Saudi Arabia Public Prosecution Takes Actions Against Money Laundering

Since the 2020 revisions that gave it independent powers to investigate major crimes requiring detention, the Saudi Arabia Public Prosecution has taken a number of steps that demonstrate its commitment to pursuing serious financial crimes.

Three recent developments involving the Public Prosecution reflect that continuing commitment with regard to anti-money laundering (AML) enforcement.  First, on December 25, the Public Prosecution clarified its approach to pursuing foreign nationals who have been accused of committing money laundering inside Saudi Arabia after they leave the Kingdom.  According to Abdullah Al-Zahrani, Acting Member of the Public Prosecution Anti-Money Laundering Unit, Saudi authorities would submit a request through the Kingdom’s International Cooperation Unit to the countries of those foreign nationals who were accused of the crime and left the Kingdom to extradite them to Saudi Arabia and hand them over for trial.

Although the countries of those convicted of the crime have the right to extradite them to the Kingdom, Al-Zahrani reportedly also noted that the Kingdom allows the countries of the foreign nationals accused on money laundering to pledge to Saudi Arabia that they would try them in their competent courts for those crimes.

Second, on January 2, the Public Prosecution announced that it had convicted six defendants, some Saudi nations and some non-Saudi nations, in money laundering cases.  Those defendants received sentences totaling 31 years’ imprisonment and fines totaling more than SR152 million ($40.5 million), as well as travel bans on the convicted Saudi citizens for a period equal to their jail terms and deportation of the convicted expatriates after serving their prison terms.

According to the Public Prosecution, the defendants included some Saudi citizens, who are owners of commercial entities such as furniture upholstery and flower businesses as well as fake businesses, and several expatriates who were involved in money laundering transactions.  Public Prosecution investigations established that the Saudi citizens allowed the expatriates to use their bank accounts, in return for a monthly fee of SR10,000, as a cover for transferring their illegal funds to locations outside the Kingdom. Under article two of the Saudi Anti-Money Laundering Law, transactions that are made under the pretext of practicing bogus commercial activities are considered a criminal act.

Third, on January 20, the Saudi Oversight and Anti-Corruption Authority reportedly stated that an unnamed head of a committee at the Saudi Ministry of the Interior was recently convicted of embezzlement, forgery, and money laundering, and was sentenced to nine years’ imprisonment and ordered to pay SR1.02 million ($271,620).  A businessman who was convicted of complicity in the same case was sentenced to seven years’ imprisonment and a fine of SR500,000 ($133,147).  In addition, both defendants were banned from travel outside the Kingdom for three years each after serving their terms.

Compliance officers in companies that are based or operate in Saudi Arabia should brief other company executives, as appropriate, on these recent developments, and incorporate information about the developments into their AML training.  Company executives and managers, whether physically located in the Kingdom or elsewhere, need to understand that complicity in money laundering activities affecting the Kingdom can lead to sustained efforts to prosecute them, whether in the Kingdom or the country in which they reside.

United Kingdom Supreme Court Recognizes Guaidó Board of Venezuela Central Bank, Provisionally Denies Maduro Regime Control of $1 Billion in Gold Reserves

In the field of international commercial litigation, it is routine for two parties to make competing claims on assets under a financial institution’s control.  What is far from routine is a situation in which the competing claimants also claim to be the legitimate government of a sovereign nation.

Since 2018, Venezuelan President Nicolás Maduro has maintained that he was lawfully reelected, while the United Kingdom Government has recognized Juan Guaidó, President of the democratically elected Venezuelan National Assembly, as interim president.  Because of the crippling sanctions that the United States has imposed on the Maduro government and various Venezuelan-connected individuals, the Maduro regime has been desperate to identify financial assets that they can control or sell.

One significant set of assets that the Maduro government has been avidly pursuing concerns foreign currency reserves.  The Bank of England has been holding gold reserves of approximately $1 billion for the Central Bank of Venezuela (BCV), and Deutsche Bank (“DB”) is obliged to pay the proceeds of a gold swap contract to the BCV for approximately $120 million that have been held by court-appointed receivers.  Because Guaidó and Venezuelan Special Attorney General José Ignacio Hernández appointed different members to the BCV Board, the Bank of England, DB, and the receivers received conflicting instructions regarding the gold reserves from the Maduro-appointed Board and the Guaidó-appointed Board.  These competing claims led to extended litigation in United Kingdom courts.

On December 20, 2021, the United Kingdom Supreme Court decided two fundamental and complex legal issues, both critical to the litigation, in favor of the Guaidó Board.  First, the Supreme Court addressed the issue of whether Her Majesty’s Government (HMG) had recognized Guaidó as President of Venezuela.  The Court held that that issue, under the United Kingdom’s constitutional arrangements, is a matter for the executive.  It determined that HMG’s statement was a “clear and unequivocal recognition” of Guaidó as President, and that courts in the United Kingdom “are bound to accept HMG’s statements” that establish Guaidó’s status and that Maduro is not recognised by HMG as President of Venezuela “for any purpose.”

Second, the Supreme Court addressed the foreign act-of-state doctrine, which a leading legal authority described as “one of the most difficult and most perplexing topics which, in the field of foreign affairs, may face the municipal judge in England.”  Two critical aspects of that doctrine are that United Kingdom courts will recognise and not question the effect of (1) a foreign state’s legislation or other laws in relation to any acts which take place or take effect within the territory of that state (“Rule 1”); and (2) an act of a foreign state’s executive in relation to any acts which take place or take effect within the territory of that state (“Rule 2”).

The Supreme Court determined that Rule 2 applies to an exercise of executive power such as Guaidó’s appointments to the BCV’s Board.  It also held, however, that judicial rulings of a foreign state are not subject to the act of state doctrine.  In this case, the Court acknowledged that the Venezuelan Supreme Tribunal of Justice (“STJ”) has issued several judgments holding that the Venezuelan transition statute under which Guaidó was appointed interim President of Venezuela is null and void.  Accordingly, the Supreme Court ruled that because it remains necessary to consider whether the STJ judgments should be recognised or given effect in the United Kingdom, it remitted the proceedings to the Commercial Court for it to do so.

For lawyers interested in complex litigation involving foreign states, the Supreme Court’s decision in Maduro Board provides some welcome clarity on certain aspects of the foreign act of state doctrine.  The Court’s resolution, however, is in no way a definitive victory for the now-floundering opposition forces under Guaidó’s leadership.  Indeed, the remittance of the case back to the Commercial Court ensures that there will be no final resolution regarding the disputed gold reserves for some time to come, as the parties litigate the issue of recognition of the STJ judgments in that Court and the losing party in that Court will undoubtedly seek to appeal.  Whether the Guaidó opposition can last long enough for such a final resolution is regrettably open to question.