The International Commitment of the State of Kuwait to Combating Money Laundering and Terrorism Financing

The State of Kuwait is an active partner in international efforts to combat Money Laundering and Terrorism Financing, based on its commitment to global standards aimed at protecting the financial and economic systems. This commitment is reflected in its membership in numerous international bodies and agreements, as well as its continuous efforts to enhance its legal and regulatory framework.

Kuwait is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF) and is also a member of the Gulf Cooperation Council, which in turn is a member of the Financial Action Task Force (FATF). Kuwait has also signed the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 and complies with the Financial Action Task Force (FATF) recommendations and international standards regarding Know Your Customer (KYC) procedures. Kuwait implements United Nations Security Council resolutions adopted under Chapter VII of the UN Charter relating to terrorism and its financing.

Kuwait is also subject to mutual evaluations by international bodies such as the Financial Action Task Force (FATF), which are conducted to assess compliance with the FATF's Forty Recommendations and the effectiveness of Kuwait’s anti-money laundering and terrorism financing system.

These evaluations aim to identify and address deficiencies and to prevent Kuwait from being placed on the FATF's "Gray List," which includes countries subject to enhanced monitoring due to weaknesses in their anti-money laundering and terrorism financing measures.

Kuwait's supreme objective is to strengthen its regulatory defenses and supervisory infrastructure, rebuild international confidence, and avoid any inclusion in the Financial Action Task Force's grey list by demonstrating tangible and high-impact reforms that align with global expectations. This includes enhancing supervision over sectors such as money exchange companies, real estate, and gold and precious metals dealers, which are considered medium to high-risk sectors.

1- The Nature of Anti-Money Laundering and Terrorism Financing

Anti-Money Laundering and Terrorism Financing constitutes a global and domestic effort aimed at protecting financial and economic systems from exploitation in criminal activities. In the State of Kuwait, money laundering crime is defined as any act that involves concealing, transferring, or possessing funds while knowing they are proceeds from a crime that violates the state's regulations or with the intent to hide or disguise their illicit source. As for Terrorism Financing, it refers to the provision or collection of funds with the intent of using them in terrorist acts.

Kuwaiti laws punish these two crimes with the severest penalties, given their serious threat to the state's economic and social security.

2- Legal Basis for the Mandatory Appointment of Compliance Officers

The obligation to appoint a Compliance Officer in Kuwait is based on an integrated legal and regulatory framework aimed at enhancing transparency and accountability in financial transactions.

This legislative sequence demonstrates a clear direction by the Kuwaiti legislator toward strengthening the regulatory framework for Anti-Money Laundering and Terrorism Financing, transforming compliance from a mere recommendation into a fundamental requirement for conducting commercial activities.

3- Target categories of the decisions (categories obligated to appoint a Compliance Officer)

The categories obligated to appoint a Compliance Officer are defined as "financial institutions and designated non-financial businesses and professions subject to the supervision of the Ministry of Commerce and Industry." These categories include more specifically:

4- Role of the Compliance Officer specialized in monitoring financial transactions:

The Compliance Officer must supervise the company's or institution's implementation and execution of relevant legal requirements, executive regulations, and ministerial decisions. His duties and responsibilities include the following:

He is responsible for developing work policies and procedures, systems, and internal controls related to Anti-Money Laundering and Terrorism Financing, commensurate with the company's size and scope of operations, which must be approved by senior management.

He is tasked with preparing and updating risk assessment studies for clients and transactions.

The compliance officer must review the establishment's suspicion indicators, establish a mechanism for notifying the Kuwait Financial Intelligence Unit of suspicious transactions, and maintain records of such notifications.

The compliance officer shall establish a mechanism for reporting to the UN Security Council Resolutions Implementation Committee when services are provided to any individual or entity listed on international or domestic sanctions lists.

Staff Training:

Responsible for training company employees to ensure implementation of obligations stipulated under the law.

Record and Transaction Retention ;

Must retain records, transactions, and studies and submit them to the relevant authority upon request.

Implementation of Due Diligence Measures :

 This includes implementing simplified and enhanced due diligence measures on clients and beneficial owners.

 Its role requires personal attendance by the concerned department to complete the required data.

 The provisions contained in the law and related ministerial decisions apply to all domestic and foreign branches and their subsidiaries.

