The General Authority for Endowments issued a set of new and binding regulations aimed at governing the endowment sector in the Kingdom of Saudi Arabia. These regulations include crucial decisions regarding the identification of the "beneficiary" and restricting the management of endowments to trustees residing within the Kingdom. This step comes as part of a comprehensive strategy to enhance financial transparency and protect endowment assets from any risks related to money laundering or the financing of terrorism, in line with international standards.
A regulatory framework that aligns with Vision 2030
These decisions are particularly important given the economic and regulatory changes underway in the Kingdom as part of Vision 2030, which prioritizes the non-profit and endowment sector to increase its contribution to the GDP. Historically, endowment management relied heavily on individual efforts, but the shift towards institutional work has necessitated the establishment of precise regulatory frameworks to ensure the sustainability of endowments and the proper allocation of their proceeds to legitimate and legally permissible purposes, thereby strengthening the confidence of donors and the community in this vital sector.
Details of the new criteria: Who is the real beneficiary?
According to the new regulations, the "beneficiary" is defined as any natural person who owns or exercises effective and ultimate control over the endowment. This includes the endower, the trustee, or any person with the authority to make binding decisions. If the beneficiary is a legal entity, the authority requires trustees to disclose the chain of ownership and control down to the natural persons who actually manage the endowment, to ensure there are no hidden transactions that could harm the reputation of the endowment or its financial system.
Limiting the use of glasses to residents and ensuring international compliance
One of the most prominent provisions of the regulations is the absolute prohibition on the management of Saudi endowments by non-Saudi individuals residing permanently outside the Kingdom. The Authority stipulated that oversight be restricted to residents within the Kingdom to ensure ease of communication, monitoring, and effective oversight, and to guarantee full compliance with Saudi judicial and administrative regulations.
These measures are a direct response to the requirements of the Financial Action Task Force (FATF), specifically its recommendations regarding transparency and legal arrangements. This compliance enhances the Kingdom's standing in international financial transparency indices and protects the banking and endowment system from exploitation in illicit activities.
Procedural obligations and penalties for violators
The standards require trustees to maintain accurate and up-to-date records containing detailed information (name, nationality, address, and bank details), with these records to be updated within 15 days of any changes. The authority also emphasized the necessity of retaining financial records and documents for a minimum of ten years and handing them over to the new trustee immediately upon the expiration of their term. Those who fail to comply will face strict penalties according to the schedule of penalties and violations, ensuring full adherence and protecting endowment assets from waste or misuse.
