CME-1 Anti-Money Laundering — Questions and Answers
Question 1: What is the primary Saudi legislation governing anti-money laundering?
- Capital Market Law
- Anti-Money Laundering Law issued by Royal Decree M/31 (Correct answer)
- Banking Control Law
- Commercial Court Law
Correct answer: Anti-Money Laundering Law issued by Royal Decree M/31
The Anti-Money Laundering Law (Royal Decree M/31) is the primary legislation governing AML in Saudi Arabia. It establishes offenses, penalties, and obligations for financial institutions to prevent money laundering.
Question 2: What does 'Know Your Customer' (KYC) require authorized persons to do?
- Memorize customer names
- Verify customer identity, assess risk, and maintain updated records (Correct answer)
- Only collect copies of national IDs
- Report all customers to the CMA
Correct answer: Verify customer identity, assess risk, and maintain updated records
KYC requires authorized persons to verify customer identity using reliable documents, assess the customer's risk profile, understand the nature and purpose of the business relationship, and maintain updated records.
Question 3: What is a Suspicious Transaction Report (STR) and who must file it?
- A quarterly report filed by the CMA only
- A report filed by financial institutions to the Saudi Financial Intelligence Unit when suspicious activity is detected (Correct answer)
- A customer complaint form
- An annual audit requirement
Correct answer: A report filed by financial institutions to the Saudi Financial Intelligence Unit when suspicious activity is detected
Financial institutions, including CMA-authorized persons, must file STRs with the Saudi Financial Intelligence Unit (SAFIU) when they suspect or have reasonable grounds to suspect that a transaction involves proceeds of crime or is related to money laundering or terrorism financing.
Question 4: What is the penalty for 'tipping off' a customer about a money laundering investigation?
- A verbal warning
- Administrative fine only
- Imprisonment for up to 2 years and/or a fine (Correct answer)
- No penalty if done unintentionally
Correct answer: Imprisonment for up to 2 years and/or a fine
Under Saudi AML law, tipping off a customer or any other person about an ongoing investigation or the filing of an STR is a criminal offense punishable by imprisonment for up to 2 years and/or a fine.
Question 5: What is Enhanced Due Diligence (EDD) and when must it be applied?
- Standard identity verification for all customers
- Additional verification measures applied to high-risk customers, PEPs, and complex transactions (Correct answer)
- A one-time check during account opening
- Only required for foreign customers
Correct answer: Additional verification measures applied to high-risk customers, PEPs, and complex transactions
EDD requires additional verification measures beyond standard CDD for high-risk situations, including dealings with Politically Exposed Persons (PEPs), complex or unusual transactions, and customers from high-risk jurisdictions.
Question 6: How long must financial institutions in Saudi Arabia retain customer records and transaction data?
- 3 years
- 5 years
- 10 years after the end of the business relationship (Correct answer)
- Indefinitely
Correct answer: 10 years after the end of the business relationship
Saudi AML regulations require financial institutions to retain all customer identification data, account files, and business correspondence for at least 10 years after the end of the business relationship or the date of the transaction.
CME-1 Anti-Money Laundering
What is the primary Saudi legislation governing anti-money laundering?