Saudi Authorities Crack on un-licensed lending activities.
The Saudi Ministry of Justice and the Saudi Central Bank finalized a project to connect the two entities to control the unlicensed lending and financing activities. This initiative is in response to the royal order that set to limit the practice of illegal lending activities in line with the financing entities supervision law.
This new project connects with execution courts with the central banks and will allow the identification suspicious financing activities that will be monitored through the number of execution requests that are received from suspicious entities.
This online system entities typically try to provide loans through illicit means and illicit advertising that are placed randomly on the streets and shopping malls. These activities attempt to pretty on consumers by providing them unreasonably high interest loans.
These entities usually secure their loans through enforceable promissory notes. They can later misuse these promissory notes by enforcing them through the enforcement court, which can lead consumers to legal troubles that can reach banning such consumer from travel or suspending his governmental services or freezing his bank accounts and other assets.
if the authorities detect a pattern of unlicensed lending practices, they will refer the suspected entity to the central bank to verify its activities and that is this properly licensed to conduct such activities.
The new connection between execution court and the central bank allows for rigid enforcement of the law and authorities are cracking on violating entities and referring them to the public prosecution to punish violators.
On another note, compliant entities should also aim to secure and memorialize their transactions legally and clearly. For example, if you are a seller that relies on promissory notes secure unpaid invoices, you may continue your operations provided that you document your transactions properly recorded.
If the Central Bank detects unusually high level of promissory notes for your business, you must be ready to show and substantiate the origin of such promissory notes through signed contracts with customers that include relevant payment terms.
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