Guide to Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing

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Guide to Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing

Saudi Central Bank (SAMA) Rabi' al-Thani 1442 AH / November 2020 AD

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Table of Contents

Subject	Paragraph No.	Page No.
-- Foreword	5	3
1. Freezing of Specified Funds According to Mechanisms Issued for Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing	1	5
2. Funds Subject to Freezing Under the Resolutions	6	6
3. Mechanism for Financial Institutions to Verify All Customers Against Listed Names	7	7
4. Procedures to be Followed by Financial Institutions When Freezing is Lifted	8	8
5. Confidentiality of Information	9	8
6. SAMA's Verification Mechanism for Financial Institutions' Compliance with Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing	9	9
7. Penalties Applied in Case of Non-Compliance with Requirements and Procedures Specified in the Mechanisms for Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing	7	9
8. Obtaining Information	9	9
9. Notification and Appeal Mechanism	9	9
10. Other Guidelines and Instructions	10	10
11. SAMA Circular No. 391000014326 dated 6/2/1439 AH (corresponding to 26/10/2017 AD) (Appendix No. 1)	--	11
12. SAMA Circular No. 381000077863 dated 22/7/1438 AH (corresponding to 19/4/2017 AD) (Appendix No. 2)	--	12

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Foreword: Security Council resolutions related to combating terrorism and its financing oblige countries to promptly freeze all funds, financial assets, or other economic resources belonging to or owned, controlled, or held by those individuals, groups, institutions, and entities, including funds derived from property owned or controlled directly or indirectly by them, or by persons acting on their behalf or directed by them. They must also take all measures to ensure that such funds, financial assets, and economic resources are not made available directly or indirectly to these persons, or through their nationals, or any other persons within their territory.

Pursuant to this obligation, the Royal Order No. 25505 dated 22/5/1433 AH (corresponding to 13/4/2012 AD) was issued, approving the mechanism for Security Council Resolution No. (1989/1267) and the mechanism for Resolution No. (1988), which were communicated to relevant enforcement authorities via Ministry of Interior telegram No. 38954 dated 6/6/1433 AH (corresponding to 27/4/2012 AD). On 25/4/1438 AH (corresponding to 23/1/2017 AD), the first update to the mechanisms for enforcing Security Council resolutions related to combating terrorism and its financing was issued via Ministry of Interior telegram No. (109130) dated 25/4/1438 AH, based on Article (32) of the Anti-Terrorism and Counter-Terrorist Financing System issued by Royal Decree No. (M/16) dated 24/2/1435 AH. On 4/5/1440 AH, the second update was issued via State Security Administration telegram No. 32576 dated 4/5/1440 AH, based on Article (75) of the Anti-Terrorism and Counter-Terrorist Financing System issued by Royal Decree No. (M/21) dated 12/2/1439 AH, which stipulates that "the Standing Committee for Combating Terrorism and its Financing shall receive requests from countries, bodies, and organizations regarding Security Council resolutions related to combating terrorism or its financing, establish mechanisms, update them, take necessary measures and procedures to enforce Security Council resolutions related thereto, and issue decisions by the Chairman of State Security." These include:

1. The mechanism for enforcing Security Council Resolution No. (2253/1989/1267) regarding the Unified List of the Security Council Committees, which covers Al-Qaeda, ISIS (Daesh), and related individuals, groups, institutions, and entities, known as the "Sanctions List regarding Al-Qaeda, ISIS, and related individuals, groups, institutions, and entities."
2. The mechanism for enforcing Security Council Resolution No. (1988) and subsequent related resolutions, which includes names of individuals and entities listed before the adoption of Resolution 1988, as well as other individuals, groups, institutions, and entities associated with the Taliban movement that threaten peace, stability, and security in Afghanistan, as decided by the committee established under paragraph 30 of Resolution 1988.
3. The mechanism for enforcing Security Council Resolution No. (1373), which targets any person who directly or indirectly, by any means, and with intent, provides or collects funds, or attempts to do so, for the purpose of carrying out terrorist acts, or knowing them to be destined for such use, wholly or partially, for any purpose even if the terrorist act has not yet occurred, or is related to a specific terrorist act regardless of where it occurred or was planned. It includes individuals, groups, institutions, and entities targeted by countries nationally, listed on the Unified List of Committee (2253/1989/1267) and Committee (1988), with updates received solely from the State Security Administration.

Accordingly, SAMA directed supervised financial institutions to adopt a number of implementation measures for the updated mechanisms via Circular No. 381000077863 dated 22/7/1438 AH (corresponding to 19/4/2017 AD) (Appendix No. 2). To ensure optimal implementation by supervised financial institutions, SAMA has updated this Guide to Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing, which was issued via SAMA Circular No. 391000014326 dated 6/2/1439 AH (corresponding to 26/10/2017 AD) (Appendix No. 1).

