A royal statement on Saturday said King Fahd had issued a decree approving the “establishment of a charitable body called Saudi Civil Council for Relief and Charity Work Overseas.
The new body would be run by a group of citizens involved in charity work and renowned for their experience, integrity and good reputation.
The royal statement said the creation of the body would enable the Saudi people to “continue assisting their Muslim brethren everywhere” in keeping with Islamic teachings while shielding Saudi welfare work abroad from any harmful activities which might undermine it or tarnish its reputation.
The decision to establish the body was taken after the Saudi government decided to lay down clear rules to regulate Saudi welfare work outside the kingdom.
Its creation comes against the backdrop of growing accusations since the 11 September 2001 attacks on United States that at least some Saudi Islamic charities had been funding "terrorism".
The head of one of these charities, al-Haramain, was dismissed last month by the Saudi minister of Islamic affairs.
The US has been pressing oil-rich Gulf states, mainly Saudi Arabia, to regulate charity operations and make sure that funds do not end up in “terrorist-hands.”
Saudi Arabia has more than 230 charity organizations which raise about $267 million annually.