Over the past years a number of steps have been taken including: •  In 1990, the Kingdom ratified the UN Convention against Illicit Traffic in Narcotics and Psychotropic Substances. •  In 1995, SAMA issued a manual containing “Guidelines for Prevention and Control of Money Laundering Activities”. These required Saudi banks to implement “Know Your Customer” rules, maintain records of suspicious transactions and report any suspicious activities to law enforcement agencies and SAMA. •  In 2003, SAMA issued revised AML-CTF Rules that updated previous requirements and provided a comprehensive framework for KYC requirements, according to the 40+8 FATF Recommendations and the Basel Recommendations. These Rules provide for strong sanctions to be imposed on banks and individuals that fail to implement these requirements. BIS Review 59/2006  3  •  In August 2003, the Council of Ministers approved a Law for Combating Money Laundering. Subsequently, a Financial Intelligence Unit was created in the Ministry of Interior and was staffed with expert resources. •  Also in 2004, the Financial Action Task Force carried out a review of the implementation of its 40 plus its 8 special recommendations. This review indicated that Saudi Arabia was fully or largely compliant with almost all FATF recommendations. •  Finally, in 2005 Saudi Arabia became a member of FATF Regional Body for Middle East and North Africa (MENAFATF) and a Saudi official from SAMA was elected and appointed as the Executive Secretary of this regional body.
Finally, another important supervisory development has been the adoption, in 2004, of a risk based supervisory approach by SAMA. This has significantly strengthened and made more efficient the onsite and off-site supervision practiced by SAMA. This approach is proactive and requires enhanced and frequent communication with banks at all levels. It brings SAMA supervision fully in line with the new international standards. In recent years, the strength of the Saudi banking system and SAMA’s sound banking supervision practices have been recognized by a number of important international institutions. One of the findings of the Financial Sector Assessment Program by an IMF/WB Team in 2005 indicated that the SAMA Banking Supervision, fully or largely met the 25 Basle Core Principles. On the other hand, external rating agencies including S&P, Fitch and Capital Intelligence in 2004 and 2005 have issued favourable reports on the Saudi Banking system. The recent external rating upgrade by S&P to A+ reflects the inherent strength of the domestic banking system. The developments of the banking sector have been reflected positively on the performance of the Saudi economy. Over the preceding three years, GDP (at current prices) have increased by an annual average growth rate of 18.1%, and private sector GDP by 6.7%. Money supply has grown by an annual average rate of 12.9%, providing adequate liquidity to growth requirements of the economy.