in local banks is allowed from the general administration of the exchange house and requires direct approval from the owner or general manager of the exchange house.
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 exchange house's operations according to its license.
6. Money transfers within and outside the Kingdom for the exchange house’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 exchange house.
7. Money transfers from business accounts are restricted to the owner of the exchange house or executive managers directly or through Saudi representatives working at the exchange house.
8. These accounts must be subject to dual and ongoing oversight by the owner(s) of the exchange house and the general manager or compliance officer.
9. Restrict check issuance to the expense account and currency exchange account to the first beneficiary.
10. Transfers to local bank clients from the exchange house's transfer accounts are allowed (for those licensed by the central bank 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 check withdrawals is not allowed. Issuance of checkbooks, ATM cards, or credit cards for transfer accounts is not allowed, and any previously issued checks 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 exchange house and its branches.
13. Cash deposits, remittances, and checks issued and received for the expense account are permitted, provided they are used for the purposes of the exchange house and in its name, and match the nature of the activity.