EU Spotlights Saudi Arabia’s Money-Laundering Issues

Brussels is having second thoughts about embracing Saudi Arabia’s stature on the global stage, at least as far as the Kingdom’s money laundering protocols are concerned. The European Commission is poised to announce a “black list” of non-compliant countries. Saudi Arabia is prominent on a 16-nation list, which includes countries like Panama and Libya. These banking entrepots are the ugly stepsisters of international finance, according European officials.

Inclusion on the list, when finalized, will force European banks to scrutinize Saudi-based account holders more severely than others. The Financial Times notes, “Banks would be required to act on suspicions by steering clear of dubious transactions and passing any concerns onto the authorities.”

The EU list is a new initiative, running the risk of taking on a name-and-shame quality. As a result, it likely will not have the same teeth globally as the commonly-used Financial Action Task Force (FATF) criteria. But the announcement still stings, as Prince Mohammed struggles to put Saudi Arabia on an even footing with more economically-liberal nations. Apparently, the roll-out of stringent money-laundering penalties in the Kingdom in late 2017 was not enough to placate European officials. Under new Saudi guidelines, those convicted of financial crimes could be given as much as a 15-year prison term and fined almost $2 million.

The real message here may be one related to the October murder of journalist Jamal Khashoggi. These lists, after all, tend to be highly political. Consider this reality check: Russia is likely to be excluded from the European roster, despite using the Estonian Branch of Danske Bank as a full-service financial laundromat over recent years.

We should keep an eye on whether or not Paris-based FATF follows Brussels’ lead. For the record, Saudi Arabia is not categorized by FATF as a “high risk or other monitored jurisdiction.” However, a FATF report issued in September 2018 declared, “The Kingdom of Saudi Arabia is achieving good results in fighting terrorist financing, but needs to focus more on pursuing larger scale money launderers and confiscating their assets.”

Vantage Point: To borrow the Swedish expression, Saudi Arabia would like to slide onto the international stage “like a shrimp sandwich.” The Khashoggi murder makes that difficult, at least among Western nations.

Learn more at the Financial Times

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Image: Saudi riyal is pegged to the US dollar. Credit: Trafawma at Can Stock Photo.