The Ministry of Commerce and Industry’s department that tackles so-called coverup businesses has closed down such operations valued between SR 50 million and SR 55 million every month.

The department sends its inspectors to markets on the basis of reports it receives every day, Al-Sharq daily reported.

A department official said: “The illegal business coverup is mostly practiced in the wholesale sector followed by the retail sector.”

Coverup businesses, which have been found to cause a huge drain on the Saudi economy, involve an expatriate conducting his own business under the cover of a Saudi sponsor, who would receive a nominal payment.

The official added: “Approximately 50 percent of coverup establishments are owned by Arab expatriates.” The official said Jeddah had the most seized coverup establishments, 258 in all, accounting for 25.3 percent of all detected operations in the Kingdom last year.

Madinah followed with 174 operations accounting for 15.4 percent and Riyadh, particularly the Batha district, came third with 161 operations (14.3 percent), according to a register maintained at the ministry. The number of illegal operations detected in Dammam was 155, while Makkah had 93 such establishments.

The punishment for an expatriate involved in such ventures is a fine of 10 percent of the illegal investment, which sometimes can run into several million riyals, besides two years in jail. His Saudi sponsor will also be fined and jailed.

However the fine will usually be halved when a defendant lodges a complaint to the Court of Grievances, while the prison sentence is scrapped, the official said.

He added that recently inspection visits to track down coverup operations have intensified. Around 18 visits are made monthly.

The official claimed the department did not have the required number of inspectors to cope with the rising number of daily reports it received about cover up operations. It currently has seven inspectors.

Director General of the Saudi Credit Information Bureau (SIMAH) Nabil Al-Mubarak said an electronic surveillance system to detect the movement of salaries of private sector employees would shortly be put in place.

He said: “The new system aims to simplify efforts of banks, supervisory or monitoring agencies to combat money laundering, coverup operations and other illegal financial dealings.”

He added the practice of coverup operations appeared in the Kingdom about 40 years ago and the banking sector cannot help very much in fighting them because banks run on an international system.

The ninth developmental plan is expected to lay down tough regulations to stop coverup business, which also hinder nationalization efforts.