Saudi Arabia is highly on various kinds of International pressures and is increasingly being deployed by lawmaking bodies in ways that could slow much needed foreign investments, as regional analysts point out. However, on Wednesday, the EC (European Commission) added Saudi Arabia to its list of high-risk third countries that have strategic deficiencies in their anti-money laundering and counter-terrorism financing regimes, also known as AML/CFT.
The designation may not stick, the European Parliament or European Commission can reverse in one-to-two month that the bodies have to vote on it. But the move will now highlight a new willingness by lawmakers to more intensely scrutinize Saudi compliance with international conventions and withdraw privileges that the kingdom has enjoyed until now. As a result of the listings made, the European Commission has officially wrote in statement that the banks and the other bodies that are operating under the EU’s anti-money laundering rules will certainly be required to apply increased checks due diligence, on transactions between individuals and institutions from Saudi Arabia, as well as more than 20 other listed countries, to get a better identify any suspicious money flows.
The impact that made by the Election Commission will now really depends on its acceptance by other European lawmaking entities as well as that of the United States. Moreover, countries such as France and the United Kingdom have expressed their opposition, having a significant trade that ties and weapons exports to the kingdom, and may attempt to reach a middle ground with the Election Commission. The Specific evidence for Saudi Arabia’s listing has not been publicly disclosed, but the EC cites risks posed by third country jurisdictions which have strategic deficiencies in their AML/CFT regimes that pose significant threats to the financial system of the Union.
On Thursday the inclusion of Saudi Arabia is on the list and is potentially very serious, Loretta Napoleoni, terror finance expert and author of the book Terror, has told the national media channel via email. But rejection from the United States of the European decision will prove key. This would create a contradiction; she explained that having an impact upon European investors and anybody who operates under the EU jurisdiction, but this will not affect those who operated under the United States and in U.S. dollars.
Napoleon added that the history of the kingdom with money laundering and terror financing is no secret. She added, the designation is justified because we know that Saudis’ money has gone to fund several jihadist organizations for decades. We also have a country whose financial system is not under our jurisdiction. She said that Islamic finance is a separate system with its own rules, so international monetary authorities lack the power to stop money laundering or terrorist financing.
The foreign ministry of Saudi Arabia and the embassy of Saudi in London did not reply to the journalist’s requests for comment. However, on Thursday a government statement from the Saudi Press Agency (SPA) read that Riyadh notes with regret the decision, despite the latter’s adoption of measures to reinforce its legal framework, leading to enhanced cooperation with its counterparts. The statement added that “The Kingdom reaffirms its commitment to the common fight against money laundering and terrorism financing a commitment it shares with its international partners and allies.” The SPA quoted Saudi that Mohamed al- Jadaan, honorable Finance Minister of Saudi, as saying that fighting the two is a strategic priority and that Riyadh would continue to develop and enhance our regulatory framework to achieve this goal.
Ayham Kamel, the Eurasia Group’s Middle East practice head has said that the country is not effectively nor routinely tracking and reporting any suspicious transactions. However, Riyadh has recently established an anti-money-laundering and anti-terror laws intended to combat terrorism financing, and Kamel notes that a 2018 report from the Financial Action Task Force shows positive compliance by the Saudi government with what’s called AML/CFT anti-money laundering and countering the financing of terrorism.
Kamel said that “EU officials have more latitude to penalize Saudi Arabia after the Jamal Khashoggi killing.” He added that “In all likelihood, Riyadh has been violating some EU standards with misplaced confidence that Europe would be unlikely to move against the kingdom.” The development comes as both Republicans and Democrats are pushing different pieces of legislation aimed at holding Riyadh responsible for the killing of Saudi journalist Jamal Khashoggi, withdrawing the support of United States for the Saudi-led offensive in Yemen, and opposing oil cartel OPEC, of which Saudi Arabia is the most powerful member.
Regardless of the outputs that have come, any blemish on the kingdom’s image adds further challenges to its economic goals set out in Vision 2030, an ambitious plan spearheaded by Crown Prince Mohammed bin Salman to diversify the economy away from oil and drive private sector job creation. Attracting foreign capital is central to that agenda.
The senior analyst of Gulf State Analytics, Cinzia Bianco, said that the language used by the Commission that suggests the move is about encouraging the government, who wants to attract foreign investments, to take proactive steps to become a more palatable destination for European investments. However, she added that the given European banks have already been more cautious than their Asian or American counterparts to engage with Saudi Arabia where political risk is considered very high at the moment this move can impact negatively on the issue even if remains only partially adopted.