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Guide to Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing

.1 Freezing of Specified Funds According to Mechanisms Issued for Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing: 1-1. In compliance with Security Council resolutions related to combating terrorism and its financing, and in implementation of the relevant mechanisms, financial institutions must promptly (within hours) and without prior notice freeze any funds, economic resources, or property owned, controlled, or held, wholly or partially, directly or indirectly, by any of the following: (a) Any person, group, or entity listed on the Security Council Committee (2253/1989/1267) or Committee (1988) lists. (b) Any person, group, or entity listed on the aforementioned Security Council committees in paragraph (a), acting on their behalf, directly or indirectly, owned by them, controlled by them, directed by them, or held by them. 2-1. The mechanisms for enforcing Security Council resolutions related to combating terrorism and its financing prohibit any natural or legal person, including all categories of financial institutions, from making available to any listed person, group, or entity any funds, economic resources, or property. They are also prohibited from providing any form of financial or other services directly or indirectly to these persons or for their benefit, except after the name is removed by the Security Council committees or upon obtaining a prior reasoned permit from SAMA. 3-1. The mechanisms also require daily monitoring of updates to United Nations listed names by referring to the websites of Committee (2253/1989/1267) and Committee (1988). Both committees maintain electronic websites containing updated regulations with listed names at the following addresses: • https://www.un.org/sc/suborg/ar/sanctions/1988/materials • http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml All Security Council resolutions adopted under the United Nations can be found at: http://www.un.org/ar/sc/documents/resolutions/

4-1. SAMA must be notified of freezing within five working days (as a maximum), providing full details about the account or transaction as detailed in paragraph 3-3(c) of this Guide. In case of name similarities, SAMA must be notified and appropriate measures taken (freezing or not freezing until directed by SAMA) based on the similarity degree assessed by financial institutions using available information and data. 5-1. Immediate freezing is applied to any names classified by the Kingdom of Saudi Arabia according to Security Council Resolution No. (1373), for which freezing requests are issued through the State Security Administration (Standing Committee for Combating Terrorism) and transmitted to financial institutions via SAMA. 6-1. Payments made to listed names (individuals, groups, institutions, or entities) may be added to frozen accounts, provided these payments remain frozen and SAMA is notified.

.2 Funds Subject to Freezing Under the Resolutions: 1-2. The obligations specified in the mechanisms for enforcing Security Council resolutions related to combating terrorism and its financing apply to any "funds," a term broadly defined in the mechanisms to include: "assets, economic resources, or property of any kind, however obtained, regardless of value or type, whether tangible or intangible, movable or immovable, including documents, instruments, or evidence indicating ownership or interest therein (including, but not limited to, checks, drafts, stocks, securities, bonds, bills of exchange, letters of credit, and any interest, profits, or other income arising from or generated by such funds or assets, whether within or outside the Kingdom of Saudi Arabia)." 2-2. The freezing order extends to funds owned, controlled, or held wholly or partially, directly or indirectly, by the concerned person. For example, it applies to companies controlled by the listed person, bank accounts formally or informally held in their name, joint accounts, credit funds, companies owned by the listed person (e.g., through children or spouse), shell/nominee companies used by the listed person, joint ventures, and companies with complex ownership structures designed to conceal control. These are examples illustrating that any funds under the control or ownership of a listed person, in any form, directly or indirectly and through any mechanism, fall within the scope of Security Council resolutions. 3-2. It is important to note that funds owned, controlled, or held jointly by a listed person/group/entity and an unlisted person/group/entity are fully subject to the freezing order, including the portion owned or controlled by the unlisted party. They are not disposed of until referring to SAMA, which in turn refers the matter to the State Security Administration (Standing Committee for Combating Terrorism) for consideration, with each case handled individually.

.3 Mechanism for Financial Institutions to Verify All Customers Against Listed Names: 1-3. Financial institutions must continuously and daily verify customer databases and any obtained information about potential or existing customers against the names listed by the relevant Security Council committees, determining whether financial institutions hold or manage any funds subject to these committees' resolutions. Consequently, an updated list of listed entities and persons must be maintained in the database. This also applies to names classified nationally under Security Council Resolution No. (1373) received from the State Security Administration and transmitted by SAMA to supervised financial institutions. 2-3. Some financial institutions rely on electronic services that verify customers are not subject to sanctions related to Committee (2253/1989/1267) or Committee (1988). These electronic services are useful but cannot be considered a guaranteed compliance with imposed procedures. Daily and continuous verification against names listed by UN sanctions committees is required. The basis for monitoring updates and ensuring application of sanctions on listed names remains the electronic websites of both committees, referenced above in paragraph 3-1. 3-3. If a financial institution discovers that any funds in its custody or management are subject to freezing, it must take the following steps: a. Promptly freeze (within hours) all such funds and any derived or generated funds without prior notice. b. Refrain from providing any financial or other services, or making funds available, to any listed person, group, or entity or for their benefit. This prohibition covers any type of service provided to the listed person/group/entity, including opening accounts or providing financial/consulting/brokerage/investment services, or any assets/property (tangible/intangible, movable/immovable) directly or indirectly. c. Notify SAMA of the freezing within five working days (as a maximum) from the imposition date, providing information on fund status, measures taken, nature and quantity of frozen funds, and any other relevant information facilitating compliance. Financial institutions must ensure the accuracy of provided information. 4-3. If a financial institution determines that no targeted funds are in its custody or management, it must immediately notify SAMA if a previous or transient customer is/was a listed person, group, or entity. 5-3. In case of name similarities, financial institutions must search through available means to confirm whether the names match or not. If they cannot obtain information confirming a match, they must immediately notify SAMA without taking any action.

