Saudi Arabia: Corruption investigations
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- Resolving Critical Issues and Crises
Saudi Arabia: Corruption investigations reflect crown prince’s remaking of state-business relations
Royal decrees on 4 November relieved several senior officials of their positions and established a supreme anti-corruption commission. The government has subsequently said that over 200 people have been detained on allegations of corruption and money-laundering, including members of the royal family, current and former officials and members of the business community. Former minister of the Saudi Arabian National Guard (SANG) Miteb bin Abdullah bin Abd al-Aziz Al Saud, former economy and planning minister Adel Fakeih and billionaire prince al-Walid bin Talal bin Abd al-Aziz Al Saud were reportedly among those detained.
- The unprecedented detentions reflect the centralisation of power and decision making by Crown Prince Mohammed bin Salman bin Abd al-Aziz Al Saud (widely known as MbS). SANG was the only significant ministry outside his control. MbS now controls economic policy, the military and the domestic counterterrorism and intelligence apparatus. Over the past two years he has effectively sidelined all potential rivals and demonstrated his ability to target individuals who were previously considered untouchable.
- The corruption investigations are likely to reflect MbS’s wish to assert control over the dispensing of patronage. Groups of princes have traditionally controlled the distribution of state largesse, from which politically connected business figures have benefited. MbS has worked to increase central oversight of public spending and will want to signal to the country’s economic elite that the prevailing model of state-business relations is changing.
- The dismissals and detentions are unlikely to create political instability over the coming months. Discontented princes and members of the country’s economic elite have few means of pushing back against MbS. SANG’s apparent acquiescence to Miteb’s dismissal points to the low probability of any resistance emerging within the security forces. The public is also likely to be relatively supportive of the moves, given the well-publicised allegations of corruption against several of those who were detained.
- The detentions are likely to have an indirect impact on foreign companies’ operations. Ruling family members’ business interests include extensive relationships with multinationals, though often through structures that obfuscate their involvement. The government announced it was freezing the detainees’ bank accounts, and will seek to recover ill-gotten funds or assets. The full list of detainees remains unknown and more arrest are likely. No foreign entities have been mentioned during the investigations thus far.
Top five things companies should do
To remain successful in this changing marketplace, businesses will have to reconsider their operating model in Saudi Arabia to ensure that they are operating in line with what appears to be the government’s new approach to corruption and favouritism. If your organisation currently does business in the kingdom, you should consider the following steps to ensure that your business plan for the kingdom is resilient to these changing rules of the game.
1. Implement a monitoring framework to ensure you have the latest information and analysis about in-country developments and that it is distributed to the relevant stakeholders within your organisation.
2. Map your business and reputational exposure in the kingdom: determine whether you work directly with individuals accused of corruption or partner with business interests they control. Have you received contracts from ministries where they were active?
3. Confirm you did your due diligence on your partners in Saudi Arabia. If you did, these due diligence exercises should be revisited. If you did not do due diligence, consider doing it now.
4. Review your anti-corruption programmes governing your Saudi business and conduct a corruption risk assessment if you have not. Audit your existing documentation demonstrating implementation of your anti-corruption policy, including training logs, gifts and donations registers, risk assessments and due diligence reports.
5. Test your preparedness in case of an investigation or raid against your offices or one of your partners’ offices