Kuwait

Last updated: 19/12/2012


CENTRAL AUTHORITY FOR REPORTING

Kuwaiti Financial Investigation Unit (KFIU)

The KFIU operates under the auspices of the Central Bank of Kuwait.

The KFIU works in conjunction with the Office of the Public Prosecutor (OPP) to process and exchange information about suspicious money laundering activity. In particular the KFIU is responsible for the following:

  • Receiving reports of money laundering transactions from the OPP, analyzing the reports and providing technical opinions to the OPP;
     
  • Maintaining a database and statistics with regards to these reports;
     
  • Contributing to training and awareness programmes regarding combating money laundering transactions in coordination with the National Committee of Fighting Money- Laundering Transactions and Terrorism Finance and other relevant bodies;
     
  • Coordinating with the OPP on the exchange of information and data on both national and international levels.

OTHER ANTI-MONEY LAUNDERING REGULATOR(S)

The CBK is the regulator for banks, investment companies and exchange companies. The CBK regularly issues instructions and circulars with regard to compliance with anti-money laundering (AML) legislation. For instance, it has issued the Instruction No. (2/BS/92/2002) regarding combating money laundering operations and terrorist financing. These instructions set out in reasonable detail specific measures to be taken in order to comply with AML legislation. In case a bank breaches the instructions issued by the CBK, such bank may be subject to various sanctions (under the Central Bank of Kuwait Law 32/1968) including financial penalties and exclusion from the register of banks.

The Office of the Public Prosecutor is the implementing authority of the Law on Combating Money Laundering Operations (the “Law No. 35 of 2002”). In accordance with this law, the OPP is authorised to receive reports, freeze assets and prosecute offenders.

  • Director General of Customs (the “DGC”)

The DGC is mandated to implement the Ministerial Resolution No. 9 of 2003 which requires travellers to notify customs authorities of any local or foreign currency, gold bullion and goods or precious objects with values that exceed Kuwaiti Dinars (KWD) 3,000.

  • National Committee for Counter Fighting Money Laundering Transactions and Terrorist Financing

This Committee is chaired by the Governor of the CBK and is an inter-ministerial, inter-departmental committee charged mainly with strategic and policy matters in relation to combating money laundering.


ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?

Ministerial Order No. 9 of 2005 sets out the individuals and entities that are subject to Article 2 of the AML legislation. Lawyers are expressly included and are thus subject to the principle legislation i.e. the Law Regarding Combating Money Laundering Operations, Law No. 35 of 2002 and its implementing procedures (set out in Ministerial Order No. 9 of 2005).


LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.

  • Law Regarding Combating Money Laundering Transactions. Law No.35 of 2002
This law sets out the definition of money laundering, criminalizes money laundering operations and enlists the different penalties. Money laundering is defined as:
(i) committing money laundering, knowing the money is derived from an act/acts of participation in the same,
(ii) the conversion, transfer, possession, acquiring, using, keeping or receiving money, knowing that the money is derived from a crime or one  of the acts of participation therein
(iii) the concealment or disguise of the true nature of the money, its origin, place, manner of disposition, movement or rights related to it or its possession, knowing that it is derived from a crime or any act of participation in the same.

The OPP is named as the competent authority to receive reports under this law, and solely has the responsibility of investigating and taking action in respect to crimes set out in the law.  Article 3 requires banks, investment companies and other financial institutions and individuals determined by a resolution of the Minister of Finance to abide by certain anti-money laundering measures. Ministerial Order No.9 of 2005 was issued in this regard.

This law establishes the CBK. Pursuant to the above law the CBK regulates financial institutions in Kuwait including banks and investment companies.

  • Law No. 5 of 2006 Ratifying the United Nations Convention Against Transnational Organized crime and Its Protocols (the Palermo Convention)

Pursuant to this law, Kuwait ratified the Palermo Convention adopted by General Assembly resolution 55/25 of 15th November 2000. The Convention aims at combating money laundering, human trafficking and arms trafficking.

  • Law No. 25 of 2000 Ratifying the United Nations Convention Against Illicit Traffic In Narcotic  Drugs and Psychotropic Substances 1988 (the Vienna Convention)

The purpose of this law is to implement the Vienna Convention and it aims at addressing the various aspects of illicit traffic in narcotic drugs and psychotropic substances having an international dimension.

