Kuwait Takes Steps to Combat Financial Crimes

The Kuwaiti Government has taken a significant step in addressing the issues of money laundering and terrorism financing by passing Law No. 106 of 2013, also known as the New Law. This law supersedes the previous Law No. 35 of 2002 and establishes new and improved governing principles and standards to protect local financial institutions from being used for illicit activities.

Key Provisions of the New Law

Criminalizing Terrorist Financing

One of the most pressing issues highlighted by the Middle East & North Africa Financial Action Task Force (MENAFATF) in their 2011 Mutual Evaluation was that the Old Law failed to criminalise terrorist financing. The New Law addresses this issue by introducing Article 3, which states that any person who has directly or indirectly, willingly and illicitly, collected funds with the intention to use these funds for committing a terrorist act shall be considered as having committed a terrorist financing crime.

Freezing Terrorist Assets

Another key provision of the New Law is the implementation of measures that enable the freezing of terrorist assets. Article 22 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.

Implementing Customer Due Diligence Practices

The Central Bank of Kuwait has also supplemented the New Law by issuing circulars and instructions to local financial institutions, instructing them on measures that should be taken to ensure that customer due diligence practices are adhered to. This includes making sure that banks have suitable safeguards in place to prevent accounts from being opened for terrorist financing or money laundering purposes.

Creation of a Fully Independent Financial Intelligence Unit

The New Law also establishes a fully independent Financial Intelligence Unit (FIU), which will serve as the main investigative body responsible for receiving, applying for, analysing and transferring information related to suspected proceeds of money laundering or monies used to finance terrorism.

Stricter Sanctions and Penalties

Article 28: Money Laundering

Article 28 provides for a prison sentence not exceeding ten years and a financial penalty not exceeding the funds laundered in breach of Article 2.

Article 29: Terrorist Financing

Article 29 states that any person found guilty of financing terrorism shall be subject to 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 for Hawaladars

The New Law also includes restrictive provisions covering Hawala agents, who provide a cross-border cash courier service. Any person wishing to leave Kuwait with currency or other negotiable financial instruments must disclose the value of these currencies or negotiable financial instruments to the Kuwaiti Customs Authority.

Conclusion

The introduction of the New Law demonstrates the Kuwaiti Government’s level of commitment to combating both terrorist financing and money laundering. The creation of a fully independent FIU and the implementation of stricter sanctions and penalties send a strong message to criminal and terrorist organizations that prey on the relatively new and inexperienced banking systems in the Middle East. While an evaluation of its effectiveness cannot yet be given, it is a positive step towards addressing these critical issues.