Exclusive: Saudi Arabia tightens anti-crime oversight on UAE-bound transfers, sources say

By Timour Azhari

RIYADH, Aug 18 (Reuters) – Saudi Arabia has subjected bank transfers to the United Arab Emirates to stricter regulatory oversight normally applied to jurisdictions deemed high-risk for illicit money flows, according to three people with direct knowledge of the matter, in what appears to be the latest sign of friction between the two Gulf monarchies.

The unannounced measures may help explain why a number of companies say they have struggled to move funds from Saudi accounts to the UAE in recent months, an issue first reported by Bloomberg and the Financial Times in July. The enhanced oversight has not been previously reported.

Six businesspeople told Reuters their companies have had transfers in various currencies delayed or returned by Saudi banks with no official explanation.

Saudi Arabia’s central bank requires financial institutions to apply additional checks when dealing with customers or jurisdictions that pose elevated risks of money laundering, terrorism financing and other financial crimes. Earlier this year, it notified key banks in the country to apply such measures when handling settlements with the UAE, the three sources said.

A fourth person, a Western executive with operations in Saudi Arabia, said their bank offered the same explanation when asked about transaction delays.

In response to Reuters questions, the Saudi central bank said: “There are no direct restrictions on specific countries.” It said the kingdom has a robust regulatory framework to combat money laundering and terrorism financing, in line with standards set by the Financial Action Task Force (FATF), the Paris-based global watchdog.

“All banks in the Kingdom apply necessary controls and preventive measures to mitigate risks based on their own internal assessments and institutional risk appetite, while also assessing various risk factors, including country and geographic risk,” it said.

A UAE official said the Ministry of Economy has not received any reports from private-sector companies regarding difficulties or unusual delays in completing bank transfers between the two nations. “The UAE and Saudi Arabia maintain deep and longstanding economic and commercial ties, supported by significant trade and investment flows,” the official said. “We remain in regular engagement with the private sector and relevant stakeholders, and would review any specific concerns brought to our attention through the appropriate channels.”

High-risk list includes UAE, sources say

The additional scrutiny places the UAE – a hub for real estate investment and trade in precious metals and stones – among more than half a dozen countries in the region that Saudi Arabia treats as high-risk for financial crimes, two of the sources said. Those countries include Lebanon, South Sudan and Iraq, all on the FATF’s “grey list” of jurisdictions requiring extra monitoring.

The FATF removed the UAE from that list in 2024 after it strengthened its anti-money laundering regime, a decision some anti-corruption groups said was premature. The United States has also imposed sanctions on a number of UAE-based individuals and entities accused of raising or laundering funds for groups such as Iran’s Islamic Revolutionary Guard Corps and Somalia’s al Shabaab militants.

A Saudi insider said the enhanced oversight was intended as a “subtle message” to Emirati leaders about the need to preserve good relations after a period of escalating tensions between the two heavyweights – an interpretation shared by four regional financial-sector sources who said they were not briefed on the reasons for the measures. Authorities in both countries did not answer questions about what prompted the move.

The two countries remain major trading partners, but their interests have diverged over the years on everything from oil quotas and geopolitical influence to the race for foreign talent and capital.

Simmering disagreements burst into the open late last year over their support for opposing sides in the Yemen war. Saudi Arabia accused the UAE of threatening its security by backing secessionist forces that pushed toward its borders. There have also been differences over how to respond to Iran’s war with the United States and Israel, even as Riyadh and Abu Dhabi sought to present a united front against Tehran’s attacks on Gulf nations.

Analysts say a full-blown economic rupture is unlikely given how deeply the two economies are intertwined in trade, investment and logistics. Saudi Arabia is the UAE’s largest trading partner in the Arab world, and the UAE was Riyadh’s fifth-largest export destination overall and fourth-largest source of imports in 2024, according to data from the Observatory of Economic Complexity.

For all their differences, the Iran war has solidified the rationale for cooperation to secure vital interests, including reopening the Strait of Hormuz, said Justin Alexander, director of Khalij Economics, a Gulf-focused consultancy.

Top media officials from both nations posted synchronized statements on social media last month underlining the brotherly ties between the two.

Economic rivalry

Still, economic competition has been brewing for years as both attempt to reduce their reliance on oil-and-gas revenues and establish themselves as world-class financial and business centers.

While Dubai remains the Gulf’s main business hub, Saudi Arabia has pushed multinational companies to relocate their regional headquarters to Riyadh, making it a condition to secure big government contracts.

The businesspeople who spoke to Reuters said their difficulties with cross-border transfers began in the weeks after the UAE announced on April 28 that it was leaving OPEC, the group of oil-producing states effectively led by Saudi Arabia.

The head of a Dubai-based consultancy said some Saudi clients were struggling to make payments to the firm and had advised him to set up operations elsewhere.

Two other UAE-based companies received similar requests from clients, who said Saudi authorities asked them not to do business with firms in the UAE, according to an investor with stakes in both firms. The companies have been waiting weeks for payments from Saudi Arabia, in some cases for amounts below 1 million dirham ($272,257), which would previously have been processed in a few days, the investor said.

Authorities in Saudi Arabia and the UAE did not respond to questions about these accounts.

Three bankers said the enhanced oversight means transfers to the UAE now pass through more hands and receive closer scrutiny from compliance departments. Some transfers take weeks to go through; others never make it, they said.

Three businesspeople said their firms now route payments via third countries to get around the issue.

($1 = 3.6730 UAE dirham)

(Reporting by Timour Azhari in Riyadh; Editing by Alexandra Zavis)