.4 Procedures to be Followed by Financial Institutions When Freezing is Lifted: 1-4. If a name is removed by Security Council Committees (2253/1989/1267) and (1988), the freezing must be lifted promptly (within hours) without prior notice, and SAMA must be notified (as clarified in paragraph 2-4 below), unless prior notice of non-lifting due to classification under Security Council Resolution No. (1373) is received. For names whose relationships were previously frozen based on SAMA directives, they remain frozen until SAMA issues instructions to lift the freezing. 2-4. SAMA must be notified of the lifting within five working days (as a maximum) from the lifting date, providing information on fund status, measures taken, nature and quantity of unfrozen funds, and other relevant information. Financial institutions must ensure accuracy. 3-4. If the Security Council approves partial lifting of frozen funds and other assets identified under Resolution No. (1452), SAMA will notify supervised financial institutions accordingly.

.5 Confidentiality of Information: Financial institutions must ensure confidentiality of information related to listed names according to Security Council resolutions, in compliance with relevant regulations and instructions, including the Anti-Money Laundering System, the Anti-Terrorism and Counter-Terrorist Financing System, and SAMA's AML/CFT rules.

.6 SAMA's Verification Mechanism for Financial Institutions' Compliance with Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing: Financial institutions must take all measures ensuring full compliance with sanctions imposed on names listed by Committees (2253/1989/1267) and (1988), and names transmitted by SAMA based on Security Council Resolution No. (1373). Full compliance will be verified through field visits, and penalties specified in relevant regulations will be applied in case of financial institutions' negligence, delay, or failure to implement instructions.

.7 Penalties Applied in Case of Non-Compliance with Requirements and Procedures Specified in the Mechanisms for Enforcing Security Council Resolutions Related to Combating Terrorism and its Financing: Any person who delays imposing freezing or fails to execute a freezing order against names subject to the mechanisms for enforcing Security Council resolutions related to combating terrorism and its financing is subject to accountability under relevant regulations. This also applies to any person who makes funds or related services available to the listed person or for their benefit in violation of the mechanisms, fails to disclose information or discloses incorrect information intentionally or due to negligence, or delays providing information.

.8 Obtaining Information: Financial institutions must obtain accurate information, whether basic or regarding potential/existing customers, to verify against names listed by the relevant Security Council committees. This includes information related to beneficial ownership of legal persons (e.g., shell companies) when investigating crimes or violations concerning Security Council resolutions addressing terrorist financing.

.9 Notification and Appeal Mechanism: Persons classified under Security Council resolutions have the right to be notified that enforcement measures are being applied against them as they appear in the relevant lists. They also have the right to file appeal cases, either within or outside the Kingdom, against any decisions issued against them in accordance with the Diwan Al-Mazalim System and the Anti-Terrorism and Counter-Terrorist Financing System, while respecting the rights of good-faith third parties acting in compliance.

.10 Other Guidelines and Instructions: Notified financial institutions must identify, assess, understand, document, and update their terrorist financing risks, providing risk assessments to SAMA upon request. This considers a wide range of risk factors including those related to customers, countries or geographic regions, products or services, transactions, or delivery channels. Risk assessment studies for new products and operational practices/technologies must be conducted before use. Updates to the national unified list under Security Council Resolution No. (1373) must be monitored daily and continuously through the State Security Administration website (Standing Committee for Combating Terrorism and its Financing), noting any amendments such as new listings, deletions, or data modifications. Updates must be tracked directly via the electronic website of the Standing Committee for Combating Terrorism and its Financing under State Security Administration. Assessments must be conducted on the quality of applied procedures for: (1) Naming/Listing, and (2) Freezing or Lifting Freezing, and (3) Removing names from lists? And the extent to which these procedures comply with Security Council resolutions. -- End --

Appendix No. (1)

Appendix No. (2)