Financial Crime World

Kuwait Adopts New Anti-Money Laundering and Terrorism Financing Laws

In a significant move to strengthen its financial system and protect against the risks of money laundering and terrorism financing, Kuwait has introduced new laws aimed at combating these crimes.

Background

The previous law No. 35 of 2002 had several shortcomings, including failing to criminalise terrorist financing and lacking measures for identifying and freezing terrorist assets. These issues have been addressed in the new laws, which came into effect in September 2013.

Key Provisions

  • Terrorist Financing: The new laws make terrorist financing a punishable crime under Article 3. Any person who has directly or indirectly collected funds with the intention to use them for committing a terrorist act is guilty of a terrorist financing crime.
  • Freezing of Terrorist Assets: The new laws provide measures for freezing terrorist assets, implemented under Article 22. This gives power to the public prosecutor or his authorised public lawyers to freeze or confiscate funds or instruments if sufficient evidence exists to suggest that they were obtained or used with regards money laundering or terrorism financing.
  • Customer Due Diligence: The Central Bank of Kuwait has issued circulars and instructions to local financial institutions, instructing them on measures that should be taken to ensure customer due diligence practices are adhered to. The new laws require banks to have suitable safeguards in place to prevent accounts from being opened for the purpose of terrorist financing or money laundering.
  • Financial Intelligence Unit (FIU): A fully independent FIU has been established under Article 16, which will serve as the main investigative body and be responsible for receiving, applying for, analysing and transferring information related to suspected proceeds of money laundering or monies used to finance terrorism.

Sanctions and Penalties

The new laws introduce stricter sanctions and penalties for breaches. The punishment for breach of Article 2 (money laundering) is a prison sentence not exceeding ten years and financial penalties not exceeding the funds laundered. The punishment for breach of Article 3 (financing of terrorism) is a prison sentence not exceeding 15 years and a fine of no less than the funds subject to the crime and no more than double their value.

Restrictive Provisions

The new laws also include restrictive provisions covering Hawaladars or ‘Hawala’ agents, who provide a no-questions-asked cross border cash courier service. Any person wishing to leave the State of Kuwait with currency or other negotiable financial instruments is now required to disclose their value to the Kuwaiti Customs Authority.

Conclusion

The new laws demonstrate the Kuwaiti Government’s commitment to combating both terrorist financing and money laundering, sending a strong message to criminal and terrorist organisations that prey on relatively new and inexperienced banking systems in the Middle East.