Saudi Arabia has succeeded in introducing a range of anti-money laundering initiatives and measures over the past few decades, which have helped to protect the national economy, writes Talat Zaki Hafiz
Money laundering is becoming a disturbing issue for the world economy and the global financial markets. The UN Office on Drugs and Crime estimates that $800 billion to $2 trillion is laundered each year, equal to around 2 to 5 percent of the global GDP.
Governments around the world have stepped up their efforts to combat money laundering in recent years by implementing regulations that require financial institutions to put systems in place to detect and report suspicious activity.
Moreover, most governments have established international and regional organizations and introduced legislative and supervisory bodies to enhance the performance of financial and non-financial institutions to prevent money laundering activities.
Put simply, money laundering is the illegal process of making large amounts of money from criminal activity, such as drug and human trafficking, tax evasion, illegal arms sales, smuggling and other organized crimes. This money is considered “dirty” and by laundering it through legitimate business activities it is then made to look “clean.”
Money laundering usually goes through three basic steps to make illegally gained proceeds appear legal. The first step is placement (the movement of cash from its dirty source into a financial institution), layering (converting cash into monetary instruments) and integration (the movement of previously laundered money back into the economy).
In response to the mounting concern over money laundering, the Financial Action Task Force (FATF) was established in 1989 in Paris by the G7 to develop a coordinated international response to the issue. One of the first tasks of the FATF was to develop a list of recommendations — 40 in total — which national governments should take to implement effective anti-money laundering programs.
In response, Saudi Arabia has been proactive in combating money laundering activities and has set about improving its legal framework, introducing Anti-Money Laundering and Combating the Financing of Terrorism laws in 2017.
Authorities such as the Permanent Committee for Anti-Money Laundering and the Saudi Arabia Financial Investigation Unit are continuing to work hard to enforce these laws and ensure that the legal framework in place is effective.
In this regard, Saudi Arabia has consistently aimed for international best practices, which has led to it achieving financial stability and the prevention of suspicious operations.
In addition, the minister of commerce has also launched the National Program for Combating Commercial Concealment to ensure that all commercial businesses operating in the Kingdom are run legally and to encourage all outlets to transition to electronic payment systems.
In recognition of Saudi Arabia’s efforts with regard to combating money laundering, the Kingdom was granted permanent membership to FATF during its session in Orlando in June 2019, the first Arab country to receive this distinction.
In my opinion, Saudi Arabia has succeeded in introducing a range of anti-money laundering initiatives and measures over the past few decades, which have helped to protect the national economy and promote it as one of the most proactive countries when it comes to combating this issue.
Talat Zaki Hafiz is an economist, financial analyst and a board member of the Saudi Financial Association.