5- Risks of non-compliance with such decisions and sanctions that may be imposed

Failure to appoint a Compliance Officer or non-compliance with Anti-Money Laundering and Terrorism Financing requirements results in severe consequences, including administrative, financial, and criminal penalties, in addition to other risks:

A. Risks and penalties arising from failure to appoint a Compliance Officer

b. Risks and penalties arising from improper implementation of financial transactions monitoring

(Non-compliance with Anti-Money Laundering and Terrorism Financing Laws):

These penalties and risks demonstrate that the State of Kuwait adopts a stringent approach in combating money laundering and Terrorism Financing, and the function of the Compliance Officer and implementation of sound procedures are vital to ensure compliance and avoid these severe consequences.

Conclusion and Recommendations

The function of the Compliance Officer constitutes a fundamental pillar in the Anti-Money Laundering and Terrorism Financing system in the State of Kuwait. The analysis has demonstrated that the appointment of a Compliance Officer is not merely an option, but rather a direct legal obligation that is closely linked to the operational continuity of companies through its connection to the renewal of commercial licenses. The categories subject to this appointment requirement have been clearly defined through various legislations.

The developments in conditions and requirements, particularly with the entry into force of Ministerial Decision No. (141) for the year 2025, reflect a trend toward simplifying certain appointment-related procedures while preserving the core duties and responsibilities of the Compliance Officer. This continuous evolution in ministerial decisions demonstrates that the regulatory framework is not static but continuously developing.

Based on the above, we recommend the following:

Obligated companies and institutions must ensure the appointment of a qualified compliance officer in accordance with current and future requirements, and begin adapting to the requirements of Resolution 141 of 2025 before its effective date to ensure continuous compliance and avoid any disruption to their operations.

Compliance officers and senior management must continuously review and update internal policies and procedures to ensure their alignment with the latest legislation and amendments issued.

Despite the removal of the accredited training course requirement in the new resolution, training company employees on Anti-Money Laundering and Terrorism Financing requirements remains vital and necessary to ensure proper understanding and implementation of these requirements at all operational levels. Training must also encompass the identification of indicators of suspicious financial transactions, such as the use of suspicious credit cards or bank accounts, and the appropriate procedures for handling such cases in accordance with internal policies and regulatory legislation.

Companies must ensure that their contact information is updated with the Ministry of Commerce and Industry, as this has become a fundamental requirement for the issuance or renewal of licenses under Decision 141 of 2025.

It is recommended to monitor any amendments or new ministerial decisions that may be issued in the future, as the regulatory environment in this field is characterized by dynamism and continuous change, requiring constant vigilance and adaptation. This monitoring must include continuous surveillance of prohibition lists issued by the Kuwait Financial Intelligence Unit and international laws relating to prohibited persons, entities, and countries, to ensure no dealings with them.

Given the complexity and intricacy of these regulations, it is advisable to engage specialized legal experts or firms specializing in financial transactions supervision and enhanced due diligence to ensure procedural integrity and assess exposure to penalty risks, while avoiding any legal or operational risks that may arise from misunderstanding or improper implementation.

It must be emphasized that appointing a Compliance Officer in a nominal or formal capacity, without effectively activating their role in monitoring financial transactions and enhanced due diligence, does not achieve the purpose of legal protection nor does it protect the company from exposure to sanctions. Effective compliance requires continuous work and heightened vigilance, particularly in light of the increasing risks that may arise from the use of suspicious credit cards or bank accounts, or dealings with individuals and nationalities that may fall within prohibited jurisdictions. Therefore, enhanced due diligence of all financial transactions and continuous auditing of clients and transactions is vital to ensure the integrity of procedures and avoid the risks of exposure to sanctions.

This requires companies to adopt a dynamic and proactive approach to compliance, which is not limited to adhering to current requirements only, but also includes continuous monitoring of legislative changes and adapting to them effectively. Effective compliance is no longer merely a process that occurs "once and forever" but rather is a continuous process that requires vigilance and adaptation. It must be an approach embedded within the commercial establishment's policies and form part of its permanent operations to ensure protection from liability and safeguard against risks posed by clients who attempt to conceal their funds through fraudulent methods, and financial institutions must not serve as a gateway for such activities.

Prepared by / Dr. Fayez Al-Fadhli