The FATF’s rejection of Saudi Arabia hurts Riyadh

On September 24, Saudi Arabia received negative news from the Financial Action Task Force on Money Laundering (FATF), which rejected the Kingdom’s bid for membership. 

Although the Paris-based global institution—also known as Groupe d'action financiere—credited Saudi Arabia with establishing a solid understanding of money laundering and terror financing, in addition to putting forward certain measures to mitigate such risks, the body’s 246-page report concluded that Riyadh has failed to adequately investigate and prosecute people who have allegedly taken part in money laundering on a larger scale. 

Such investigations in Saudi Arabia have been “too low” in number said the analysis. Furthermore, the FATF also maintained that Riyadh has not been “effectively confiscating the proceeds of crime.” 

Under the body’s “mutual evaluation” procedure, Riyadh was deemed to have fallen short on seven out of the 11 criteria for membership.

The decision of this 37-member institution, which is tasked with fighting terror financing and illegal money flows, marks a setback to Riyadh’s agenda of revamping its image before the world within the context of Crown Prince Mohammad bin Salman (MbS)’s ambitious Vision 2030 and rhetoric about “moderate Islam”. 

Doubtless, MbS has been seeking to make changes in the Kingdom aimed at making the oil-rich country riper for foreign investment. This quest has now suffered yet another blow in light of the FATF’s recent rejection of Saudi Arabia, which President Donald Trump called “the world’s biggest funder of terrorism” in his 2011 book, Time to Get Tough: Making America #1 Again.

Then-US Secretary of State Hillary Clinton said Saudi was home to donors that make up “the most significant source of funding to Sunni terrorist groups worldwide” in a leaked memo from 2009.

To be sure, the FATF’s decision to deny membership to Saudi Arabia undermines Riyadh’s ability to speak about terrorism from a moral high ground. 

Against the backdrop of US legislation—Justice Against Sponsors of Terrorism Act (JASTA)—granting American citizens the opportunity to take legal action against Riyadh over the Kingdom’s alleged role in the September 11, 2001 terrorist attacks, the FATF’s rejection of Riyadh further overshadows MbS’ ambitions to redefine his country’s image before the world.

Having severed diplomatic relations with Iran and Qatar and having waged fierce media campaigns and narrative wars against both states, largely based on Riyadh’s accusations that Tehran and Doha sponsor violent extremists, it will be easier for critics of the Kingdom to accuse the Saudi leadership of hypocrisy. 

As Dominic Dudley wrote, “This analysis [of the FATF] is awkward for Riyadh and its allies such as the UAE in light of their ongoing dispute with Qatar. They typically claim they are doing everything they can to clamp down on terrorist financing while saying that Qatar actively supports it.”

Furthermore, Saudi Arabia, the UAE, and the other Arab states blockading Doha since July 2017 have demanded that Qatar “consent to monthly compliance audits in the first year after agreeing to the demands, followed by quarterly audits in the second year, and annual audits in the following 10 years”. 

Unless Saudi Arabia would accept being subject to such a compliance regime in the aftermath of the FATF’s latest analysis, the Kingdom will face increased criticism from those who find Riyadh’s finger pointing at Doha and Tehran to be based on double standards.  

The FATF’s recent “mutual evaluation” suggested that political will in Saudi Arabia was at the heart of the Kingdom’s failure to fully implement such measures that would be required for FATF membership. 

The report’s acknowledgment of the Kingdom’s proven ability to counter the terror menace within Saudi Arabia indicates that authorities in Riyadh have the means to effectively address terrorism financing adds credence to this argument about political will. 

As James Dorsey suggested, the Saudi bureaucratic establishment’s widespread criticism of MbS, as well as some opposition from segments of the country’s ultra-conservative religious establishment, could also help explain the Saudi government’s poor implementation of measures to counter terrorism financing.

Nonetheless, the FATF did not rule out the possibility of Saudi Arabia being granted membership in the future depending on Riyadh’s success in terms of addressing deficiencies highlighted in the intergovernmental body’s report. 

Overcoming this embarrassment will be important for MbS as he moves forward with his plans to return “moderate Islam” to Saudi Arabia after years of the country attempting to improve its image in the West following the 2001 attacks in the US which were carried out by 15 Saudi (and four non-Saudi) nationals. 

Clearly, just loosening strict social regulations, such as permitting women to drive, will not lead to all parties worldwide believing that Saudi Arabia has taken all the necessary steps to deserve any leadership position in the struggle against violent extremism in the Islamic world.

Doubtless, the FATF’s report must have left officials in Riyadh feeling extremely awkward and uncomfortable. However, their counterparts in Doha and Tehran likely rejoiced as the “mutual evaluation” from this Paris-based body injects yet another talking point into their arguments that the Kingdom’s accusations against Qatar and Iran are misguided and hypocritical