New endowment regulations: Determining the true beneficiary and the residency requirement for trustees
The General Authority for Endowments in Saudi Arabia has issued a set of binding regulatory standards aimed at identifying the “beneficiary” of endowment assets, a pivotal step seeking to enhance governance and financial transparency in the non-profit sector. These measures are part of a comprehensive strategy to protect the endowment sector from the risks of financial crimes, particularly money laundering and the financing of terrorism, thereby ensuring the sustainability of endowments and maximizing their social and economic impact.
Context of reforms and keeping pace with Vision 2030
These decisions fall within the broader context of structural reforms underway in the Kingdom's third sector, in line with the objectives of Vision 2030, which focuses on increasing the non-profit sector's contribution to GDP and promoting transparency and accountability. This step is a direct response to international requirements, as the Kingdom is working diligently to implement the highest standards of financial compliance, thereby enhancing its standing in global indicators related to the integrity of financial transactions.
Compliance with international FATF standards
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 international alignment aims to ensure accurate and comprehensive knowledge of the true beneficiary of endowment assets, thus preventing any attempts to exploit endowments as a front for illicit financial activities and enhancing local and international confidence in the Saudi endowment system.
Who is the "real beneficiary"?
According to the new regulations, the “beneficial owner” is defined as any natural person who owns or exercises effective and ultimate control over the endowment. This definition includes the endower himself, the trustee, or any person with the authority to make binding decisions in the management of the endowment, as well as the beneficiaries specified in the endower’s conditions. If the beneficiary is a legal entity, the chain of ownership down to the controlling natural persons must be disclosed.
Limiting the viewing to residents and accurate records
One of the most significant aspects of the new regulations is the absolute prohibition on non-Saudi individuals permanently residing outside the Kingdom managing Saudi endowments. The Authority stipulated that oversight must be restricted to trustees residing within the Kingdom to ensure effective monitoring, supervision, and compliance with local judicial and administrative regulations.
The standards also require supervisors to create up-to-date records that include:
- Full personal data (full name, nationality, place of birth).
- National residence address and identity number.
- Accurate banking data for endowment proceeds transfers.
Oversight and legal accountability
The Authority stressed the necessity of updating data within 15 days of any change, along with conducting an annual review to verify the accuracy of the information. It also mandated that trustees maintain financial records and payment classifications for a minimum of ten years. Those who fail to comply will be held legally accountable according to the schedule of penalties and violations, underscoring the Authority's commitment to enforcing these standards to ensure a secure and transparent endowment environment.
