Endowments prohibit non-residents from serving as trustees and specify the true beneficiary

The General Authority for Endowments has issued a set of new, binding regulations and controls aimed primarily at identifying the “beneficiary” of endowment assets and restricting endowment management to trustees residing within the Kingdom of Saudi Arabia. This strategic step comes within the framework of enhancing financial transparency in the endowment sector and protecting it from any risks related to money laundering or the financing of terrorism.

A regulatory framework that aligns with Vision 2030

These moves are part of a broader structural reform process underway in the Kingdom's non-profit sector, in line with the goals of Saudi Vision 2030, which aims to increase the sector's contribution to GDP and enhance its governance. The endowments sector is a vital economic and developmental pillar, necessitating a robust legislative environment that ensures the sustainability of assets and the precise allocation of their proceeds to legitimate and regulated beneficiaries, free from any financial or administrative irregularities.

International compliance standards and FATF recommendations

The Board of Directors of the Authority adopted these standards to achieve full compliance with the requirements of the Financial Action Task Force (FATF), specifically the recommendations related to transparency and legal arrangements. This step is essential to enhancing the Kingdom's standing in international indicators related to the integrity of the financial system, as adherence to these standards contributes to preventing the exploitation of endowment entities as a cover for illicit financial activities, thereby strengthening local and international confidence in the Saudi endowment system.

Strict controls to identify the “true beneficiary”

Under the new regulations, the “beneficial beneficiary” is defined as any natural person who owns or exercises effective and ultimate control over the endowment, whether it be the endower himself, the trustee, or any person with the authority to make binding decisions. The standards require trustees to maintain accurate and up-to-date records that include:

• Full name and ID number.
• Nationality, date and place of birth.
• Address of residence and bank details for transferring rent.

If the beneficiary is a legal entity, the chain of ownership and control must be disclosed to reach the natural persons who actually control it.

Limiting the scope of observation to residents and modernization mechanisms

The regulations explicitly prohibit the management of Saudi endowments by non-Saudi individuals permanently residing outside the Kingdom, stipulating that oversight must be restricted to trustees residing within the Kingdom to ensure effective monitoring, oversight, and legal accountability. The Authority also mandates updating records within 15 days of any changes and requires annual verification of data accuracy.

Record keeping and legal accountability

The regulations stipulate that the trustee must retain all records, documents, and financial data for a minimum of ten years and hand them over to the new trustee immediately upon the expiration of their term. Those who fail to comply will be held legally accountable according to the schedule of penalties and violations, ensuring the protection of endowment assets and their continued service to the community.