In a strategic move aimed at regulating charitable and social work and enhancing transparency in the Kingdom of Saudi Arabia, the National Center for the Development of the Non-Profit Sector launched the first edition of the Family Funds Governance Standard. This step aligns with the objectives of the Kingdom's Vision 2030, which seeks to increase the non-profit sector's contribution to the GDP and transform social work from individual efforts to organized and sustainable institutional work.
The new standard imposes a rigorous regulatory framework comprising 103 verification questions and 28 precise management practices to ensure the financial and legal compliance of these entities. This move aims to institutionalize operations within family trusts through three key indicators: compliance (70%), financial soundness (20%), and transparency and disclosure (10%), thereby guaranteeing the sustainability of these entities and protecting their assets from waste or mismanagement.
Regarding the administrative structure, the center mandated that the funds form a board of trustees with no fewer than three fully qualified Saudi nationals, provided they have no criminal record and obtain prior approval for their appointment. The regulations also emphasized the appointment of a full-time executive director with clearly defined powers to ensure clear administrative oversight and rigorous accountability.
Among the most prominent features of the new regulations is a complete ban on international transactions without official authorization. The regulations prohibit family trusts from participating in events outside the Kingdom, providing external services, obtaining international memberships, or receiving funds from outside the family without explicit and prior written approval from the center. This measure aims to strengthen financial sovereignty and ensure that these trusts are not exploited for illicit purposes.
Regarding financial integrity and combating financial crimes, the standard imposes stringent measures to combat money laundering and terrorist financing, requiring funds to understand risks and document assessment procedures. The rules also mandate the segregation of Zakat funds in separate accounts, the adoption of financial regulations and procedures manuals to control cash flows, and the appointment of a licensed external auditor.
These standards are of paramount importance both locally and internationally. Locally, they enhance public and donor confidence in these funds and ensure that money reaches its intended beneficiaries. Internationally, the non-profit sector's adherence to financial governance and anti-money laundering standards improves the Kingdom's ranking in global financial transparency indices and underscores its commitment to international standards issued by the Financial Action Task Force (FATF).
The regulations concluded by affirming the right of stakeholders to hold the government accountable through electronic complaint channels, while adopting a dual evaluation mechanism that includes desk reviews and field visits, to ensure the actual application of standards and not just a superficial one.
