The financial institutions in the State of Kuwait, including business entities supervised by the Central Bank of Kuwait, Capital Markets Authority, Insurance Regulatory Unit, and Ministry of Commerce and Industry, are required to comply with the requirements of Anti-money laundering and combating the finance of terrorism (AML-CFT) given its implications on Kuwait’s financial system reputation, stability and integrity.
In this context, the State of Kuwait enacted Law No. 106 of 2013 regarding Anti-money Laundering and Combating the Finance of Terrorism, in addition to recommendations issued by Financial Action Taskforce (FATF), an inter-governmental body established in 1989 by the G7 member states.
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 that:
A Unit called the “Kuwait Financial Intelligence Unit” shall be established. 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 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:
| Central Bank of Kuwait | It is tasked with supervising banks, exchange companies, financing companies, credit information companies, and electronic payment businesses. |
| Capital Markets Authority | It is tasked with supervising investment companies, securities trading companies, financial brokerage companies, stock exchanges, clearing agencies, funds and custodians. |
| Insurance Regulatory Unit | It is tasked with supervising insurance companies, insurance agents, insurance brokers, and insurance professionals. |
| Ministry of Commerce & Industry | It is tasked with supervising exchange establishments, real estate brokers, merchants of precious metals and stones, and accountants. |
| Self-Regulatory Organizations – Lawyers Association | It is tasked with supervising the legal profession. |
What are the mandatory requirements and determinants issued by the Central Bank of Kuwait regarding AML-CFT?
The Central Bank of Kuwait issued detailed instructions to its supervised entities regarding AML-CFT, which can be summarized as follows:
- Banks:
Circular No. (2/ BS, IBS, 507/2023) dated 16 February 2023 regarding AML-CFT.
- Finance Companies:
Circular No. (2/ FC/ 309/2023) dated 23 July 2013 regarding AML-CFT.
- Exchange Companies:
Circular No. (2/ ES/ 508/2023) dated 16 February 2023 regarding AML-CFT.
The AML-CFT instructions include the mandatory requirements and determinants that CBK-supervised entities should observe, including but not limited to risk identification and assessment, development, and approval of policies, procedures, and internal controls, compliance with due diligence measures towards customers and politically exposed persons, suspicious transaction reporting obligations, and record retention requirements.
Does the Central Bank of Kuwait require engaging an audit firm to verify exchange companies’ compliance with AML-CFT requirements?
Yes, the Central Bank of Kuwait requires exchange companies to engage an audit firm to conduct an examination and assessment of compliance with AML-CFT requirements.
The required Report should be prepared on a semiannual basis as at 30 June and 31 December of every year, no later than 60 days from the end of the reporting period.
(Reference: Circular No. (2/ES/542/2024) dated 18 April 2024 to all exchange companies regarding the engagement of an audit firm to conduct examination and assessment of compliance with AML-CFT requirements)
What are the mandatory requirements and determinants issued by the Capital Markets Authority regarding AML-CFT?
These requirements and determinants are stated in the provisions of the Executive Bylaws 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 developing effective regulations, policies, and procedures, assessing the risks of money laundering and financing of terrorism, applying enhanced due diligence procedures to any client with a high-risk profile, monitoring the business relationship with clients, complying with record retention and suspicious transaction reporting requirements.
Does CMA require engaging an external auditor to verify 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 no later than 31 March of every year as per the following references:
(Reference: Executive Bylaws – 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?
- Comply with laws, regulations, resolutions, and instructions issued by the Central Bank of Kuwait and Capital Markets Authority.
- Enhance the business entity’s reputation and increase all stakeholders’ confidence.
- Protect the business entity and its clients from illegal transactions, which may involve money laundering, terrorism financing, or any other criminal activity.
- Contribute to optimizing the capital market integrity and credibility.
What are the services offered by Baker Tilly Kuwait?
- Preparing Assurance Report on Examination and Assessment of Compliance with AML-CFT Requirements
This report should be prepared by exchange companies on a semiannual basis as at 30 June and 31 December of every year no later than 60 days from the end of the reporting period.
- Preparing Assurance Report on Compliance with AML-CFT Legislation
This report should be prepared by the licensed companies on an annual basis, and a copy thereof to be submitted to CMA no later than 31 March of every year.