Governance of family trusts: Ban on external donations and new controls
The National Center for Non-Profit Sector Development announced the launch of the first edition of its standard for family fund governance, a regulatory step aimed at ensuring the financial and legal compliance of these entities. The new standard establishes a rigorous framework comprising 103 verification questions and 28 management practices to guarantee the highest levels of efficiency and transparency.
This strategic move aligns with the goals of Saudi Vision 2030, which places great emphasis on developing the non-profit sector and increasing its contribution to the GDP. Family trusts have long been a cornerstone of Saudi society, strengthening kinship ties and mutual support. However, the current transformation aims to shift these entities from individual efforts and haphazard operations to organized, institutionalized practices, ensuring their sustainability and protecting their assets for future generations.
Key regulations: Prohibition of foreign transactions
In the context of protecting financial and security sovereignty, the new regulations explicitly prohibit family trusts from engaging in any activities outside the Kingdom's borders. This prohibition includes participation in international events, providing external services, or obtaining memberships in international organizations. The center also emphasized the prohibition of receiving any funds or donations from outside the family or from external sources without prior, explicit written approval from the center, to ensure the integrity of financial flows.
Administrative structure and compliance
The new standard requires funds to form a board of trustees consisting of at least three Saudi members with full legal capacity and a clean criminal record, subject to the center's approval of their appointment. The regulations also mandate the appointment of a full-time executive director, with clearly defined responsibilities to ensure clear management accountability. The evaluation criteria are based on three main indicators: compliance (70%), financial soundness (20%), and transparency and disclosure (10%).
Financial transparency and anti-money laundering
To enhance financial integrity, the standards imposed stringent anti-money laundering and counter-terrorism financing measures. These measures require funds to understand the risks associated with clients and geographic regions, and to immediately report any suspicious transactions to the General Directorate of Financial Investigations without alerting the client. The regulations also mandate that Zakat funds be segregated into separate accounts, that a licensed external auditor be appointed, and that financial and administrative records be maintained for a minimum of ten years.
The evaluation and monitoring mechanism adopted by the center is based on two parallel tracks: the first is desk-based evaluation of documents and data, and the second is based on field visits to verify compliance on the ground, which enhances the credibility of the non-profit sector in the Kingdom.
