You can see the rules and regulations in other jurisdictions.
Fintech transactions are not subject to any different laws from conventional financial transactions. As a result, all financial transactions, whether fintech or conventional, are subject to the same laws.1
Nevertheless, the relevant authorities introduced specific licences for certain fintech activities as well as guidelines for applying for said licences in order to keep up with Saudi Arabia's rapid development. Here are some options fintech companies can use to enter the Saudi market:
Fintech companies operating in the Saudi market are granted up to six months for operations, which can be renewed. Those that are regulated by the CMA have a two-year license, on the condition of renewal. Lastly, entities practising debt-based crowdfunding, payment service provider or finance support will be provided with licences that range from three to five years depending on the applicable activity; these can also be renewed.1
Debt-based crowdfunding entities may avoid the sandbox step and apply directly for the debt-based crowdfunding licence issued by SAMA, which will subject the entity to the Finance Companies Control Law.1
Applicants must submit the following documents in order to obtain this type of license:
A Saudi national with professional finance qualifications should also hold executive positions in the entity. In order to establish a debt-based crowdfunding entity, a minimum capital requirement of 5 million riyals is required, which can be increased or decreased on a case-by-case basis at the discretion of SAMA. Finally, upon submission, SAMA receives a notice, and the entity is required to respond to any additional information requested by SAMA within 30 days to ensure SAMA can issue its initial acceptance or rejection within 60 days. After receiving SAMA's initial approval, applicants will have six months to submit commercial registration and an agreement describing the necessary activities (failure to submit will result in the initial approval expiring). In addition, these licences are valid for five years and are subject to renewal via a three-month renewal letter to be sent to SAMA.1
Additionally, SAMA and the CMA intend to further regulate fintech in Saudi Arabia, as follows. A regulatory, legislative and judicial body, SAMA was established by two royal decrees. It oversees securities activities and crowdfunding solutions.1
According to the Investment Fund Regulations and Authorised Persons Regulations of the CMA, setting up an asset management company in Saudi Arabia requires licensing. Before the entity can carry out its activities in Saudi Arabia, it must meet a number of requirements, including establishing multiple key functions and appointing specialized officers, in addition to a minimum capital requirement.2
Generally, collective investment is allowed under SAMA regulations, subject to licensing and minimum capital requirements. All activities with the intention of financing will be governed by the Finance Companies Control Law promulgated in Royal Decree No. M/51 on 02/07/2012 (the Finance Companies Law) and its enforcing regulations. As such, if the purpose of collective investment is to finance companies, it triggers the application of the Finance Companies Law. In accordance with this law and its enforcing regulations, financing activities may not be conducted in Saudi Arabia without obtaining the required licenses from SAMA and being consistent with shariah principles. Therefore, any entity wishing to manage investments for financing other entities must satisfy SAMA licensing specifications.1
In order to set up an investment portal, the manager of the investment should apply for a licence from SAMA. This is due to potential money laundering risks, which would lead to investigations. As a result, SAMA is cautious in allowing people and entities to collect funds unless they can convince them that all transactions will be appropriately monitored. To successfully gain the required permission, we encourage the manager of the investment to outline methods of addressing any associated money laundering concerns and provide this information to SAMA.1
The CMA has authorized equity-based crowdfunding in Saudi Arabia, adhering strictly to the related laws and regulations. To begin this process, entities must apply through the CMA portal to be eligible for a temporary licence - which can later be upgraded to a permanent one - to carry out crowdfunding activities during the trial period. Due diligence is required when handling money collection as it is a potentially risky activity; thus it is paramount for entities to demonstrate how they intend to keep an eye on any possible money laundering operations.1
Because peer-to-peer lending falls under financing activities, it is governed by SAMA and subject to the Finance Companies Law, just like collective investment. A peer-to-peer lending entity must ensure that it is licensed by SAMA and that the activities are conducted in accordance with Shariah principles prior to carrying out peer-to-peer lending activities.1
Where the entity is responsible for managing amounts, it is subject to CMA regulations as management activities fall under securities business activities. This means that peer-to-peer lending will activate SAMA and CMA licensing requirements. When all the relevant permits are obtained, the entity is be authorised to perform lending and management activities in Saudi Arabia.1
