The National Center for Development of the Non-Profit Sector in Saudi Arabia announced the launch of the first edition of its Governance Standards for Family Funds, a step aimed at regulating the operations of these important social entities. The new standards include a comprehensive regulatory framework comprising 103 verification questions and 28 management practices, designed to ensure sound financial and legal performance and guarantee the highest levels of efficiency and integrity.
This step comes within the framework of the Kingdom's ongoing efforts to develop the non-profit sector (the third sector) in line with the objectives of Vision 2030, which seeks to increase this sector's contribution to the GDP and enhance its social impact. Family funds are an integral part of the Saudi social fabric, aiming to strengthen kinship ties and solidarity among family members. However, their institutional organization has become an urgent necessity to ensure their sustainability and protect their assets from any potential risks.
The new standard details the assessment, which is based on three key indicators to ensure institutionalized operations: compliance and adherence (70%), financial integrity (20%), and transparency and disclosure (10%). The regulations have imposed strict restrictions on external transactions, categorically prohibiting family trusts from participating in any events outside the Kingdom, providing external services, obtaining international memberships, or receiving funds and donations from outside the family or external entities without prior, explicit written approval from the center.
Regarding the administrative structure, the center mandated that funds form a board of trustees comprised of at least three Saudi members with full legal capacity and no criminal record, and that a full-time executive director be appointed with clearly defined responsibilities. The regulations also emphasized financial aspects, requiring the segregation of Zakat funds in separate accounts and the implementation of stringent anti-money laundering and counter-terrorism financing measures, including the immediate reporting of any suspicious transactions to the General Directorate of Financial Investigations without notifying the client.
These measures are of paramount importance in safeguarding the Kingdom's financial system, ensuring that the funds of these trusts are spent legitimately within the family and local spheres, thus preventing any exploitation of these entities for illicit activities. The regulations also mandate an external auditor, ten-year record-keeping, and restrict bank signatures to Saudi nationals only, thereby enhancing transparency and accountability and guaranteeing the rights of all stakeholders.
