Ministry of Finance Resolution No. 37 of 2013 Issuing the Executive Regulations of Law No. 106 of 2013 on Combating Money Laundering and Terrorist Financing

Ministry of Finance Resolution No. 37 of 2013
Issuing the Executive Regulations of Law No. 106 of 2013 on Combating Money Laundering and Terrorist Financing

Article 1

In applying the provisions of these Executive Regulations, the definitions set out in Article (1) of the Law on Combating Money Laundering and Terrorist Financing shall apply, and the following words and expressions shall have the meanings assigned to them:
1- The Law: means the Law on Combating Money Laundering and Terrorist Financing No. (106) of 2013.
2- Correspondent banking: means the provision of banking services by the “correspondent bank” to the “respondent bank” (the final executor of the transaction).
3- Enhanced due diligence measures: include taking additional due diligence measures where the risks of money laundering or terrorist financing operations occurring are high, for example: intensifying the degree and nature of monitoring of the business relationship in order to determine whether these transactions or activities are unusual or suspicious, requesting additional information on the customer, requesting additional information on the nature of the intended business relationship, requesting information on the source of the customer’s funds or wealth, or any other procedures determined by the supervisory authorities.
4- Politically exposed person: (a) any natural person, whether a customer or a beneficial owner, who has in the past been entrusted with, or currently holds, prominent public functions in the State of Kuwait or in a foreign country. This definition includes heads of state or government, senior politicians, senior government, judicial or military officials, senior executives of state-owned companies, and prominent officials of political parties;
(b) any person who is or has in the past been entrusted with senior management positions in an international organisation, such as directors, deputy directors and members of the board of directors. This term also includes family members up to the second degree and close associates.
5- Supervisory authorities: means the following authorities in the State of Kuwait:

Central Bank of Kuwait	Responsible for supervising: banks, exchange companies and finance companies.
Ministry of Commerce and Industry	Responsible for supervising: agents and brokers, exchange establishments, real estate brokers, dealers in precious metals and precious stones, and accountants.
Capital Markets Authority	Responsible for supervising: investment companies, securities trading companies, financial brokerage companies, insurers, asset managers, mutual funds, and custodians.
Insurance Regulatory Unit	Responsible for supervising: insurance companies, reinsurance companies, takaful insurance companies, branches of foreign insurance companies, and insurance and reinsurance pools.
Self-regulatory bodies: Kuwait Bar Association	Responsible for overseeing lawyers.

6- National Committee: the committee formed in accordance with the provisions of these Regulations to develop and update national strategies and to ensure effective coordination mechanisms at the domestic and international levels in the field of combating money laundering and terrorist financing.

* The table of supervisory authorities in Clause (5) was replaced by Ministerial Resolution No. 5 of 2021 (Kuwait Al-Youm, Issue No. 1520, 31 January 2021).

Part One – Preventive Measures

Chapter One – Risk Identification and Assessment

Article 2

Financial institutions and designated non-financial businesses and professions shall establish the policies and procedures necessary to implement the provisions of the Law, these Executive Regulations, the relevant ministerial resolutions and the instructions issued by the supervisory authorities, including appropriate customer acceptance and risk management policies, provided that such policies and procedures are reviewed and approved periodically.

Article 3

Financial institutions and designated non-financial businesses and professions shall establish appropriate procedures to identify the money laundering and terrorist financing risks that may arise in the course of their business activities, and to assess, monitor and manage such risks and mitigate their effects, in particular those associated with the following:
(a) Customers
(b) The countries or geographic areas in which customers conduct their business, or the origin or destination of transactions.
(c) The nature of the products and services offered.
(d) The channels through which products and services are delivered.

Article 4

Financial institutions and designated non-financial businesses and professions shall take appropriate steps to document the risk assessments they carry out, and to update and review them periodically; the results of the assessments shall also be made available to the supervisory authorities upon request.
The supervisory authorities may decide not to require certain financial institutions and designated non-financial businesses and professions to document their risk assessments, where the money laundering and terrorist financing risks associated with a particular activity have been clearly identified, understood and managed.

