Mar.30, 2010

JEDDAH – The Bureau of Investigation and Prosecution (BIP) has launched a crackdown on the country’s illegal loan sharks who are suspected of being involved in money laundering.

Loan sharks are individuals or groups of people who pay a person’s debt at a bank by offering an even greater loan to the indebted person at exorbitant interest rates. The interest rates are as high as 19 percent. The practice is illegal in the Kingdom.

Other bodies investigating these practices are the commerce and industry and finance ministries, the Capital Market Authority and municipalities.

Advertisements promoting these offers are found at ATMs and in newspapers offering free advertisements.

Authorities suspect these advertisers because it is not known where they get their money.

It is expected the Ministry of Interior is to take a number of measures to crack down on those involved.

The Emirs of the regions, along with other executive bodies, will be requested to refer these advertisements to the BIP. The loan sharks will be charged with breaching the regulations of the Ministry of Commerce and Industry regarding the sources of their money.

The move comes in the wake of the BIP dealing with a number of disputes between lenders and debtors over the practice of taking over bank loans.

It is expected that the BIP, in coordination with the Saudi Arabian Monetary Agency (SAMA), will also summon bank employees who have been found to have facilitated the granting of loans in such cases.Legal consultant Muhammad Aal Thunaiyan said Monday that the situation “requires rapid action by relevant authorities, including the Ministry of Interior and SAMA”. He added that offering loans with interest, in exchange for paying a person’s debt to a bank, “is a clear violation of the banking regulations and the rules of the capital market and Ministry of Commerce”.

Aal Thunaiyan said the banks are strictly monitored by SAMA and have nothing to do with these operations. “The issue is between individuals, or maybe a small company and an individual, and they sometimes have contracts,” he said.