Case Study Details

Background: A foreign bank from the UK wants to expand its operations in Saudi Arabia, as part of its global strategy to tap into the emerging markets. The bank has obtained a license from the Saudi Central Bank (SAMA) to open a branch in Riyadh, the capital city of Saudi Arabia. The bank offers various products and services, such as deposits, loans, remittances, trade finance, and investment banking. The bank wants to comply with the local and international regulations and standards that apply to its activities, such as anti-money laundering (AML), counter-terrorism financing (CTF), anti-bribery and corruption (ABC), sanctions, and data protection.

Objective: The bank needs to design and implement a compliance program that will address the following issues:

• How to identify and assess the risks and obligations associated with its operations in Saudi Arabia.
• How to develop and implement policies and procedures that reflect the applicable laws and best practices.
• How to train and educate its staff on the compliance requirements and expectations.
• How to monitor and test the effectiveness of its compliance controls and measures.
• How to report and resolve any incidents or breaches of compliance.

Process: The bank follows these steps to implement a compliance program:

• Hire a compliance officer who is responsible for overseeing and managing the compliance program. The compliance officer is a qualified and experienced professional who has knowledge of the Saudi legal system, the banking sector, and compliance standards. The compliance officer reports directly to the senior management of the bank and has sufficient authority and independence to perform his or her duties.

• Conduct a risk assessment that identifies and evaluates the potential sources of compliance risk for the bank. The risk assessment considers factors such as the nature, size, complexity, and geographic scope of the bank’s activities, the regulatory environment, the customer profile, the product portfolio, the delivery channels, the third-party relationships, and the internal controls. The risk assessment also assigns a risk rating for each risk category, such as high, medium, or low, based on the likelihood and impact of occurrence.

• Develop a compliance policy that sets out the objectives, principles, and responsibilities of the compliance program. The compliance policy is approved by the senior management of the bank and communicated to all staff. The compliance policy covers topics such as:
• The scope and purpose of the compliance program.
• The roles and responsibilities of the senior management, the compliance officer, and other staff involved in compliance activities.
• The risk assessment methodology and process.
• The compliance standards and requirements that apply to the bank’s operations, such as AML/CTF, ABC, sanctions, and data protection.
• The procedures for developing, implementing, reviewing, and updating the compliance policies and procedures.
• The training and awareness programs for staff on compliance matters.
• The monitoring and testing mechanisms for evaluating the effectiveness and adequacy of the compliance controls and measures.
• The reporting and escalation procedures for any incidents or breaches of compliance.
• The corrective and preventive actions for addressing any gaps or weaknesses in the compliance program.
• Implement compliance policies and procedures that provide detailed guidance and instructions on how to comply with the relevant laws and standards. The compliance policies and procedures are aligned with the risk assessment and reflect the best practices and recommendations of the regulatory authorities, such as SAMA, the Financial Action Task Force (FATF), and the Organization for Economic Co-operation and Development (OECD). The compliance policies and procedures cover topics such as:
• Customer due diligence (CDD) procedures for verifying the identity and background of customers, including beneficial owners, politically exposed persons (PEPs), sanctioned persons or entities, etc.
• Transaction monitoring procedures for detecting and reporting any suspicious or unusual transactions or activities that may indicate money laundering, terrorism financing, bribery, corruption, or sanctions evasion.

• Record-keeping procedures for maintaining accurate and complete records of customers, transactions, reports, policies, procedures, etc., for a minimum period of 10 years or as required by law.
• Data protection procedures for safeguarding the confidentiality, integrity, and availability of personal data, in accordance with the Personal Data Protection Law and other applicable laws.
• Train and educate the staff on the compliance requirements and expectations.

The training and education programs are tailored to the roles and responsibilities of the staff and cover topics such as:

• The importance and benefits of compliance for the bank, its customers, its stakeholders, and society at large.
• The compliance policy and procedures of the bank, and how to apply them in practice.
• The compliance standards and requirements that apply to the bank’s operations, such as AML/CTF, ABC, sanctions, and data protection.
• The compliance risks and challenges that the bank faces, and how to mitigate and manage them.
• The compliance scenarios and cases that illustrate common or complex situations, and how to handle them appropriately.
• The compliance resources and tools that are available to the staff, such as manuals, checklists, forms, software, etc.
• Monitor and test the effectiveness and adequacy of the compliance controls and measures. The monitoring and testing mechanisms include:
• Internal audits that review and evaluate the design and implementation of the compliance program, and provide recommendations for improvement.
• External audits that verify and validate the compliance of the bank with the applicable laws and standards, and report any findings or issues to the regulatory authorities.
• Compliance reviews that assess and measure the performance and results of the compliance program, and identify any gaps or weaknesses.
• Compliance indicators that track and report the key metrics and trends of the compliance program, such as the number and value of transactions, customers, reports, incidents, breaches, etc.
• Compliance surveys that solicit and collect the feedback and opinions of the staff, customers, stakeholders, and regulators on the compliance program, and measure the level of satisfaction and confidence.
• Report and resolve any incidents or breaches of compliance. The reporting and resolution procedures include:
• Reporting any suspicious or unusual transactions or activities to the Financial Intelligence Unit (FIU) of SAMA, as per the Anti-Money Laundering Law and its Implementing Regulations.
• Reporting any violations or infringements of the Personal Data Protection Law to the National Cybersecurity Authority (NCA), as per the Law and its Executive Regulations.
• Reporting any other incidents or breaches of compliance to the relevant authorities, such as SAMA, the Ministry of Commerce, the Ministry of Justice, etc., as per their respective laws and regulations.
• Resolving any incidents or breaches of compliance by taking appropriate corrective and preventive actions, such as investigating the causes and consequences, imposing sanctions or penalties, compensating the damages or losses, enhancing the controls or measures, etc.

Outcome: The bank successfully implements a compliance program that ensures its adherence to the local and international regulations and standards that apply to its operations in Saudi Arabia. The compliance program also enhances the reputation and competitiveness of the bank in the market, as it demonstrates its commitment to integrity and transparency.