Article 5

Financial institutions and designated non-financial businesses and professions shall identify the customer or the beneficial owner and verify their identity on the basis of the following documents:
(a) The civil ID card, for citizens and residents.
(b) The passport or travel document, for persons not resident in the State of Kuwait.
(c) The commercial licence issued by the Ministry of Commerce and Industry, for companies and establishments registered in Kuwait; and, for foreign companies and establishments, the documents issued by the competent authorities of the country in which they were registered or incorporated.
(d) The documents, papers, instruments and judicial rulings proving that a person has been appointed to represent the person concerned.
The supervisory authority may require financial institutions and designated non-financial businesses and professions to apply additional measures to identify the customer and verify their identity.

Article 6

In applying the provisions of Article (5) of the Law, the designated threshold shall be 3 thousand Kuwaiti dinars or its equivalent in foreign currency.

Chapter Three – Enhanced Due Diligence Measures for Certain Customers

Article 7

Financial institutions and designated non-financial businesses and professions shall put in place appropriate risk management systems to determine whether the customer or the beneficial owner is a politically exposed person and, where this proves to be the case, they shall apply due diligence measures in addition to those provided for in the second paragraph of Article (5) of the Law, as follows:
(a) In respect of a foreign politically exposed person:
1- Obtaining senior management approval before establishing or continuing a business relationship with such person.
2- Taking all appropriate measures to establish the source of wealth and funds.
3- Conducting enhanced and ongoing monitoring of the business relationship.
(b) In respect of a domestic politically exposed person, and also in respect of any person who is currently entrusted, or was previously entrusted, with a prominent function by an international organisation:
The measures referred to in Section (a) above shall be applied wherever the risks identified by the financial institutions and designated non-financial businesses and professions, associated with such person and relating to money laundering and terrorist financing, are high.

Article 8

The supervisory authorities shall verify the compliance of financial institutions and designated non-financial businesses and professions with the measures set by the Kuwait Financial Intelligence Unit in the field of identifying countries considered high-risk, provided that these measures include, without limitation, the following:
(a) Applying specific elements of enhanced due diligence, in the manner of requesting additional information on the customer, the purpose of the transactions, the nature of the business relationship and the source of the customer’s funds or assets.
(b) Obtaining senior management approval to continue the relationship.
(c) Enhancing the monitoring of transactions.
(d) Reviewing, amending or terminating the relationship with correspondent banks, if necessary.
The Unit may request the supervisory authorities to take a number of necessary measures, including, without limitation, the following:
(a) Submitting additional reports on financial institutions and designated non-financial businesses and professions.
(b) Refusing the establishment of subsidiaries, branches or representative offices of financial institutions belonging to the countries identified by the Unit.
(c) Prohibiting the establishment of branches, representative offices or subsidiaries of financial institutions and designated non-financial businesses and professions in the country identified by the Unit.
(d) Requiring financial institutions and designated non-financial businesses and professions to limit business relationships or financial transactions with the country identified by the Unit or with persons in that country.
(e) Intensifying supervision and external audit requirements for the branches and subsidiaries of financial institutions and designated non-financial businesses and professions from the country identified by the Unit that operate in the State of Kuwait.
(f) Requiring financial institutions and designated non-financial businesses and professions to enhance external audit requirements for their branches and subsidiaries located in the country identified by the Unit.

Chapter Four – Banking Relationships with Foreign Correspondent Banks or Other Similar Relationships

Article 9

Before entering into correspondent banking relationships with foreign correspondent banks or other similar relationships, financial institutions shall, in addition to the normal due diligence measures they apply, take the following measures:
(a) Gathering sufficient information about the respondent institution.
(b) Understanding the nature of the respondent institution’s business.
(c) Assessing the reputation of the respondent institution and the quality of the supervision to which it is subject, including whether it has been subject to a money laundering or terrorist financing investigation or regulatory action.
(d) Assessing the controls applied by the respondent institution to combat money laundering or terrorist financing.
(e) Obtaining senior management approval before establishing new correspondent relationships.
(f) Clearly understanding and documenting the respective responsibilities of each institution in the field of combating money laundering and terrorist financing.
These measures shall also be applied to providers of cross-border correspondent banking services and to all similar relationships established before the entry into force of the Law and the issuance of these Executive Regulations.

