CMS Expert Guide To Mandatory Reporting Of Criminal Offences For Companies And Their Responsible Persons in Saudi Arabia

Under Saudi Arabian law, companies and their responsible persons are required to report certain criminal offences.  The list includes money laundering, financing of terrorism and fronting/concealment offences, as well as corruption or misuse of public office, cybercrimes, general crimes like theft or fraud.

In terms of money laundering and terrorist-financing, the following offences must be reported:

• Conversion, transfer, or any transaction involving funds known to be proceeds of crime to disguise their illegitimate origin. [1]
• Acquisition, possession, or use of funds known to be proceeds of crime. [2]
• Concealment or disguise of the true nature, source, movement, ownership, or rights with respect to funds known to be proceeds of crime. [3]
• Any attempt to commit the aforementioned acts or participation through agreement, assistance, incitement, counselling, advice, facilitation, collusion, or cover-up. [4]
• Financing of terrorism, including the provision of funds for the commission of terrorist acts or for the benefit of terrorist entities or persons. [5]

According to the Anti-Concealment Law [6] , fronting or concealment arrangements (whereby a foreign entity or person who is not licensed to undertake business activities in the Kingdom of Saudi Arabia (KSA) conducts business activities in the KSA for its own benefit via a person or entity who is licensed to undertake business activities in the KSA) are also prohibited.

The responsibility for reporting violations typically falls on the company's compliance officer, senior management, or any designated person responsible for anti-money laundering (AML) and counter-terrorism financing (CTF) compliance. The specific roles and responsibilities may vary depending on the company's internal policies and the nature of the business [7] .

Violations under the Anti-Money Laundering Law should be reported to the General Directorate of Financial Intelligence (GDFI) under the oversight of the President of the State Security. The report must include all available data and information on the suspicious transaction and relevant parties. Additionally, companies must respond promptly and fully to any requests for additional information from the GDFI. [8]

In relation to violations pertaining to the Anti-Concealment Law, any person who provides credible information leading to the opening of an investigation into any of the offences or violations provided for in the Anti-Concealment Law and which leads to a final judgment or decision, shall be granted a reward of up to 30% of the fine imposed for the reported offence or violation.

Failing to report a criminal offence or its perpetrator can result in severe consequences for both the company and the individuals responsible. These risks include:

• In relation to AML offences:
  • Criminal Liability: Individuals and companies may face criminal charges, including imprisonment and substantial fines. Penalties for money laundering offences can include imprisonment for up to ten years and fines up to SAR 5 million [9] .
  • Administrative Sanctions: these include written warnings, orders to comply with specific instructions, monetary fines, and restrictions on business activities [10] .
• In relation to CTF offences, anyone aware of an attempted terrorist crime or its financing and who fails to report it to the competent authority may be sentenced to up to a five-year prison term. [11]
• In relation to fronting/concealment offences, penalties can include up to five years imprisonment, a fine of up to SAR 5 million, as well as a range of administrative sanctions including (without limitation) suspension or cancellation of licences, dissolution of legal entities and  deportations of non-Saudi citizens. [12]
• For all of the above offences, failure to report can severely damage the company's reputation, leading to loss of business and trust from clients, partners, and stakeholders.

If the criminal offence is reported in good faith exercising reasonable caution, there is limited risk of the reporter facing criminal or civil liability even if the reported event is not prosecuted.

There is a risk of accessory criminal liability for both the company and individuals within the company. This includes:

• Legal Persons: Companies can be held criminally liable if any money laundering or terrorist financing offences are committed in their name or for their benefit. Penalties can include substantial fines of up to SAR 50 million under the Anti-Money Laundering Law and restrictions on business activities [13] . Companies can face fines of between SAR 3 million and SAR 10 million and suspension or permanent closure.
• Natural Persons: Directors, board members, managers, employees, and other individuals acting on behalf of the company can also be held personally liable. This includes those who knowingly participate in, assist, or facilitate the criminal activities. Individuals can face custodial sentences of up to ten years and fines of up to SAR 5 million, as well as being disqualified from management and/or prohibited from participation in certain sectors. [14]