Regulatory Alerts2021-02-13
Financial Frauds Through Prior Authorization and Notification Features
The Saudi Central Bank (SAMA) requires acquiring service providers and POS transaction hosts to exercise caution, adhere to international payment network directives, and restrict prior authorization and notification features exclusively to targeted sectors. Service providers must actively monitor and investigate suspicious or high-risk transactions relative to customer segments and transaction amounts, while implementing compliant fraud monitoring and detection systems. Full adherence is mandated with the Financial Fraud Prevention Guide issued under SAMA Circular No. 41.71315 dated 27/12/1441 AH, effective immediately.
Saudi Central Bank (SAMA)
Circular
To: Respected Parties,
Peace, mercy, and blessings of God be upon you.
Subject: Financial Frauds Through Prior Authorization and Notification Features.
Reference is made to the Saudi Central Bank's (SAMA) supervisory role in striving to combat financial fraud crimes and overseeing financial transactions executed through various payment instruments, such as credit cards or debit cards and similar instruments, via point-of-sale (POS) devices available in stores and commercial sectors across the Kingdom.
We wish to inform you that it has recently been observed that certain parties are executing suspicious transactions through POS devices via fraudulent practices by exploiting the prior authorization feature (Preauthorization transaction) and the notification/capture feature (Capture / Purchase Advise) using bank cards belonging to global payment networks.
In order to protect the host banks, financial technology companies, and their clients from any suspicious transactions that may result in these entities facing consequences of financial fraud crimes, the Saudi Central Bank emphasizes the importance of all acquiring service providers for POS transactions exercising caution and adhering to relevant directives from international payment networks when allowing this type of transaction, and ensuring that it is exclusively available to targeted sectors according to relevant standards. Furthermore, all service providers should monitor transactions executed via the prior authorization and notification features, investigate suspicious and high-risk transactions relative to the customer segment and transaction amount, and develop financial fraud monitoring and detection systems (Fraud Monitoring & Detection System) in compliance with these standards. Full compliance is also emphasized with the Financial Fraud Prevention Guide issued under SAMA Circular No. 41.71315 dated 27/12/1441 AH.
For your information and action, effective from its date.
Yours sincerely,
Fahd bin Ibrahim Al-Shathri
Deputy Governor for Supervision
Distribution Scope:
- Banks operating in the Kingdom
- Payment service companies
P.O. Box 2992 Riyadh 11169, Kingdom of Saudi Arabia Tel: +966 11 463 3000
P.O. Box: 2992, Riyadh, 11169, Kingdom of Saudi Arabia Tel: +966 11 463 3000