Customer Screening in Saudi Arabia for AML Compliance

Customer screening in Saudi Arabia is essential for compliance and crime prevention, requiring careful verification, risk assessment, and ongoing monitoring tailored to the Kingdom’s regulatory environment.

This process helps banks and other financial institutions comply with Saudi Arabian laws and international standards such as those set by the Financial Action Task Force (FATF).

What is Customer Screening in Saudi Arabia?

According to Saudi Arabia AML law,

“ The financial institution shall develop a policy for acceptance of new customers and business relationships, which includes due diligence measures to identify and verify a customer, a person acting on his behalf, or a beneficial owner. The policy shall be consistent with the risk assessment results and shall be documented and approved at the level of the board of directors.”

This means a financial institution (like a bank or other regulated company) must create a formal policy for how it accepts new customers and starts new business relationships. This policy should include:

• Due diligence measures: Steps to properly identify and verify who the customer is. This also applies to anyone acting on the customer’s behalf (like an agent) or the ultimate beneficial owner (the person who ultimately owns or controls the customer).

The policy should be aligned with the risk assessment results, meaning it must reflect how risky the customer or relationship might be (for example, some customers might pose higher risks for money laundering or fraud).

Finally, the policy must be documented clearly and approved by the board of directors, ensuring top-level oversight and accountability.

In simple terms, the bank or financial company needs to have clear rules for checking new customers carefully, especially to prevent fraud or illegal activities. These rules should match how risky each customer is and must be officially written down and approved by the company’s leadership.

The Regulatory Framework of Customer Screening in Saudi Arabia

Saudi Arabia’s commitment to global AML/CTF standards is demonstrated by its membership in the Financial Action Task Force (FATF) since 2019. The Kingdom continually updates its laws and practices to align with FATF recommendations, including enhanced customer screening protocols.

Moreover, in June 2025, Saudi Arabia has signed a Memorandum of Understanding (MoU) with Kuwait to boost regional collaboration on AML/CTF efforts, facilitating information sharing and joint investigations.

Key Regulatory Authorities

1. Saudi Central Bank (SAMA): As the primary regulator for banks and financial institutions, the Saudi Central Bank issues AML/CFT regulations, supervises compliance, and enforces penalties. The Saudi Central Bank’s guidelines require institutions to maintain effective customer screening processes and conduct periodic risk assessments.

2. Saudi Financial Intelligence Unit (SAFIU): SAFIU oversees suspicious transaction reporting and coordinates investigations with other government agencies.

3. Capital Market Authority (CMA): Responsible for regulating the securities sector, the CMA also imposes AML/CTF compliance requirements on capital market participants.

Key Takeaway:

Customer screening in Saudi Arabia is governed by stringent AML and CTF laws enforced by the Saudi Central Bank and other bodies, with ongoing alignment to FATF standards and increasing regional cooperation to enhance financial crime prevention.

Read more: Key Aspects of Customer Screening in Kuwait for AML Compliance

The Customer Screening Lifecycle

Effective customer screening in Saudi Arabia is a multi-stage process designed to manage risk throughout the customer relationship. It begins at onboarding and continues with ongoing vigilance to detect suspicious activity.

1. Know Your Customer (KYC): The Foundational Step

The KYC process involves collecting and verifying essential customer information to establish identity and assess risk. This includes:

• Personal identification: Valid government-issued IDs such as the Saudi National ID or Iqama for expatriates.
  

• Proof of address: Utility bills or tenancy contracts.
  

• Source of income and wealth: Documentation confirming the legitimacy of funds.
  

2. Enhanced Due Diligence (EDD) for Higher-Risk Customers

Certain customers pose increased risks, necessitating additional scrutiny. These include:

• Politically Exposed Persons (PEPs): Individuals holding prominent public roles or their close associates. Read more: Politically Exposed Persons in the UAE and AML Compliance
  

• Customers from high-risk jurisdictions: Countries with weak AML controls or those subject to sanctions.
  

• Complex or opaque ownership structures: Entities with unclear beneficial ownership.
  

EDD involves deeper investigation, ongoing monitoring, and senior management approval before onboarding.

3. Beneficial Ownership Identification

Saudi regulations require identification of the Ultimate Beneficial Owners (UBOs) behind legal entities. This transparency is critical to prevent misuse of shell companies or nominee arrangements for illicit purposes.

4. Ongoing Monitoring and Transaction Surveillance

Customer screening doesn’t end at onboarding. Continuous monitoring involves analyzing transaction patterns for anomalies, such as unusual transfers or activity inconsistent with the customer profile. Alerts triggered by automated systems prompt further investigation and, if necessary, suspicious activity reporting.

This ongoing vigilance helps financial institutions in Saudi Arabia stay ahead of evolving risks and regulatory expectations.

Key Takeaway:‍

Customer screening in Saudi Arabia is a continuous lifecycle, starting with thorough KYC and enhanced due diligence, extending to ongoing monitoring to effectively identify and mitigate financial crime risks.

Read more: Sanctions Screening in Saudi Arabia: Regulations, Challenges, and Best Practices

Advanced Screening Technologies in Saudi Arabia

In response to growing regulatory demands and increasing transaction volumes, financial institutions in Saudi Arabia are leveraging advanced technologies and tools to enhance customer screening efficiency and accuracy.

