Impact of the 2017 Anti-Money Laundering Law on Financial Institutions in KSA: A Critical Assessment

Abstract

An ongoing and intricate threat to the stability and integrity of international financial systems is money laundering. Understanding the legal and institutional reaction to this threat in the Kingdom of Saudi Arabia (KSA) requires an appreciation of a unique setting that is influenced by both deeply ingrained Islamic legal and ethical norms and international duties. In order to fortify its financial regulatory system, conform to the guidelines of the Financial Action Task Force (FATF), and facilitate the KSA’s wider economic transformation in line with its Vision 2030, a new Anti-Money Laundering (AML) Law was passed in 2017. KSA’s legal history, which is based on Shari'a as the main source of law, presents serious concerns in terms of how well international AML standards align with it. This thesis critically evaluates how well the KSA's 2017 AML Law strikes a compromise between three main goals: preventing financial crime, protecting the autonomy and confidentiality commitments of financial institutions, and guaranteeing conformity with Islamic law. The main research question of the study is: How well does the KSA's current AML legal framework balance respect for institutional autonomy and client confidentiality, effective anti-money laundering enforcement, and adherence to Shari'a's ethical and jurisprudential requirements? By adopting a socio-legal viewpoint and a doctrinal legal methodology, the thesis examines pertinent institutional practices, implementing regulations, and statutory texts. KSA legislative instruments, royal decrees, regulatory guidelines, scholarly legal commentary, and important findings from foreign organisations such as the FATF are some examples of the sources used. In order to evaluate the moral and legal foundations of financial control in KSA, the research also takes into account the fundamental ideas of Islamic jurisprudence, specifically the goals of Islamic law (Maqāṣid al-Sharīʿa). The thesis reaches the conclusion that the legitimacy and effectiveness of the AML regime in KSA depend upon its capacity to consider both Islamic legal principles and the realities experienced by financial institutions as well as complying with international standards. To enhance this capacity, legal Islamic concepts should be introduced into standard regulatory and statutory language, proportionate compliance frameworks that consider the inherent risks should be created, a national Shari’a AML advisory council should be established and there should be more training for judges with regard to Islamic criminal and commercial law. For the AML regime in KSA to meet its goals, both ethical and technical, this thesis concludes that there should be more clarity in terms of legal definitions, guidelines should be provided to improve interpretation and there should be a consistency in the principles of the law.