Fines for the actual beneficiary: escalating penalties up to 80,000 riyals

In a regulatory move aimed at enhancing transparency in the Saudi Arabian business environment, the Minister of Commerce, Dr. Majid bin Abdullah Al-Qasabi, issued a decisive ministerial decree imposing escalating financial penalties on companies that violate regulations regarding the disclosure of "beneficial owners." This decision is based on the powers granted to the Ministry under the Companies Law and the rules governing beneficial owners, reflecting the seriousness of the relevant authorities in regulating the market and combating commercial concealment.

Warning mechanism and corrective grace period

The first article of the decision stipulates a graduated approach to dealing with violations. An initial warning is issued to any company that fails to disclose beneficial owner information or fails to submit annual confirmation of this information for the first time. Following this warning, the offending company is granted a 30-day grace period to rectify the situation, starting from the day after the notification date. If this period expires without the situation being rectified, a direct financial penalty is imposed immediately, placing companies under a legal obligation to act swiftly to ensure compliance.

Details of financial penalties according to capital

The Ministry of Commerce took into account the size of commercial entities in its decision, classifying fines based on the company's capital to ensure fairness and proportionality. The penalties were as follows:

• Small businesses: A fine of 4,000 riyals for companies whose capital is less than 500,000 riyals.
• Medium-sized companies: A fine of 20,000 riyals for companies whose capital ranges between 500,000 and 2.5 million riyals.
• Large companies: A fine of 40,000 riyals for companies whose capital ranges between 2.5 million and 5 million riyals.
• Large companies: A fine of 80,000 riyals for companies whose capital exceeds 5 million riyals.

Stricter penalties in case of repeated offenses

To ensure deterrence, the decision includes a clause increasing the penalty for repeat offenses. The fine is doubled if the violation is repeated after the previous decision becomes final, up to a maximum of 500,000 Saudi Riyals. Notification of penalties is carried out according to the mechanism stipulated in Article 94 of the Implementing Regulations of the Companies Law.

The economic context and the importance of the decision

Disclosure procedures for the "beneficial owner" are of paramount importance in the modern economy, serving as a cornerstone of the Kingdom's efforts to combat money laundering and terrorist financing, in line with the requirements of the Financial Action Task Force (FATF). This concept aims to identify the natural person who effectively owns or controls a company, thereby closing the door to commercial concealment practices and the exploitation of legal entities in illicit activities.

This decision enhances the attractiveness of the Kingdom's investment environment, as international investors consistently seek markets characterized by transparency and clear regulations. This move aligns with the objectives of Vision 2030, which aims to build a prosperous and competitive economy by eliminating the informal economy and ensuring the integrity of financial and commercial transactions, thereby improving the Kingdom's ranking in global transparency indices.