AML-CFT Compliance

Anti-money laundering and combating the finance of terrorism (“AML-CFT”) have been of great concern for all governments worldwide due to their detrimental effects on economies and internal security of such countries.
Pursuant to Law No. 106 of 2013 enacted in the State of Kuwait, Article (2) thereof sets forth the definition of the money laundering crime as follows:
“Any person who knows that funds are the proceeds of crime and who has done the following acts voluntarily shall be considered to have committed a money laundering offense:.

• converts or transfers or substitutes such funds with the purpose of disguising or concealing the illicit origin thereof, or helping a person involved in the commission of the predicate offense evade the legal consequences for his/her acts;
• disguises or conceals the true nature, source, location, disposition, movement or ownership of such funds, or rights pertaining thereto; or
• acquires, possesses or uses such funds.

A legal person shall be held liable for a money laundering offense if it were committed in its name or to its credit.

Punishment of the person for a predicate offense shall not preclude conviction of that the same person for a money laundering offense.

When establishing that funds are proceeds of crime, a conviction for the commission of a predicate offense shall not be required.

Article (3) of the same Law sets forth the definition of financing of terrorism crime:
Any person who by any means, directly or indirectly, unlawfully and willfully, collects or provides funds, with the knowledge that they will be used or with the intent that they should be used, in full or in part, in order to carry out a terrorist act or for the benefit of a terrorist organization or of a terrorist shall be considered to have committed a terrorism financing offense.
Any of the acts mentioned in the previous paragraph shall be considered a terrorism financing offense even if the terrorist act does not occur, or if the funds are not actually used to commit or attempt to commit the act or if the funds are not linked to a specific terrorist act.

What is the international body concerned with AML-CFT ?

It is the Financial Action Task Force (FATF), which is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions.

What is the State of Kuwait’s body tasked with receiving notices related to money laundering and financing of terrorism ?

Article (16) of Law No. (106) of 2013, as amended, concerning Anti-Money Laundering and Combating the Financing of Terrorism sets forth establishing a Unit called the “Kuwait Financial Intelligence Unit”. It shall be an independent legal person and serve as the body responsible for receiving, requesting, analyzing, and disseminating information concerning suspected proceeds of crime or funds related, linked to or to be used for money laundering or terrorism financing according to the provisions of this Law.

What is the State of Kuwait’s body tasked with receiving notices related to money laundering and financing of terrorism ?

The State of Kuwait enacted legislation addressing countering money laundering and combating the financing of terrorism. Such legislation includes Law No. (106) of 2013 concerning Anti-Money Laundering and Combating the Financing of Terrorism, and its Executive Regulations issued under Ministerial Resolution No. 37 of 2013.

What are the regulators in the State of Kuwait tasked with the supervision of AML-CFT?

The State of Kuwait’s regulators concerned with the supervision of AML-CFT are as follows:

What are the mandatory requirements and determinants issued by Capital Markets Authority regarding AML-CFT?

These requirements and determinants are stated in the provisions of the Executive Regulations of Law No. 7 of 2010 regarding the Establishment of Capital Markets Authority and Regulation of Securities Business, as amended, Module 16: Anti-Money Laundering & Combating Financing of Terrorism.

The AML-CFT mandatory requirements and determinants include but are not limited to:

1. 1. Developing effective written regulations, policies and procedures intended to prevent money laundering and combat terrorist financing. Senior management shall be responsible for effective risk management including the risk of money laundering and financing of terrorist;
   2. Appointing a compliance officer at senior management level who shall be directly responsible for supervising the implementation of AML-CFT policies and procedures and for reporting to the Kuwait Financial Intelligence Unit any suspicious money laundering or terrorist financing;
   3. Reviewing the AML-CFT policies and procedures on regular basis to ensure their effectiveness;
   4. Assessing the risks of money laundering and financing of terrorism including those related to the development of new products and technologies; Implementing policies and procedures for customer acceptance and due diligence procedures pertaining to the customer;
   5. Developing and preparing procedures for identifying, monitoring, managing and mitigating the risk of money laundering and financing of terrorism;
   6. Developing mechanisms to exchange available information and maintain confidentiality thereof with financial institutions and their local and foreign branches, and subsidiaries;
   7. Applying the policies to the Licensed Person’s branches and its subsidiaries outside the State of Kuwait;
   8. The Licensed Person shall not accept dealing with liquid cash funds provided by the customer for the purpose of investment or in consideration for service rendered to the customer;
   9. The Licensed Person shall apply the due diligence procedures to any customer with high risk profile;
   10. The Licensed Person shall monitor the business relationship with its customers on ongoing basis and check all complex and huge transactions and all unusual patterns of transactions that have no clear economic or legal objective;
   11. The Licensed Person shall review and update the customers’ records;
   12. The Licensed Person shall comply with the record retention requirements set forth in Module 16 of the Executive Regulations of the Capital Market Authority Law;
   13. The Licensed Person shall immediately notify the Unit of any activity or transaction involving money laundering and the financing of terrorism;
   14. The Licensed Person shall not disclose to a customer or any other person any notices, reports or information sent or to be sent to the Unit; and
   15. The Licensed Person shall provide training to its employees, managers, directors and the executive management members in respect of all aspects of AML-CFT.

Does CMA require engaging an external auditor to verify the compliance with AML-CFT requirements by a licensed person ?

Yes, CMA requires engaging an external auditor to prepare a report including the evaluation of compliance with all legislative determinants and requirements set forth in AML-CFT Law as well as CMA regulations issued in this regard. The required report should be prepared on annual basis for the period from 1 January to 31 December of every year, and provide CMA with a copy thereof not later than 31 March of every year as per the following references:

(Reference: Executive Regulations – Module 16: Anti-Money Laundering & Combating Financing of Terrorism, Article 7.7)
(Reference: CMA Circular No. 13 of 2017 dated 14/12/2017)

What is the added value to business entities from Compliance with AML-CFT Legislation Report?

1. 1. Comply with laws, regulations, resolutions and instructions issued by Capital Markets Authority;
   2. Enhance business entity’s reputation and increase all stakeholders’ confidence;
   3. Protect the business entity and its customers from illegal transactions, which may involve money laundering, terrorism financing or any other criminal activity; and
   4. Contribute to optimizing the capital market integrity and credibility.

What are the services offered by Baker Tilly ?

Assurance Report on Compliance with AML-CFT Legislation

Such report includes matching the mandatory AML-CFT requirements and determinants issued by CMA and the implementation of such requirements and determinants by the licensed person, and identifying the deficiencies to take corrective actions and prevent reoccurrence thereof.

Other related services

• Financial Statements Audit
• Internal Control Review
• Internal Audit Unit Assessment
• Customers’ Funds and Assets
• Custodian’s IT Systems
• Loans & Financing Portfolios Review
• Agreed-Upon Procedures
• Attestation