Chapter Five – Wire Transfer Requirements

Article 10

Financial institutions that carry out cross-border wire transfer activity shall obtain accurate information on the originator and the beneficiary and all related messages, and shall ensure that this information remains attached to the wire transfer or related messages throughout the payment chain at all its stages.
The information accompanying all wire transfers shall include the following:
(a) The full name of the originator,
(b) The originator’s account number, where such account is used to process the transaction.
(c) The originator’s address and the customer’s civil ID number, or the place and date of birth.
(d) The name of the beneficiary and the beneficiary’s account number, where such account is used to process the transaction.
Financial institutions that are party to domestic wire transfers shall include in the message relating to the payment chain the originator information as set out in Clauses (a) to (c) above.
Financial institutions shall also monitor wire transfers in order to detect transfers that do not contain information on the originator and/or the beneficiary, and shall take appropriate measures in respect of them.

Chapter Six – New Products, Business Practices and Systems

Article 11

Financial institutions and designated non-financial businesses and professions shall identify and assess the money laundering and terrorist financing risks, and take the necessary measures in respect of them, that may arise from the following operations:
(a) The development of new products and new professional practices, including automated means of delivering new products and services.
(b) The use of new or developing technologies in relation to existing products or when offering newly introduced products.

Chapter Seven – Policies, Work Procedures, Systems and Internal Controls

Article 12

Financial institutions and designated non-financial businesses and professions shall establish policies, work procedures, systems and internal controls to combat money laundering and terrorist financing, which shall be applied in all domestic and foreign branches and subsidiaries of the group.
Financial institutions and designated non-financial businesses and professions shall verify that their foreign branches and subsidiaries implement the requirements set out in Article (10) of the Law, to the extent permitted by the local laws of the host country. Where the laws of the host country do not permit the above requirements to be applied in full, financial institutions and designated non-financial businesses and professions shall apply appropriate additional measures to manage money laundering and terrorist financing risks and shall notify the supervisory authorities. Where the additional measures are insufficient, the supervisory authorities shall consider taking additional supervisory measures, including imposing additional controls on financial institutions and designated non-financial businesses and professions, or requiring them to terminate their operations in the host country, where appropriate.

Article 13

Financial institutions and designated non-financial businesses and professions shall record and register all transactions conducted with customers in official records in accordance with a regular accounting system, and shall retain such records and all documents and papers relating to the transaction and make them available to the relevant supervisory authorities, each within the limits of its competence.

Article 14

Financial institutions and designated non-financial businesses and professions shall implement an ongoing training programme for their employees to ensure that they are familiar with the requirements of combating money laundering and terrorist financing, and with the latest developments, techniques and methods prevailing in the field of money laundering and terrorist financing.

Chapter Eight – Reliance on Third Parties

Article 15

Financial institutions and designated non-financial businesses and professions may rely on third parties to carry out certain customer due diligence measures, subject to obtaining the approval of the supervisory authority for such measures and ensuring that the following conditions are met:
(a) The ability to obtain immediately, upon request, all the information specified in the second paragraph of Article (5) of the Law.
(b) Obliging the third party to provide, upon request and without delay, copies of identification data and other documents relating to customer due diligence measures.
(c) Ensuring that the third party is subject to regulation, supervision or monitoring for compliance with the requirements set out in Articles (5) and (11) of the Law, and that it has measures in place to comply with those requirements.
Provided that the ultimate responsibility for identifying the customer and verifying their identity remains with the financial institutions and designated non-financial businesses and professions to which the supervisory authority has granted approval to rely on the third party.

