PEP Screening in Saudi Arabia: Key Risks and Compliance

According to the Saudi Central Bank, a financial institution must implement effective tools and procedures to assess whether a customer or beneficial owner is a Politically Exposed Person (PEP), whether domestic or foreign.

This PEP screening in Saudi Arabia may include searching various available and reliable information sources to identify the individual, as well as utilizing credible databases designed to screen and verify PEP status. These databases may involve specialized software or automated systems that help determine if a customer, prospective client, or beneficial owner holds such a designation.

Additionally, the institution should incorporate specific questions related to PEP status during the initial onboarding process or while updating and reviewing customer information. It is also important to verify the individual’s official position and assess any associated authority or influence they may possess.

What is PEP Screening in Saudi Arabia?

In Saudi Arabia, Politically Exposed Person (PEP) screening is a critical part of the anti-money laundering (AML) compliance framework. PEP screening refers to the process by which financial institutions identify individuals who hold or have held prominent public positions and may present a higher risk of involvement in corruption, money laundering, or other financial crimes.

The Saudi Central Bank (SAMA), which regulates banks and financial institutions in the Kingdom, mandates the implementation of robust systems to screen customers for PEP status. This screening applies not only at the point of onboarding but also throughout the customer lifecycle via periodic reviews and ongoing monitoring.

Under Saudi AML regulations, the primary goal of PEP screening is to:

• Prevent financial systems from being exploited by corrupt officials or their associates.
  

• Ensure compliance with local and international AML obligations.
  

• Detect and report suspicious activities tied to high-risk individuals.
  

Saudi Arabia aligns with global standards set by the Financial Action Task Force (FATF), of which it is a full member, and incorporates these requirements into its local AML framework; specifically the Anti-Money Laundering Law (Royal Decree M/20 dated 5/2/1439H) and its Implementing Regulations.

Key Takeaway:

PEP screening in Saudi Arabia is a regulatory requirement designed to identify high-risk individuals in positions of power to prevent misuse of the financial system. It aligns with both Saudi and FATF standards for AML compliance.

Who is Considered a Politically Exposed Person in Saudi Arabia?

A Politically Exposed Person (PEP) in Saudi Arabia is someone who holds or has recently held a high-ranking public position that gives them significant influence or access to public funds. Because of this power, they are considered higher risk for potential involvement in corruption, money laundering, or abuse of financial systems.

Common Examples of PEPs in Saudi Arabia:

• Ministers, deputy ministers, and government advisors
  

• Members of the Shura Council or provincial councils
  

• Senior officials in ministries, authorities, or regulatory bodies
  

• Military leaders at high ranks
  

• CEOs or board members of government-owned companies
  

• Judges, prosecutors, and senior legal officials
  

• Ambassadors and senior diplomats
  

This status also includes former officials, not just those currently in office. Financial institutions must identify them during onboarding and review their status over time.

Who Is Considered a Close Associate?

According to Saudi AML regulations and FATF guidance, a close associate includes:

• Immediate family members, such as:
  

• Spouse or life partner
  

• Children and their spouses
  

• Parents
  

• Siblings
  

• Business or personal associates, such as:
  

• People with joint ownership of companies or assets with the PEP
  

• Individuals who are known to have close business relationships
  

• Anyone who acts on behalf of the PEP (e.g., legal representatives or personal assistants)
  

Banks and other financial institutions must monitor these individuals with the same level of care as the PEP themselves. This includes identifying them during onboarding and applying enhanced due diligence if needed.

Is PEP Status Permanent or Limited in Time in Saudi Arabia?

In Saudi Arabia, PEP status does not last forever, but it doesn’t end immediately when a person leaves their public role either. This means PEP status is time-bound, not permanent.

Financial institutions must assess how much time has passed since the person left their position. Factors that help decide whether to still treat someone as a PEP include:

• Level of their former position
  

• How long ago they left office
  

• Ongoing ties or influence they may still have
  

• The nature of the business relationship

Read more: Politically Exposed Persons in the UAE and AML Compliance

What are the Core Elements of PEP Screening in KSA?

Effective PEP screening requires a clear grasp of key components that guide compliance and risk management within Saudi financial institutions.

What Does PEP Screening Cover?

PEP screening applies broadly to all individuals and entities interacting with Saudi banks and financial institutions, including:

• The PEPs themselves
  

• Their immediate family members and close associates
  

• Companies owned or controlled by PEPs
  

The Legal Backbone Behind PEP Screening

The framework for PEP screening in Saudi Arabia is built on:

• The Anti-Money Laundering Law
  

• Regulations issued by the Saudi Central Bank
  

• International standards set by the Financial Action Task Force (FATF)

Who Oversees PEP Screening?

• The Saudi Central Bank (SAMA) is the principal regulator for banks and financial firms
  

• The Financial Intelligence Unit (FIU) monitors suspicious transactions involving PEPs
  

Evaluating Risk Associated with PEPs

Risk assessment involves analyzing:

• The official role and country of the PEP
  

• The nature and duration of the business relationship
  

• Transaction behaviors and source of funds
  

Meeting Compliance Requirements

Institutions must:

• Develop and maintain formal policies on PEP screening
  

• Train employees to identify and manage PEP risks
  

• Use accurate screening tools and up-to-date databases
  

• Keep records and report any suspicious activities promptly
  

Why PEP Screening Matters

The main objectives are to:

• Saudi Arabia’s economy, heavily reliant on oil exports, handles large sums of money that require careful monitoring to avoid misuse by politically influential individuals.
  

