Saudi Arabia: Banks Cannot Open Accounts for Entities Involved in Illegal Operations

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Saudi Arabia: Banks Cannot Open Accounts for Entities Involved in Illegal Operations

Saudi Gazette, 6 February 2022: Saudi Arabia’s Central Bank has announced local banks in the Kingdom are banned from allowing accounts to be opened by entities which are involved in illegal operations.

The Bank has also instructed banks to notify customers about their accounts being frozen at least 30 days before they are frozen.

The changes are contained in updated Bank Account Rules which are mandatory and have to be enforced by Saudi banks from 2 February 2022.

Banks will be able to carry out outgoing remittance transactions and cheques sold by customers who are account holders.

Under the amendments, banks cannot open bank accounts for investment companies, investment funds, foreign financial institutions, including investment companies in the Gulf countries or their intermediaries who sell their products illegally in the Kingdom and collect money in Saudi Riyals and foreign currencies.

Saudi banks can also not facilitate these illegal businesses in any way.

However, there are exemptions for the categories of entities which the Saudi Capital Market Authority allows to invest in shares of Saudi joint stock companies.

All Saudi national banks will have to submit a statement at the end of March annually to the Bank in the correct form.

This statement will have to include an inventory of unclaimed accounts and abandoned accounts whose holders have been cut off from the bank.

The statement will have to comply with the nature and category of accounts and account numbers without mentioning personal information, as of the end of December of the previous year.

These unclaimed and abandoned accounts should be internally audited every two years and the report submitted to the audit committee.

The annual audit programme is not linked to any other periodic programmes related to the accounts.

Under the amendments, Saudi banks have the right to freeze the account once the validity of the official employment contract has expired or the requirement to update banking information has not been complied with.

The account can also be frozen where financial and personal information and addresses of account holders is not submitted.

In addition, banks are banned from enabling customers to personally carry out banking operations using the account after the validity of their ID has expired unless they have renewed or updated the Know Your Customer information.

There will be an exemption for all deposits. This will include incoming local and international transfers. Exemptions will also be given to accounts of Government employees whose salaries are received through the banks, but their accounts were frozen or they were unable to provide national identity cards because of any legal problems.

These employees will have 180 days from the date of the expiry of their IDs or from the last date for the update.

Banks must open accounts for any customers who make a request of this kind provided they submit all the required documents and meet the conditions for the account opening process.

The banks must agree to open the account without putting conditions to deposit any amounts at the time of opening the account. In the event of any amounts not being deposited within 90 days after opening the account, the banks must close the account.

However, there will be an exemption for the accounts of Government agencies. This has been approved by the Finance Ministry. The Ministry will determine the exemption period for amounts to be deposited.

The bank accounts of prisoners will be opened when they approach the banks accompanied by security guards affiliated with the General Administration of Prisons. The banks must obtain a letter from the prison administration in the city where the prison is located. It must be addressed to the bank branch mentioning the prisoner’s name, ID or iqama number and their intention to open the account.

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Benjamin Filaferro