The European Commission has confirmed that it intends to include Saudi Arabia in the updated list of high-risk countries for money laundering and terrorist financing.
Other countries such as Pakistan, Libya and Panama have also been added to the list, which the European Parliament is expected to ratify within one month.
Financial institutions in the Member States of the European Union must now commit to a wider scrutiny of transactions involving high-risk countries, including faster access for law enforcement agencies conducting investigations into terrorism.
Following a series of known scandals involving EU financial institutions and international accounts, the EC is acting.
Sven Giegold, MEP, told Al Jazeera: "It is a sign of European confidence, and the EU will insist on enforcing its standards."
The effect on Riyadh is probably threefold. Firstly, the investment risk faced by EU financial institutions targeted by Crown Prince Mohammed bin Salman (MBS) as part of its "Vision 2030" reform package.
Second, the damage in public relations is due to alleged ties between Saudi Arabia and alleged armed groups, including the Islamic states of Iraq and the Levant (ISIL, ISIS) and Al-Qaeda. The EC is convinced that it has reason to believe that Saudi Arabian individuals or financial institutions are at high risk of being used to launder or finance terrorism. These new measures offer the prospect of uncomfortable relations between Saudi Arabian units and organizations accused of terrorism.
Third, Saudi citizens around the world make up the world's second largest money transfer market, worth $ 37 billion in 2017. Citizens using EU-regulated financial institutions may expect to have more control over their accounts, possibly delaying or interrupting transfers.
The inclusion of Saudi Arabia in the list of high-risk countries marks a significant change in its relations with the EU.
"Europe was not serious when it came to ML [money laundering] and TF [terror financing]'It's changing now,' said Giegold.
He said the decision to accept Saudi Arabia is proof that the EU is moving away from politically-driven decision-making to a more fact-based decision, arguing that more needs to be done.
"It is disturbing that Dubai is not there," he said, adding, "31 more countries are still being evaluated, Dubai, Russia, Azerbaijan and others."
Wednesday's announcement breaks new ground and further jeopardizes the development of the Crown Prince's reform agenda.
Vision 2030 began in 2016 as a program to diversify the Saudi economy and promote private investment. However, foreign direct investment in the Kingdom fell sharply in 2017 and investor confidence was further affected by the assassination of Saudi writer Jamal Khashoggi last autumn. The prospect of a country on the EC's list could be a further deterrent for investors.
The EU was more explicit in its criticism of Riyadh than the United States or individual EU Member States. Including Saudi Arabia in the list also reflects the years of difficult European voters facing the challenges of international terrorist financing. After the attacks in Europe, the work of law enforcement agencies has been hampered by insufficient data exchange.
The list was compiled using a new rating model, which the EC refers to as "the world's strongest anti-money laundering standards".
"Europe can not be a laundromat for dirty money that promotes crime and terrorism," EU Justice Commissioner Vera Jourova said on Wednesday.
Officially, efforts to combat money laundering and terrorist financing are coordinated by a committee of several ministries and agencies. The Saudi government does not publish the results of its own risk assessment like many other countries.
The countries can also be removed from the list, and Jourova indirectly dealt with the supplements on Wednesday.
Whether Saudi Arabia will answer the call remains to be seen. Giegold, however, was confident that progress was needed. "It does not make the relationship easier, but it's necessary."