Banking on Saudi SAMA’s advice to combat financial crime

Fraudulent operations and money laundering transactions are often interrelated and linked

  
A Saudi money changer counts U.S banknotes at a currency exchange shop in Riyadh, Saudi Arabia September 29, 2016. Image used for illustrative purpose.

A Saudi money changer counts U.S banknotes at a currency exchange shop in Riyadh, Saudi Arabia September 29, 2016. Image used for illustrative purpose.

REUTERS/Faisal Al Nasser
 

The advances in modern communications technology have been incredible, such as high-speed internet, text messaging, social networking sites, WhatsApp, and smartphones. However, where there are pioneers there are also criminals.

The Saudi Central Bank (SAMA) has indicated that technology in the field of banking business has proven to be a double-edged sword.

While it has made life easier, faster, and more convenient, as the cost of computers, printers, and scanners decreases, it is now easier for fraudsters to set up operations. Using ordinary, everyday, cheaply available equipment, they can immediately set about targeting potential victims.

SAMA has defined fraud as “any act involving deceit to obtain a direct or indirect financial benefit by the perpetrator or by others with his help, causing a loss to the deceived party.”

Fraud is not necessarily limited to obtaining cash and tangible benefits, since the definition includes a financial gain, in addition to other benefits, such as the right to have access to or obtain information by deceit or any other dishonest conduct.

Fraudulent operations and money laundering transactions are often interrelated and linked. Fraud is considered a gateway to money laundering because the proceeds generated from illegal operations are considered dirty money and criminals usually clean it up through the financial markets and banking system.

Stealing ATM or credit cards and withdrawing cash are examples of some common fraudulent techniques. Promoting and advertising fabricated investments and using fake profiles to try and obtain users’ personal information are some of the more sophisticated methods used by fraudsters.

The Saudi Ministry of Finance has warned against dealing or investing in virtual currencies, including cryptocurrencies, as they are not legally recognized in the Kingdom.

The ministry has also alerted investors to virtual currencies which claim to have a relationship with the Kingdom by using the name of the national currency the Saudi Riyal, or the country’s emblem of two crossed swords with a palm tree.

In addition, SAMA has issued warnings against the activity of trading in securities through unlicensed foreign exchanges, which some fraudsters have used to entrap their victims and promote fake investments.

The central bank has also urged bank customers to be vigilant and not respond to messages from senders claiming to be SAMA employees and attempting to obtain their personal banking details.

SAMA has always been proactive in protecting individuals from becoming victims of fraudulent operations by alerting them to the importance of protecting personal information and financial records.

However, for the alerts to work and be effective, individuals (banks’ clients and other financial institutions) should treat the warnings seriously in order to help reduce the number of victims of financial crime.

• Talat Zaki Hafiz is an economist, financial analyst, and a board member of the Saudi Financial Association. Twitter: @TalatHafiz

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