These are implementing regulations for Law No. 35 of 2002. The regulations provide a detailed list of entities and individuals that are subject to the law which includes lawyers. The regulations provide a list of obligations including due diligence obligations that apply these entities and individuals. The regulations set out certain penalties for non-compliance and provides for the establishment of the Kuwait Financial Investigation Unit. 

  • Central Bank of Kuwait Resolution No. 1/191/2003

The resolution establishes the Financial Investigation Unit chaired by the CBK Governor.

This decision empowers the Governor of the CBK to take necessary actions to establish the Kuwait Financial Investigation Unit.

This decision provides for the establishment of a National Committee for Combating Money Laundering Operations and Terrorism Finance. The committee is chaired by the Governor of the CBK, and is comprised of members from the CBK, the Ministry of Interior, Ministry of Foreign Affairs, Office of the Public Prosecutor, Ministry of Commerce and Industry, Ministry of Finance, Ministry of Social Affairs and Labour, Kuwait Stock Exchange, General Customs Directorate and Kuwait Banks Union.

The general function of the committee is to advise the state on the general strategy and policy for combating money laundering and terrorism finance, to coordinate with state ministries and institutions related to money laundering operations and terrorism finance, to monitor local, regional and international developments in the field of money laundering and to represent Kuwait in local, regional and international meetings.

This resolution requires travellers arriving in Kuwait to notify customs authorities of any local or foreign currency, gold bullion and goods or precious objects that are valued at more than Kuwaiti Dinars (KWD) 3,000 or the equivalent.

  • Kuwait Stock Exchange Resolution No. 31 of 2003

The above resolution was issued by the Kuwait Stock Exchange (KSE) with regard to anti-money laundering and combating the financing of terrorism. This resolution applies to brokerage companies and portfolio management companies and provides interalia that brokerage companies, portfolio management companies and clearing companies must verify the identity of customers before establishing a business relationship and monitor the transactions conducted in order to avoid money laundering.

  • MOCI Resolution No. 252 of 2000

The MOCI issued the above resolution with regard to anti money laundering and combating the financing of terrorism. This resolution applies to investment companies, insurance companies, brokers and agents, exchange companies and organizations and other financial institutions not under the CBK’s supervision. This resolution requires interalia the establishment of the identity of clients.

  • MOCI Resolution No. 204 of 2004

Pursuant to this resolution, the MOCI requested investment companies, insurance companies, brokers and agents, exchange companies and other financial institutions not under the supervision of the CBK to submit their financial statements to the MOCI, to note all financial transactions in their books and records and to not take deposits, or open safe boxes in the names of anonymous clients.


ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

The AML legislation does not distinguish between local lawyers and visiting lawyers. The rules and regulations are applicable in Kuwait and hence are addressed to entities and individuals in Kuwait. While there is no guidance from the relevant authorities, our view is that, as the AML legislation is intended to prevent any attempts of money laundering and terrorism financing in Kuwait, visiting lawyers should be subject to Kuwaiti AML law to the same extent as Kuwaiti lawyers.

Lawyers and other entities/individuals to whom the Law is applicable would be required:

  • When acting on behalf of their clients, not to open or keep any unidentified accounts, perform any transactions whatsoever, rent safes, keep (among others) bonds, financial or commercial bills, notes, precious jewels or metals in anonymous code or fake names;
     
  • When acting on behalf of their clients, not to open any account or perform any transaction that amounts to more than KD 3,000 except after verifying the identity and capacity of the client;
     
  • To record and register all financial and non-financial transactions in their official records in accordance with regular systems and maintain such records for at least 5 years;
     
  • To report any suspicious financial transaction that may come to their knowledge;
     
  • To train their respective staff and officers on a regular basis about new developments in the field of fighting money laundering transactions;
     
  • To establish and consolidate internal control regulations;
     
  • To observe ministerial orders and instructions related to fighting money laundering transactions. 

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

No information available. 


IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

In Kuwait, the profession of lawyers is regulated by the Kuwait Lawyers Association (the “KLA”), a self-regulatory organization. The KLA is a body that represents the profession of lawyers and has the role of regulating persons who are qualified to practice in the profession. Currently the KLA is not involved in enforcing compliance with AML regulations.


DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

As previously stated, the Law requires that the identification and capacity of clients be verified. In this regard the following may be reviewed:

  • Civil identity cards for Kuwait residents;
     
  • Passport or travel documents for non-residents;
     
  • Commercial licenses issued by the Kuwait Ministry of Commerce and Industry for firms and companies;
     
  • Papers, documents, instruments, court judgments evidencing authorization of representatives of companies, firms and individuals;
     
  • Official documents for other local authorities and documents issued or certified by the respective authorities of representatives of non-resident firms, corporations and companies.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

As previously stated, the Law requires that the identification and capacity of clients be verified. In this regard the following may be reviewed:

  • Civil identity cards for Kuwait residents;
  • Passport or travel documents for non-residents;
  • Commercial licenses issued by the Kuwait Ministry of Commerce and Industry for firms and companies;
  • Papers, documents, instruments, court judgments evidencing authorization of representatives of companies, firms and individuals;

Official documents for other local authorities and documents issued or certified by the respective authorities of representatives of non-resident firms, corporations and companies. 


DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

No information available. 


ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

No.


ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

No. 


ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

No informationa available.


WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

Any suspicious financial transaction in relation to money laundering must be reported. It is also a criminal offence for obligated persons (e.g. Lawyers) to fail to report to the authorities any suspicious financial transactions that has come to their knowledge or who damage or conceal documents or instruments relevant to money laundering crimes.

Accordingly, lawyers are under the obligation to report as soon as they become aware of suspicious transactions. The penalty on conviction is imprisonment not exceeding more than 3 years and/or a fine of between Kuwaiti Dinars (KWD) 5,000 and Kuwaiti Dinars (KWD) 20,000. Additionally, the culprit will be dismissed from his job.


DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

The law and regulations are silent in this regard. There are no precedents or guidance which would shed light on this issue. 


DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

Under Law 35 of 2002 the court may, at its own discretion, relieve any person from penalties prescribed by the law who, on his own initiative, informs the authorities of a crime and those committing it before the authorities have gotten hold of it.

Further, any person who in good faith reports information according to the provisions of the law is protected from any criminal, civil or administrative liability whether or not reported activities were lawful.


ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

No information available.


IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

Article 11 of Law 35 of 2002 makes it an offence for someone to disclose information that came to his knowledge through his position regarding any crimes falling under the Law. 


DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

Basic due diligence would be required before undertaking any transaction for a client that amounts to Kuwaiti Dinars (KWD) 3,000 or more. The lawyer must verify the identity and capacity of the client prior to commencing any actions. 


ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE

No information available.


DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.

No information available. 


HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

No information available.


HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

The State of Kuwait is a member of the Middle East & North Africa Financial Action Task Force (“MENAFATF”) and a member of the Gulf Co-operation Council, which is a member of the Financial Action Task Force (“FATF”). These bodies have adopted a mutual evaluation report on Kuwait conducted by the International Monetary Fund for MENAFATF and FATF. The Mutual Evaluation Report (“Report”) was considered and adopted by the MENAFATF at its plenary meeting in Kuwait City, Kuwait on 5 May 2011, and then by the FATF at its plenary in Mexico City, Mexico on 24 June 2011, which introduced limited changes to it.

The Report recognised that AML legislation, containing the core elements of the anti money laundering regime, was introduced in 2002 in Kuwait through the enactment of Law 35 of 2002 combined with the implementation of subsidiary rules. This legislation imposed customer due diligence (CDD) obligations on a range of financial institutions, and made these financial institutions responsible for submitting suspicious transaction reports (STRs) to the OPP.

However, it has been stressed in the Report that the current anti money laundering/combating the financing of terrorism (AML/CFT) framework has many shortcomings, as it does not provide for effective, dissuasive or proportionate measures and there is a lack of effective supervision of designated non-financial businesses and professions(DNFBP’s), including lawyers. Legal professionals, primarilycovered by Resolution No. 9 of 2005, remain unsupervised with respect to AML, as the self-regulating organization responsible for lawyers appears unaware of the fact that lawyers are subject to any provisions regarding AML/CFT. The Report also notes that lawyers are unaware that AML laws apply to their profession.

The Report recommends that lawyers should be subject to effective systems for monitoring and ensuring compliance with AML/CFT requirements and that guidelines should be established to assist DNFBP’s to comply with their AML/CFT obligations. The Report further recommends that legislation (primary or secondary) be passed to strengthen Kuwait’s AML/CFT framework.



Information provided by:

Ibrahim Sattout and Ezekiel Tuma

ASAR - Al Ruwayeh & Partners
(In Association with Stephenson Harwood)
Salhiya Complex
Gate 1, 3rd Floor
Kuwait
isattout@asarlegal.com  
www.asarlegal.com  

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