Kuwait – Know Your Customer (KYC) Rules

 

 

Financial crimes, such as money laundering and terrorist financing, remain concerns in Kuwait primarily due to lack of adequate legislation. As of December 2010, the Central Bank of Kuwait reported total banking sector assets of $142 billion. Currently 21 banks operate in Kuwait: five commercial banks, five Islamic banks, ten branches of foreign banks, and the Central Bank of Kuwait.

Kuwait Flag

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: NO
    • Domestic PEP: NO

Kuwait – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Kuwaiti Law:

    • Banks
    • Financial institutions
    • Insurance agents, brokers and companies
    • Investment companies
    • Exchange bureaus
    • Jewelry establishments, including gold, metal, and precious commodity traders
    • Real estate agents/establishments
    • Auditing firms

Kuwait – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

The following is a list of STR covered entities covered by Kuwaiti Law:

    • Banks
    • Financial institutions
    • Insurance agents, brokers and companies
    • Investment companies
    • Exchange bureaus
    • Jewelry establishments, including gold, metal, and precious commodity traders
    • Real estate agents/establishments
    • Auditing firms

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: None in 2010 or 2011
Convictions: None in 2010 or 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Kuwait‘s anti-money laundering (AML) law has not been updated since its passage in 2002. Kuwait has had difficulty implementing its AML law (Law No. 35) due in part to structural inconsistencies within the law itself.

Kuwait does not have specific legislation to target terrorist financing. The current AML law does not specifically cite terrorist financing as a crime; terrorist financing criminal cases are treated as crimes against the state. In December 2009, the Kuwaiti Government presented to parliament a draft comprehensive anti-money laundering/counter-terrorist financing (AML/CFT) law intended to bring Kuwait into compliance with international standards, and including definitions of roles and responsibilities and the establishment of a financial intelligence unit (FIU). In November 2010, the Kuwaiti Parliament sent the law back to the government directing it to consider placing provisions for the criminalization of terrorist financing into a separate law.

The vague delineations of the roles and responsibilities of the FIU, Central Bank of Kuwait (CBK), and the Office of Public Prosecution (OPP) continue to hinder the overall effectiveness of Kuwait‘s AML/CFT regime. Kuwait‘s FIU fails to meet the minimum criteria for membership in the Egmont Group. The FIU currently operates under the authority of the CBK and is not an independent, autonomous authority. Law No. 35 requires banks to file STRs with the OPP, which, in accordance with a memorandum of understanding with the Central Bank, will in turn refer the STRs to the FIU for analysis. The FIU conducts analysis and reports any findings to the OPP for the initiation of a criminal case. The FIU is further limited by its inability to share information about STRs with relevant authorities without prior approval from the OPP. Kuwait‘s FIU should be made the national authority for the receipt, analysis and dissemination of STRs and other reports, and given true operational independence.

Covered entities do not demonstrate an understanding of what comprises a suspicious transaction; and Kuwait‘s financial crimes enforcement and investigative capacity are also weak. In early 2011, responsibility for investigating money laundering crimes transferred from the Ministry of Interior to Kuwait State Security. Kuwaiti customs, police and prosecutors should be made aware of money laundering methodologies and should initiate inquiries and investigations without waiting for the filing and dissemination of a STR. In order to build domestic enforcement and investigative capacity and to increase public awareness about financial crimes and regulations, the Government of Kuwait (GOK) hosts money laundering training conferences and other similar events, sometimes in coordination with regional bodies and international organizations.

Although the law requires travelers to disclose to customs authorities upon entry if they are carrying any national or foreign currency, gold bullion, or other precious materials, the law does not require a universal written declaration when carrying cash or precious metals upon exiting Kuwait. Despite the criminalization of currency smuggling into Kuwait, cash reporting requirements are not uniformly enforced at ports of entry other than at Kuwait International Airport and the Al-Abdali point of entry. The last court case of currency smuggling on record was reportedly in 2008 and has not been prosecuted. Kuwait should take steps to implement and enforce a uniform cash declaration policy for both inbound and outbound travelers at all its points of entry.

The GOK monitors and regulates funds transfers by authorized charities abroad, using a coupon tracking system as well as electronic bank transfers to create a formal paper trail for all donations. The GOK reports that, despite increased regulations, the amount of donations continues to rise in Kuwait. Financial support to terrorist groups, both by charities and by individuals continues to be a major concern. Kuwait should criminalize terrorist financing and ratify and implement fully the United Nations International Convention for the Suppression of the Financing of Terrorism.