• The Kingdom’s commitment to international anti-corruption standards means banks and financial firms must thoroughly check whether clients hold public or political positions.
  

• As Saudi Arabia works to diversify its economy through Vision 2030, attracting trustworthy foreign investments depends on maintaining a clean and transparent financial system.
  

• Identifying politically exposed persons helps protect the country’s financial institutions from being involved in corruption or illegal financial activities.
  

• Strict PEP screening safeguards the reputation of Saudi banks, ensuring they remain credible partners both locally and internationally.
  

• Saudi regulators, including the Saudi Central Bank (SAMA), require detailed checks on customers to meet the nation’s legal and ethical standards for financial conduct.

Read more: PEP Screening in Qatar: Compliance Requirements and Risk Management

Types and Categories of PEPs in Saudi Arabia

In Saudi Arabia, PEPs are classified by their role (minister, judge, general, etc.) and by category (domestic, foreign, international). These distinctions help financial institutions assess risk and apply the right level of due diligence.

Types of PEPs (Based on Role or Position)

These are the most common types of roles that qualify someone as a PEP:

• Government Executives

• Legislative Members

• Judicial and Legal Officials

• Military and Security Officers

• Senior Executives of State-Owned Enterprises
  Diplomats and Consular Staff
  Top Officials in International Organizations

PEP Categories (Based on Jurisdiction or Exposure)

Saudi regulations and FATF standards classify PEPs into these key categories:

1. Domestic PEPs: Individuals who hold or have held a public role within Saudi Arabia.

2. Foreign PEPs: Individuals who have held a public role in a foreign country. These are considered higher risk and require automatic enhanced due diligence (EDD).

3. International Organization PEPs: People in senior leadership roles in global or regional organizations (e.g., World Bank, UN agencies, GCC Secretariat

PEP Screening Requirements in Saudi Arabia

In Saudi Arabia, financial institutions are legally required to identify and monitor Politically Exposed Persons (PEPs) as part of their anti-money laundering (AML) responsibilities.

Who Must Comply?

• Banks and Islamic banks
  

• Money exchange and remittance companies
  

• Financing companies and leasing firms
  

• Insurance companies (for life and investment-linked products)
  

• Securities and investment firms
  

• Designated Non-Financial Businesses and Professions (DNFBPs), such as law firms and real estate agents
  

What Are the Key Requirements?

1. Identify PEPs and Their Associates

1. Screen all clients at onboarding, and during periodic reviews
   

2. Include beneficial owners, legal representatives, and close associates
   

2. Apply a Risk-Based Approach

1. Automatically apply Enhanced Due Diligence (EDD) for foreign PEPs
   

2. Use risk assessment to decide EDD for domestic and international organization PEPs
   

3. Ongoing Monitoring

1. Continuously review customer transactions for unusual or suspicious patterns
   

2. Conduct periodic screening using updated PEP lists
   

4. Keep Records

1. Maintain documentation of PEP status, EDD measures, and decisions taken
   

2. Records must be kept for at least 10 years, as per Saudi AML Law
   

5. Staff Training

1. Employees must be trained regularly on how to identify and handle PEPs
   

2. Training should include updates on regulatory expectations and red flags
   

6. Use Reliable Screening Tools

1. Institutions must use credible, up-to-date PEP databases and screening technology
   

Key Takeaway:

Saudi financial institutions are required to identify PEPs, assess their risk level, monitor their activity, and apply enhanced due diligence, especially for foreign PEPs, all under the Saudi Central Bank and FATF rules.

Red Flags to Watch for When Dealing with PEPs

Financial institutions in Saudi Arabia should watch for red flags that may suggest a PEP is involved in suspicious or high-risk activity. These indicators must be evaluated along with the PEP’s position, background, and the nature of the relationship.

• Unexplained wealth or sudden increases in assets
  

• Use of complex ownership structures
  

• Transfers to or from high-risk countries or secrecy jurisdictions
  

• Inconsistent source of funds or vague income declarations
  

• Frequent or unusual transactions, especially in cash
  

• Relationships with known associates involved in corruption

Automate PEP Screening in Saudi Arabia with FOCAL

FOCAL helps Saudi institutions automate PEP screening with accuracy, comply with local AML rules, and manage risk in real time, all while cutting operational costs.

FOCAL is designed to meet the specific requirements set by the Saudi Central Bank (SAMA), ensuring full alignment with the country’s AML and counter-terrorist financing laws. It also offers continuous monitoring, meaning that if a customer’s PEP status changes or new risks are detected, the system will automatically send alerts.

Additionally, it includes a smart risk-scoring engine, helping compliance teams focus on the highest-risk profiles. With its ability to scale and adapt to regulatory updates, FOCAL allows financial institutions in Saudi Arabia to stay compliant, save time, and reduce risk more efficiently.