Financial Crime World

BANKS’ ROLE IN PREVENTING FINANCIAL CRIMES IN KUWAIT TAKEN SERIOUSLY BY GOVERNMENT

Introduction

The Kuwaiti government has recently passed a new law to address the issues of money laundering and terrorism financing in the country. The new law aims to reduce the damaging effects of these crimes on a global, local, economic, social, and political level.

Key Provisions of the New Law

  • Criminalization of Terrorist Financing: Article 3 of the new law states that any person who directly or indirectly collects funds with the intention to use them for committing a terrorist act can be said to have committed a terrorist financing crime.
  • Freezing of Terrorist Assets: Article 22 gives power to the public prosecutor or his authorized public lawyers to freeze or confiscate funds or instruments if sufficient evidence exists to suggest that they were obtained or used for money laundering or terrorism financing.

Measures to Ensure Compliance

  • The Central Bank of Kuwait has issued 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.
  • Customer due diligence measures act as a valuable whistle-blowing mechanism by which the relevant authorities are notified by the banks of transactions or persons they deem suspicious.

Introduction of the Financial Intelligence Unit (FIU)

The new law introduces a fully independent FIU, which will serve as the main investigative body and be responsible for receiving, applying for, analyzing, and transferring information related to what is suspected of being proceeds of money laundering or monies used to finance terrorism.

Restrictive Provisions

  • The law includes restrictive provisions covering Hawaladars or ‘Hawala’ agents, who provide a no-questions-asked cross border cash courier service.
  • Article 20 requires any person wishing to leave the State of Kuwait with currency or other negotiable financial instruments to disclose to the Kuwaiti Customs Authority the value of these currencies or negotiable financial instruments.

Penalties for Breach

The penalties for breach of the new law are also stricter, with a prison sentence not exceeding ten years and a financial penalty not exceeding the funds laundered in breach of Article 2. The punishment for breach of Article 3 (financing of terrorism) is not dissimilar and is provided for by Article 29.

Conclusion

The new law marks a significant step forward in Kuwait’s efforts to combat money laundering and terrorism financing. The implementation of the FIU and the stricter penalties demonstrate the government’s commitment to tackling these issues head-on. As the law is still new, an evaluation of its effectiveness cannot yet be given, but it is clear that the recommendations made by MENAFATF have been acknowledged and taken on board by the Kuwaiti government.