1. Automated Sanctions and Watchlist Screening

Automated name screening tools are critical for quickly comparing customer data against comprehensive sanctions and watchlists, including:

• Domestic lists: Issued by Saudi authorities such as the Saudi Central Bank and SAFIU.
  

• International lists: Maintained by the United Nations Security Council, FATF, OFAC (US), and EU.
  

These systems use fuzzy matching algorithms to detect variations in names and reduce false negatives. Regular updates to watchlists ensure institutions remain compliant with evolving sanctions regimes.

2. Politically Exposed Persons (PEP) Detection Tools

PEP screening tools enable institutions to identify customers with political exposure and their close associates. They incorporate databases of domestic and international PEPs and apply risk scoring models to prioritize enhanced due diligence efforts.

3. Adverse Media and Negative News Monitoring

Open-source intelligence tools automatically scan global media, legal databases, and public records for negative news about customers, such as allegations of corruption, fraud, or other criminal activity. This real-time insight supplements formal watchlist screening and informs risk assessments.

4. Transaction Monitoring Systems

Sophisticated transaction monitoring platforms analyze customer behavior patterns, flagging unusual or suspicious activity based on pre-defined rules and machine learning models. These platforms integrate with customer profiles to contextualize alerts and reduce false positives.

5. Use of Artificial Intelligence and Machine Learning

Emerging technologies like AI and ML are increasingly used to enhance screening accuracy. They help detect complex patterns, adapt to new typologies, and improve alert prioritization, enabling faster and more effective investigations.

Key Takeaway:‍

Saudi financial institutions are embracing automated screening, PEP detection, adverse media analysis, and AI-driven transaction monitoring tools to meet regulatory expectations and efficiently mitigate financial crime risks.

Challenges in Customer Screening in Saudi Arabia

While customer screening is essential for fighting financial crime in Saudi Arabia, many banks and financial institutions encounter real-world obstacles that make the process complex and demanding.

1. Keeping Up with Changing Rules and Regulations: Saudi AML laws are always evolving. Staying updated with new guidelines from the Saudi Central Bank and other regulators requires constant effort, training, and system tweaks, which can be resource-intensive.

2. Getting Accurate Customer Information Isn’t Always Easy: Collecting complete and reliable data, especially from expatriates or corporate clients, can be tricky. Missing or inconsistent details sometimes lead to mistakes in screening or extra work to verify identities.

3. Too Many False Alarms Can Slow Things Down: Automated screening tools sometimes flag innocent customers because of name similarities or incomplete information. Sorting through these false positives takes up valuable time and can overwhelm compliance teams.

4. Finding the Real Owners Behind Complex Companies: Customers using multi-layered or unclear ownership structures make it tough to identify the true beneficial owners, creating blind spots in risk assessments.

5. Making Old and New Systems Work Together: Many institutions still rely on legacy IT systems that don’t easily connect with the latest screening technologies, causing inefficiencies and delays.

6. Balancing Thorough Checks with a Smooth Customer Experience: Strict screening is necessary, but too much paperwork or delays can frustrate customers and hurt businesses. Finding the right balance is key.

7. Limited Sharing of Information Across Borders: Though regional cooperation is improving, there’s still limited data sharing among Gulf countries and beyond, which can leave gaps in understanding customer risks.

Key Takeaway:‍

Saudi financial institutions face real challenges like evolving regulations, data issues, false positives, ownership transparency, tech integration, customer experience, and cross-border cooperation, all requiring smart strategies to keep screening effective and efficient.

Best Practices for Effective Customer Screening in Saudi Arabia

To effectively address the challenges of customer screening, financial institutions in Saudi Arabia should adopt a risk-based approach that focuses resources and enhanced due diligence on higher-risk customers such as politically exposed persons (PEPs), foreign nationals from high-risk jurisdictions, and entities with complex ownership structures.

Maintaining accurate and up-to-date customer data is critical, and institutions should implement rigorous verification and periodic updates using reliable sources and digital tools to minimize errors and information gaps.

• Implement a Risk-Based Approach

• Keep Customer Data Accurate and Up to Date

• Leverage Advanced Screening Technologies

• Enhance Staff Training and Awareness

• Strengthen Beneficial Ownership Transparency

• Improve Systems Integration

• Foster Regional and International Collaboration

• Balance Compliance with Customer Experience

How to Screen Customers in Saudi Arabia?

The FOCAL crime prevention platform provides a real-time customer screening solution designed to help Saudi Arabian financial institutions meet strict AML and CTF regulatory requirements while enhancing operational efficiency and reducing risk.

Built with compliance at its core, FOCAL screens against more than 1,300 global watchlists, including, Sanctions lists (UN, OFAC, EU, and others), Politically Exposed Persons (PEPs), and Relatives and Close Associates (RCAs).

During customer onboarding, FOCAL automatically checks new clients against these continuously updated lists, generating instant alerts if a match is found. This enables institutions to take immediate action and maintain compliance with both Saudi Central Bank (SAMA) regulations and FATF recommendations.