Okaz newspaper recently published a report about the misappropriations discovered at Banque Saudi Fransi that led to a fall in the bank’s share price. According to the newspaper report, the Saudi Arabian Monetary Agency (SAMA) is investigating the violation of rules that led to the huge misappropriations and major irregularities that occurred in the bank.

The newspaper published comments from legal experts on the issue. They stated that the irregularities and misappropriations at Banque Saudi Fransi were financial crimes, which confirm the weakness and inefficiency of auditing bodies associated with listed companies. They pointed out that some quality control bodies are unable to carry out their legal and supervisory duties. This demonstrates the weakness of the legal and financial departments in the private sector, especially in large companies.

Abdul Aziz Al-Naqali, a legal expert, said that the violations committed by Banque Saudi Fransi are financial crimes, completely different from criminal offenses or cyber crimes as far as laws and penalties are concerned. If there is any default on the part of the bank, it could be faced with penal action as in the case of offenses committed by individuals. He stated that the role of SAMA in this case is that of a supervisor and accountant in financial matters. However, if it is proved that a financial crime took place, then the case and crime must be referred to the competent judicial authorities,

SAMA is waiting for the decision of the judicial authorities in this regard as its role is executing the court’s decision. Al-Naqali also stated that the role of the prosecution in this case is investigation and pleading the case in court.

While legal experts say that what happened at Banque Saudi Fransi amounts to financial crimes, the bank itself declared that its Board of Directors has designated a specialized and independent team to carry out a thorough examination in order to ascertain whether any excesses took place in transactions when some incentives were given to a number of employees, as well as to pinpoint the shortcomings and find out who were responsible for them. The board issued a statement saying that the creation of the panel was based on the information that it had received about excesses in discharging powers granted in a number of transactions related to the incentives of some bank employees. Financial payments were made in violation of the policy of the approved stimulus program.

Do we believe the opinions of the legal experts or the statement of the board? According to the board’s statement, the issue is that of giving incentives to some employees during the past years and these resulted in payments that are contrary to the policy of incentives.

Where is SAMA, which monitors the activities of banks? Why did incentives accumulate for several years in the past? Is it conceivable that the incentives reached the large amount reported by the media and resulted in financial crimes that resulted in the plunge in the bank’s share value?

The mandate to appoint a specialized and independent team to carry out a thorough examination into these irregularities is the responsibility of SAMA, and not that of the bank’s board of directors. It is not reasonable for a bank’s board of directors to investigate financial crimes that took place in its own bank. This is the responsibility of SAMA and the judicial authorities.

Furthermore, while the Capital Market Authority is supposed to play a decisive role in such issues, we have not heard anything from it about the financial crimes that rocked one of the Kingdom’s largest banks, which is also a joint stock company with large and small shareholders, including orphans, widows and pensioners who are eagerly awaiting the disbursement of dividends. All of a sudden, these shareholders have heard unpleasant news about a plunge in the bank’s share value that will adversely affect their earnings.

The legal experts, who spoke to Okaz, were unanimous in their opinion with regard to what actually happened in Banque Saudi Fransi. They pointed out that there have been weaknesses and shortcomings on the part of the regulatory authorities. Dr. Majed Qaroub, an expert on corporate governance and financial issues, noted that the bank’s announcement confirms the weakness of the auditing bodies in companies listed in the capital market, especially banks and insurance companies. He added: “Some quality control bodies are unable to carry out their legal and supervisory duties as far as the banking and insurance sectors are concerned. This indicates a serious flaw in the legal and financial departments in the private sector in general and large companies in particular.”

He said that some of these departments are sham and do not have a real and effective role to play. He added that the roles of general assemblies and members of the boards of directors are dubious, and that there is a need for legal and legislative correction.

Dr. Qaroub also questioned the role of the board members. I say that the board members are busy in arranging and clinching contracts between their own companies and the companies, in which they are board members, and that this is in violation of the Corporate Governance Law. Furthermore, all of this is happening under the watchful eyes of the Capital Market Authority.

Moreover, these board members have shown interest in earning excessive annual bonuses, attendance allowances and travel and residence allowances if they are outside the headquarters of the company. As for the General Assemblies, they do not have any importance and value, as they are more or less ornamental.

— Dr. Ali Al-Ghamdi is a former Saudi diplomat who specializes in Southeast Asian affairs. He can be reached at algham@hotmail.com