Commercial cover-up

Commercial cover-up

Commercial cover-up: how to prove it? His punishment and conditions for exemption from it – The crime of commercial cover-up is one of the negative economic phenomena that the Kingdom of Saudi Arabia seeks to combat, due to its severe impact on the economy in general. In order to combat this crime, the Kingdom has approved a special system to combat commercial cover-up, which includes a definition of the crime, penalties for violators of the provisions of this system, exemption mechanisms, and options to correct the situation, to ensure full protection from cover-up cases. Choose your lawyer carefully from the office of lawyer Abdul Muhaid Al Rashid for Legal Consultations.

First: What is the definition of commercial cover-up?

Based on Article 2 of the Anti-Cover-Up System, commercial cover-up means:

“An agreement or arrangement through which a person enables another non-Saudi person to practice an economic activity in the Kingdom that he is not licensed to practice using the license or approval issued to the cover-up.” This includes enabling a non-Saudi to use the name of the cover-up, the license or approval issued to him, his commercial record, his trade name, etc.

Article 2 also defines the basic concepts:

Enabling person: A Saudi person who enables a non-Saudi to engage in the activity.
Proceeds: Money collected from activity concealed by or through it.
Establishment: Every economic unit that carries out an economic activity.

Types of commercial cover-up (crimes)

According to Article 3 of the system, it is a crime punishable by the system to commit any of the following:

Enabling non-Saudis to practice the activity.
Non-Saudi activity.
Participating in, inciting, or providing advice regarding the crime of commercial cover-up.
Obstructing the competent authorities from implementing the provisions of the anti-cover-up system.

Second: What are the penalties imposed on violators of the commercial cover-up system?

The Anti-Cover-Up System stipulates a set of penalties against anyone who commits the crime of commercial cover-up, including:

Imprisonment for up to five years.
A fine of up to five million Saudi riyals.
Confiscation of illicit assets and funds.
Closing the facility and liquidating the activity.
Cancellation of the commercial register and cancellation of licenses.
Prohibition from practicing commercial activity.
Removing the person being covered up from the Kingdom and preventing him from returning to work.
Article Two also stipulates that: “In the event of recidivism, the penalties prescribed for the crimes stipulated in the system shall be doubled, and anyone who commits any of the crimes for which he has been sentenced by a final judgment shall be considered a recidivist within (three) years from the date of his sentencing.”

Third: After we looked at the aforementioned prescribed penalties, are there mechanisms for exemption from penalties?

Yes, the system allows the court to exempt the perpetrator of the crime of concealment from penalties, if the following conditions apply to him:

To stop committing the crime when he comes forward to report it.
To take the initiative to inform the Ministry of the commission of the crime or the identity of any of its perpetrators or participants before it is discovered by the competent authorities.
None of the perpetrators of the crime had previously reported it.
To cooperate with the Ministry and the competent authorities from the date of reporting until the completion of procedures with the parties under investigation into the crime.
To provide evidence or information on which to prove the crime.
Not to destroy, falsify or conceal any information or evidence relevant to the crime.
That his report leads to access to the proceeds of other perpetrators of the crime, or prevents them from controlling them.

Fourth: How is the crime of commercial cover-up proven?

The competent authorities in the Kingdom rely on a set of evidence to prove the occurrence of the crime of commercial cover-up, including:

Review documents and contracts, such as bank accounts and commercial contracts.
Investigate the parties concerned to find out the nature of the relationship between them.
Financial analysis to track sources of funds and the movement of financial flows.
Field investigation through visits to commercial activity sites.
Reports submitted by individuals or entities through official channels.

Finally:

As an extension of the efforts made by the Kingdom of Saudi Arabia to combat commercial cover-ups and its keenness to protect the country’s national economy. By applying deterrent penalties and providing mechanisms for exemption and correction of the situation, the Kingdom seeks to eliminate this phenomenon and achieve a fair and sustainable trade environment that enables all parties to benefit to the fullest in the Saudi market. You can contact the office of lawyer Abdul Majeed Al-Rasheed to answer all your inquiries.

