Saudi Arabia Implements Beneficial Ownership Rules to Strengthen AML Compliance

Saudi Arabia is set to introduce new beneficial ownership (BOI) regulations aimed at aligning the country with global anti-money laundering (AML) standards. The Minister of Commerce has announced the implementation of these rules, which will require companies to disclose their ultimate beneficial owners (UBOs) to the government. The regulations, which come into effect on April 3, 2025, will apply to all companies registered in the Kingdom, with the exception of publicly listed joint-stock companies.

Key aspects of the new regulations include:

• Compliance with FATF Standards: Saudi Arabia has been a member of the Financial Action Task Force (FATF) since 2019 and is implementing stricter beneficial ownership regulations to uncover the true owners of businesses and combat financial crimes.

• Previous Gaps in Regulation: Companies were required to maintain ownership records but had no obligation to disclose UBOs. Financial institutions had to identify UBOs under AML and Know Your Customer (KYC) rules, but non-financial businesses lacked a structured system for UBO disclosure.

• Tracking of Ownership: Previously, Saudi authorities only tracked direct shareholders, failing to account for indirect ownership through nominee structures, offshore holdings, or trusts.

• Disclosure Requirements:

  • Companies must submit UBO details at incorporation.

  • Existing companies must confirm UBO details annually within 30 days of their registration anniversary.

  • Any changes to UBO details must be reported within 15 days.

• UBO Definition: An individual qualifies as a UBO if they:

  • Directly or indirectly own 25% or more of a company’s share capital.

  • Directly or indirectly control 25% or more of voting rights.

  • Have the authority to appoint or remove the majority of the board, chairman, or manager.

  • Influence company decisions or operations.

  • Represent a legal entity that meets any of the above conditions.

  • If no individual qualifies, the manager, chairman, or board member is considered the UBO.

• UBO Register Requirements: Companies must maintain a register that includes:

  • The UBO’s name, national ID or passport number, residential address, and contact details.

  • The register must be stored within Saudi Arabia.

• Government Oversight: The Ministry has the authority to request UBO-related information and supporting documents at any time.

• Exemptions: Certain entities are exempt from UBO disclosure, including:

  • State-owned companies or authorities.

  • Companies undergoing liquidation under bankruptcy laws.

  • Companies granted exemption by ministerial decision (must provide proof of exemption).

• Penalties for Non-Compliance: Companies failing to comply with the new UBO regulations could face fines of up to SAR 500,000 ($133,000).

By fLEXI tEAM