Wednesday 20th September 2017 Professor in Financial Crime ‘The Kingdom of Saudi Arabia: a critical review of its response to money laundering and terrorist financing’  Wednesday 20th September 2017 Aperio Intelligence Dr. Nicholas Ryder Professor in Financial Crime Money Laundering and Terrorist Financing in Saudi Arabia

Centre for Research and Evidence of Security Threats This work has been conducted under the Centre for Research and Evidence on Security Threats through an ESRC grant which is funded in part by the UK security and intelligence agencies. FYI: (ESRC Award: ES/N009614/1) Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Abstract This presentation has two aims: Firstly, it seeks to identify what Saudi Arabia has done to tackle money laundering and terrorist financing.  Secondly it seeks to critically consider the extent to which the Saudi Arabian government is committed to tackling financial crime Money Laundering and Terrorist Financing in Saudi Arabia

International AML Legislative Efforts United Nations European Union Vienna Convention (1988) Criminalised money laundering of proceeds of drug trafficking Palermo Convention (2000) Criminalised money laundering of serious criminal offences Corruption Convention (2003) Criminalised the laundering of the proceeds of bribery and corruption Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime (1990), the Warsaw Convention (2005) Four Money Laundering Directives (1991, 2001, 2005 and 2015) Money Laundering and Terrorist Financing in Saudi Arabia

International Legislative Efforts Financial Action Task Force Financial War on Terrorism The 40 recommendations are not legally binding Sanctions can be imposed on countries that fail to follow the recommendations Remit extended to include terrorist financing since 9/11 (9 Special Recommendations) Extended in February 2012 to include bribery and corruption International Convention on the Suppression of Terrorist Financing (1999) UN Security Council Resolutions: 1267 1269 1333 1373 Recommendations Financial Action Task Force (February 2012) Money Laundering and Terrorist Financing in Saudi Arabia

The Kingdom of Saudi Arabia: the extent of financial crime Over 32,000 financial crimes are committed every year An average of around 615 a week, The highest financial crime rate was in the capital, Riyadh, where there were 9,062 reported cases. Over 200 money laundering convictions in 2015/2016 Estimated that Saudi Arabian money laundering through hawala is approximately of $1trillion, Common financial crimes were: were fraud, money-laundering, embezzlement, forgery and illegal money transfers/withdrawals. Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Background The Kingdom of Saudi Arabia is a rapidly expanding financial center in the Gulf Region, the second largest source of remittances in the world and has a high GDP, Saudi Arabia's legal system is unique: where the Holy Qur'an and Sunnah represent the core of the legal and ruling systems, Islamic Law (or Shari'ah) and jurisprudence have a general law standing in many cases, where the statutory laws are silent on some issues. Money Laundering and Terrorist Financing in Saudi Arabia

Financial Crime Legal Framework Money Laundering Counter-Terrorist Financing Saudi Arabia's anti-money laundering (AML) and counter terrorist financing (CFT) regime was created in 2003, The anti-money laundering statute (AMLS) was issued in 2003, The definition of money laundering includes terrorist financing, terrorist acts and terrorist organizations No stand alone statutory terrorist financing offence, Saudi Arabia has implemented UN Security Council resolutions (UNSCR) 2178 and 2199, and the UN Security Council ISIL (Da’esh) and al-Qa’ida sanctions regime and UNSCR 1373 has not been implemented. Money Laundering and Terrorist Financing in Saudi Arabia

Terrorist Financing Case Study Intelligence information indicates that some individuals associated with ISIL have called for donations via Twitter and have asked the donors to contact them through Skype. The donors would be asked to buy an international prepaid card and send the number of the prepaid card via Skype. The fundraiser would then send the number to one of his followers in close country from Syria and sell the number of the card with a lower price and take the cash which was afterwards provided to ISIL (FATF, 2015) Money Laundering and Terrorist Financing in Saudi Arabia

Terrorist Financing Case Study As of January 2015, the Saudi competent authorities addressed individuals and entities calling for donations for the Syrian people over the internet. Those calls were through social media, including Twitter, and included local and international banking accounts the donors could transfer to. The authorities imposed temporary attachments which resulted in a “preventive temporary freeze” on local bank accounts and prevents international transfers. A total of 61 local bank accounts have been identified and blocked. The account holders include nine different nationalities. After investigation, 16 out of those accounts have been released (FATF, 2015) Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Commentary No specific anti-money laundering legislation in Saudi Arabia before 9/11, despite ratifying the Vienna Convention, Yet Saudi Arabia implemented Suspicious Activity Reports from 1975 onwards to prevent bank secrecy, The CFT framework in Saudi Arabia suffers from shortcomings, Classified as a country/jurisdictions of concern by the US Department of State, Despite serious and effective efforts to counter the funding of terrorism originating within the Kingdom, Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Commentary A small number of individuals and entities in Saudi Arabia continue to serve as sources of financial support for Sunni-based extremist groups, The evolution of the funding streams of ISIL and its sophisticated usage of social media have facilitated charities outside of Saudi Arabia with ties to extremists to solicit donations from Saudi donors, Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Commentary While Saudi Arabia has tightened banking and charity regulations, as well as stiffened penalties for financing terrorism, funds are allegedly collected in secret and illicitly transferred out of the country in cash, Saudi Arabia has a strong counterterrorism relationship with the United States, Saudi Arabia is a key member and active participant in the coalition to tackle ISIS and However, a CREST study has questioned the ability of efforts to tackle the funding avenues of ISIS. Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Commentary It is a member of the Middle East and North Africa Financial Action Task Force, It is a Financial Action Task Force (FATF)-style regional body, Saudi Arabia earned observer status in the FATF in June 2015 Saudi Arabia is working to obtain full membership in the organization Its financial intelligence unit, the Saudi Arabia FIU (SAFIU), is a member of the Egmont Group of Financial Intelligence Units. Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Suggested Reading The Kingdom of Saudi Arabia and Counter-terrorism 2016, available through Saudi-U.S. Trade Group, available from http://sustg.com/comprehensive-document-outlining-saudi-arabias-counterterrorism-strategy-successes-released/, MENAFATF Mutual Evaluation Report Saudi Arabia, available from www.menafatf.org/MER/MER_SaudiArabia_English.pdf , FATF, Financing of the terrorist organization Islamic State in Iraq and the Levant (ISIL), available from www.fatf-gafi.org/media/fatf/documents/reports/Financing-of-theterrorist-organisation-ISIL.pdf Money Laundering and Terrorist Financing in Saudi Arabia

Money Laundering and Terrorist Financing in Saudi Arabia Suggested Reading Ryder, N. The Financial War on Terror: A review of counter-terrorist financing strategies since 2001 (Routledge, 2015) Ryder, N. ‘Out with the old and … in with the old? A critical review of the Financial War on Terrorism on the Islamic State of Iraq and Levant’ (2017) Studies in Conflict and Terrorism (Special issue on ‘Contemporary Issues, Innovation and Counter Terrorism’), 1-17. Ryder, N. ‘Banks in Defense of the Homeland:  Nexus of Ethics and Suspicious Activity Reporting’ (2013) Contemporary Issues in Law (Special Issue on Law, Ethics and Counter-Terrorism), 12(4), 311-347, with Turksen, U, Ryder, N. ‘The financial war on terrorism: a critical review of the United Kingdom’s counter-terrorist financing strategies’ In: Walker, C., King, C. and Gurule, J. Asset Stripping: Responses to the Financing of Terrorism and Crime, Palgrave, forthcoming, 2018. Money Laundering and Terrorist Financing in Saudi Arabia