In a pivotal regulatory step aimed at governing and enhancing the credibility of the non-profit sector, the General Authority for Endowments in Saudi Arabia has issued a set of binding regulations targeting the identification of the "beneficiary" of endowment assets. These measures are part of a comprehensive strategy to raise the levels of financial transparency in the endowment sector and safeguard it against any potential risks related to money laundering or terrorist financing, in line with the highest international standards.
Enhancing transparency and compliance with international standards
The Board of Directors of the Authority adopted these new standards to achieve full compliance with the requirements of the Financial Action Task Force (FATF), specifically the recommendations related to transparency and legal arrangements. This measure is part of the Kingdom of Saudi Arabia’s commitment to international agreements concerning the integrity of the financial system. The new regulations define the “beneficial owner” as any natural person who owns or exercises effective and ultimate control over the endowment, whether that person is the endower himself, the trustee, or any other party with the authority to make binding decisions, thus closing the door to any financial transactions of unknown origin or destination.
Limiting management to residents and defining responsibilities
Among the most prominent aspects of the new regulations is the absolute prohibition on non-Saudi individuals permanently residing outside the Kingdom managing Saudi endowments. The regulations stipulate that oversight must be restricted to trustees residing within Saudi Arabia. This fundamental requirement aims to ensure meticulous monitoring, facilitate effective oversight by the relevant authorities, and guarantee that those managing endowments are subject to direct and swift local judicial and administrative regulations when necessary.
Disclosure mechanisms and accurate records
The new standards require endowment administrators to create accurate and up-to-date records containing detailed data, including:
- Full name and nationality.
- Date and place of birth and address of residence.
- Identity numbers and bank details for transferring the proceeds of the endowment.
The authority also mandated that these records be updated within a maximum of 15 days of any change, with the requirement for annual verification of the accuracy of the information. If the beneficiary is a legal entity, the chain of ownership down to the controlling natural person must be disclosed.
The economic context and the importance of governance
These measures are particularly important within the framework of the Kingdom's Vision 2030, which places great emphasis on developing the non-profit sector and increasing its contribution to the GDP. Governing endowments and regulating their financial flows not only protects the national economy but also enhances the confidence of donors and those who establish endowments, thus encouraging the sustainability and growth of charitable work. A clear and transparent legislative environment is a fundamental pillar for attracting more endowment assets and managing them with high investment efficiency.
Accountability and record keeping
The Authority stressed the necessity for the trustee to retain all financial records and data for a period of no less than ten years and to hand them over to the new trustee immediately upon the expiration of their term. Those who fail to comply will be subject to legal accountability according to the approved schedule of penalties, in order to ensure the protection of endowment assets from illicit exploitation. These standards will take immediate effect upon publication.
