Fines for the true beneficiary: The Ministry of Commerce penalizes companies with 80,000 riyals
Saudi Arabia’s Minister of Commerce, Dr. Majid Al-Qasabi, issued a firm decision requiring all companies and commercial establishments to disclose the data of their “beneficial owners,” threatening escalating financial penalties for violators. This decision comes as part of the Ministry’s efforts to enhance transparency in the business environment and ensure establishments comply with established regulations and bylaws. The decision applies to companies that have delayed submitting the required data or failed to provide the annual confirmation of that data by the specified deadlines.
Details of the graduated financial penalties
According to the new decision, a clear mechanism for fines has been established, based primarily on the size of the offending company's capital, to ensure proportionality between the size of the establishment and the value of the penalty. The fines are as follows:
- A fine of 4,000 riyals for companies whose capital is less than 500,000 riyals.
- A fine of up to 20,000 riyals for companies whose capital ranges between 500,000 and 2.5 million riyals.
- A fine of 40,000 riyals will be imposed on companies whose capital ranges between 2.5 million and 5 million riyals.
- The maximum fine is 80,000 riyals for companies whose capital exceeds 5 million riyals.
The decision stipulated that violating establishments be given a corrective grace period of (30) days, starting from the day following the date of notification of the violation, before the actual application of financial penalties begins, thus giving companies an opportunity to rectify their legal status.
The economic context and the importance of transparency
These stringent measures are an integral part of the economic and legislative reforms underway in Saudi Arabia as part of Vision 2030, which aims to create a safe and attractive investment environment. Disclosing the "beneficial owner" is a cornerstone of the Kingdom's efforts to combat commercial concealment and money laundering. These regulations aim to identify the natural person who owns or exercises effective and ultimate control over the entity, thus preventing the exploitation of legal entities in illicit activities.
Expected impact locally and internationally
This decision is expected to improve the Kingdom's ranking in international transparency and ease of doing business indices. Domestically, this move enhances confidence in the Saudi market and protects fair competition among businesses. Internationally, the Kingdom's commitment to financial disclosure standards aligns with the requirements of the Financial Action Task Force (FATF), strengthening the Saudi economy's position as a reliable destination for foreign capital and underscoring the regulatory authorities' commitment to implementing the highest governance standards.
Stricter penalties in case of repeated offenses
The decision did not merely impose initial fines; it also included a clause stipulating that the fine would be doubled in the event of a repeated violation and failure to submit the annual data confirmation within the year following the issuance of the final decision. The Ministry set a ceiling for the total fines not exceeding 500,000 Saudi Riyals to ensure sufficient deterrence and encourage companies to maintain continuous compliance with commercial regulations and disclosure rules.
