In a significant regulatory step aimed at enhancing transparency and combating financial crimes, the Saudi Ministry of Commerce issued a circular requiring all precious metals and gemstones traders in the Kingdom to thoroughly verify the identity of customers and beneficial owners before finalizing any transaction. This decision is part of a comprehensive set of measures the Kingdom is taking to ensure the integrity and reliability of its commercial markets and protect them from any illicit practices.
Context of the decision and its strategic objectives
This measure is not a spur-of-the-money decision, but rather part of broader national efforts to align the Kingdom's commercial and financial regulations with best international practices. These new regulations are based on the Anti-Money Laundering Law and its implementing regulations, which aim to close loopholes that could be exploited to launder illicitly acquired funds. The gold and jewelry trade is considered a high-risk sector globally due to the ease with which assets can be converted into cash and their source concealed, making it a target for money laundering and terrorist financing networks.
This step aligns with Saudi Arabia’s commitments as a member of the Financial Action Task Force (FATF), the international organization that sets global standards for combating these crimes. By implementing these measures, Saudi Arabia reinforces its position as a trusted global financial and commercial hub committed to the rule of law, a key objective of the Kingdom’s Vision 2030, which aims to diversify the economy and foster a secure investment environment.
Expected impact on the local and international market
Domestically, this decision is expected to enhance integrity in the multi-billion riyal gold and jewelry sector. By requiring traders to implement due diligence procedures, traders themselves are protected from unintentional involvement in suspicious transactions, while the rights of both consumers and investors are safeguarded. The Ministry, through a circular addressed to the Federation of Saudi Chambers, emphasized the necessity for traders to rely on documents and data from credible and independent sources for identity verification, and provided a comprehensive guide on its electronic portal to facilitate compliance.
At the regional and international levels, stricter oversight of this vital sector enhances the reputation of the Saudi financial system and makes it more difficult for criminal networks to use the Kingdom's markets as a link in their chain of operations. This, in turn, increases the confidence of international investors and encourages foreign investment in the sector, thus supporting its long-term stability and growth. The application of these stringent standards sends a clear message that the Kingdom is serious about combating financial corruption and purging its economic environment of all impurities.
