Saudi Arabia issues guidelines on collecting donations to prevent money laundering

Dubai: The National Centre for the Development of the Non-Profit Sector has approved new regulations governing fundraising for charitable causes to increase transparency and accountability in non-profit organisations, ensuring that donations are allocated correctly and that the rights of donors are protected.

The regulations also aim to prevent money laundering and terrorist financing, while improving the governance of cash and in-kind donations.

According to sources, the regulations will come into effect immediately and consist of 24 articles, covering the mechanism and requirements for fundraising, as well as governance and organisation of work. The implementation of the regulations will be overseen by licensed legal establishments, intermediaries, and individuals.

The executive regulations limit the practice of this activity to Saudi establishments, while individuals within the Kingdom may only engage in the activity after obtaining a licence. The provisions of the regulations apply exclusively to Saudi entities and individuals operating within the country.

The executive regulations for fundraising outline the specific requirements that must be met by establishments seeking to obtain a licence. These include submitting an application through the approved channels of the National Centre for the Development of the Non-Profit Sector, providing the facility’s registration certificate, and having an approved bank account for collecting donations.

Additionally, the regulations mandate the development of an action plan that explains the purpose of the donation collection, the intended beneficiaries, the target donation amount, the cost of managing the donation, the donation disbursement plan, and the mechanism for verifying that donations reach the final beneficiary.

Individuals engaging in fundraising activities must obtain a licence and adhere to the established conditions, which are necessary for the licence to remain valid. Breaching any of the conditions may result in licence withdrawal, cessation of donation collection, or confiscation of proceeds.

According to the executive instructions, the licence for fundraising activities will be issued by the National Centre for the Development of the Non-Profit Sector in the name of the establishment or individual for a maximum period of one year or until the target amount is reached, whichever comes first.

The regulations specify five ways to collect donations: bank transfers or cheques deposited through banking services, electronic payments made via smart devices or the facility’s electronic store, text messages, or electronic points of sale within the establishment. It is mandatory for Zakat to be deposited in the Zakat account. Cash donations can only be collected or received through the headquarters or branches of licensed NGOs after obtaining the donor’s data, and it is prohibited to receive deposits from abroad. The licensee is prohibited from accepting any deposits, transfers, or cheques received from outside the Kingdom without prior approval from the Centre.

Only licensed NGOs can collect or receive cash donations through their headquarters or branches. It is strictly prohibited to deliver, make, or disburse donations to any person or entity outside the Kingdom without the approval of the relevant authorities.

According to the regulations, licensed charity collectors are required to provide a clear work plan for their fundraising project, issue serial-numbered receipts to donors, and obtain their approval for redirecting donations to other projects. They must stop collecting donations once the licence expires or the target amount is reached, disburse donations for the specified purpose, and submit a detailed semi-annual financial report to the Centre indicating disbursement and surplus amounts. For projects with implementation periods exceeding one year, they must provide a report on fundraising within 30 days of license expiration or every 6 months if the license period exceeds 6 months. This report must include a bank statement of the fundraising account for cash donations and the fundraising record, which outlines each donation process (including donation source, channel, cash value, or estimated value of in-kind donation, and donation date), as well as receipts for cash or in-kind donations.

Additionally, the licensed charity collector is required to submit a report to the Centre within (30) days of the expiration of the disbursement of donations, as per the approved disbursement plan in the licence, or every six (6) months if the duration of the disbursement plan is more than six (6) months.

This report should include a bank statement of the account designated for collecting cash donations, which were disbursed, as well as a record of each disbursement item, including the name of the item and the amount disbursed, and a beneficiary record.

The guidelines specify that donations earmarked for specific occasions or seasons must be disbursed during the designated time frame, such as the Ramadan iftar meal, zakat Al Fitr, Eid clothing, and other similar occasions.

Any surplus from these seasonal donations may be redirected to another project after receiving approval from the Centre, except in the case of Zakat. In this case, the licensee must deposit the surplus of seasonal Zakat donations with the General Authority of Zakat, Customs, and Tax. NGOs are excluded from this provision. If this is not possible, the licensee must deposit the surplus of seasonal donations into the bank account of the National Centre for the Development of the Non-Profit Sector. The centre will spend these funds according to the donated purpose or distribute them to other charitable causes it deems appropriate. The licensee may use local telecommunications companies, billboards, utility bills, publications prepared by the licensee, the facility’s social media platforms, its website, or any other means approved by the Center to promote their cause.

Their ad shall include essential information such as the name of the donating establishment, the registration number of the establishment, the license number, and the approved bank account number of the licensee associated with the donation. An electronic link that explains the work plan of the donation project, the targeted donation amount, and the address of the facility’s headquarters or branches must also be included.