Frequently Asked Questions

Commercial cover-up: how to prove it? His punishment and conditions for exemption from it / Frequently asked questions

What evidence indicates suspicion of committing a cover-up crime?

Non-Saudi workers do not participate in the facility at the General Organization for Social Insurance.
The establishment is not registered with the General Authority of Zakat and Income.
Lack of or activation of a bank account for the facility.
Failure to provide electronic payment methods if the facility’s activity is one of the activities required to do so.
The facility does not use the wage protection program approved by the Ministry of Human Resources and Social Development.
There is no evidence that the worker’s wages were transferred through the facility’s bank account.

When is a person hidden?

According to the provisions of Article Three, a person shall be hidden in the following cases:

For the empowered person (Saudi): When he “enables a non-Saudi to practice – on his own account – an economic activity in the Kingdom that he is not licensed to practice, and this includes enabling a non-Saudi to use: his name, the license or approval issued to him, his commercial record, his commercial name, or the like.”

For a non-Saudi: When he “engages in an economic activity on his own account in the Kingdom that he is not licensed to engage in, through the person who enables him.”

What does a conviction for a cover-up result in?

This results in a set of measures, the most prominent of which are the following:

The establishment shall replace the crime, cancel the license and approval issued to it to practice the activity, and delete the convict’s commercial register, unless the criminal court deems otherwise.
Preventing the convict from practicing the economic activity at the scene of the crime and any other commercial business for a period of (five) years starting from the date the sentence acquires final status.

What is the penalty for cover-up and how much is the fine?

Imprisonment for a period of up to five years, and a fine of up to five million Saudi riyals, or one of these two penalties, provided that when determining the penalty, the size of the economic activity at the subject of the crime, its revenues, the duration of practicing the activity, and the effects resulting from the crime are taken into account.

What is the penalty for covering up for a resident?

Deporting the resident from the Kingdom and preventing him from entering it in accordance with the relevant regulations and rules and what is specified in the regulations of the commercial cover-up system, after implementing the judicial ruling against him and paying his fees, taxes and other obligations in accordance with what the Criminal Court decides.

Does the cover-up warrant arrest?

Yes, in some cases, if the crime is accompanied by money laundering or fraud crimes or final prison sentences are issued.

What violations are also punishable by the anti-cover-up system?

Article 4 specifies the violations punishable by the system, which are:

Granting tools for absolute action:
“Any establishment irregularly grants a non-Saudi tools that lead to absolute disposal of the establishment.”

Possession and use of dispositional tools:
“Non-Saudi possession or irregular use of tools that lead to absolute disposition of the facility.”

Use of bank accounts:
“The establishment uses another bank account that does not belong to it in its transactions related to its economic activity.”

The article indicated that “the regulations specify the provisions related to this article, taking into account cases in which the granting or possession of tools was done in good faith.”

Will the penalty for cover-up be reduced?

Yes, as Article Nine stipulates that: “The Criminal Court shall reduce the penalties stipulated in the system, if the accused – after the Ministry learned of the occurrence of the crime – takes the initiative to provide evidence or information that could not have been obtained otherwise and relies on it to prove the crime.”

How much is the reward for reporting a cover-up?

The bonus rate is a maximum of 30% of the fine collected for any crime or violation stipulated in the Anti-Commercial Cover-Up System. To be eligible for the reward, a final ruling must be issued proving the crime or the decision must become final proving the violation, provided that the whistleblower is not convicted in the same case he is reporting.

How can a cover-up be reported?

The Ministry of Commerce has allocated the service “Reporting Commercial Establishments on Cases of Cover-Up in Other Establishments” to enable commercial establishments to report cases of commercial cover-up in other establishments. Reporting can be done through the following steps:

Log in via the Ministry of Commerce system or national unified access.
Enter the data of the informant “affiliated with the establishment”.
Include reported facility data.
Submit the request.