Chapter Nine – Obligations to Report Suspicious Transactions and to Provide Related Information

Article 16

Financial institutions and designated non-financial businesses and professions shall report to the Kuwait Financial Intelligence Unit, by the means and on the forms specified by the Unit, within two working days at most, any transaction or attempted transaction, regardless of its value, if they suspect, or have sufficient grounds to suspect, that such transaction is being conducted with funds that constitute proceeds of crime, or funds related to money laundering or terrorist financing operations, or that may be used to carry out such operations.
They shall also, in respect of any requests they receive from the Unit, provide any relevant information or copies of documents or papers, regardless of the manner in which they are stored, within the time limit specified by the Unit.

Chapter Ten – Measures and Procedures of the Supervisory Authorities

Article 17

The supervisory authorities shall issue the instructions and decisions which financial institutions and designated non-financial businesses and professions shall implement and which relate to the controls and requirements to be observed in the field of combating money laundering and terrorist financing.

Article 18

The supervisory authorities shall carry out on-site inspections to ensure that financial institutions and designated non-financial businesses and professions comply with the implementation of the provisions of the Law on Combating Money Laundering and Terrorist Financing, the Executive Regulations, and the decisions and instructions issued by the relevant supervisory authorities in this regard.
They may engage third parties for this purpose, and the supervisory authorities may also require such financial institutions and designated non-financial businesses and professions to appoint an auditor to submit a report prepared on the extent of compliance with those requirements.

Part Two – Cooperation at the National Level

Article 19

Within the framework of the requirements of national cooperation and coordination in the field of developing [and] implementing policies and activities to combat money laundering, terrorist financing [and] the proliferation of weapons of mass destruction, a committee named the “National Committee for Combating Money Laundering and Terrorist Financing” shall be established, for which the Ministry of Finance shall provide the financial allocations necessary for the performance of its functions, and which shall be composed of the following members:
1- Kuwait Financial Intelligence Unit.
2- Central Bank of Kuwait.
3- Ministry of Commerce and Industry.
4- Capital Markets Authority.
5- Public Prosecution.
6- Ministry of Justice.
7- Ministry of Finance.
8- Ministry of Interior.
9- Ministry of Foreign Affairs.
10- Ministry of Social Affairs and Labour.
11- General Administration of Customs.
12- Public Anti-Corruption Authority.
13- Insurance Regulatory Unit.
In exercising its competences, the Committee may add to its membership any of the public entities in the State of Kuwait charged with responsibilities for combating money laundering, terrorist financing and the financing of weapons of mass destruction activities, and it may also seek the assistance of any person with expertise.

* Clause (12) was added by Ministerial Resolution No. 51 of 2016 (Kuwait Al-Youm, Issue No. 1295, 3 July 2016).
* Clause (13) was added by Ministerial Resolution No. 5 of 2021 (Kuwait Al-Youm, Issue No. 1520, 31 January 2021).

Article 20

The Committee shall have the following competences:
1- Developing and updating a national strategy to combat the crimes of money laundering, terrorist financing and the financing of weapons of mass destruction activities, in coordination with the competent authorities, and following up on its implementation.
2- Assessing the risks of money laundering, terrorist financing and the financing of weapons of mass destruction activities at the national level.
3- Ensuring the existence of effective mechanisms for domestic cooperation and coordination among the competent authorities with regard to the development, updating and implementation of policies and activities to combat money laundering, terrorist financing and the financing of weapons of mass destruction activities.
4- Following up on global and regional developments, including the international standards of the Financial Action Task Force and the relevant international treaties and conventions in the field of combating money laundering, terrorist financing and the financing of weapons of mass destruction activities, and making recommendations on the development of public policies and guidelines and proposing appropriate amendments to existing legislation.
5- Contributing, together with the competent authorities, to the development of qualification and training programmes for personnel working in the field of combating the crimes of money laundering, terrorist financing and the financing of weapons of mass destruction activities.
6- Coordinating with the relevant competent committees to develop public policies and [compile] statistics in the field of combating money laundering, predicate offences, terrorist financing and the financing of weapons of mass destruction activities.

Article 21

The National Committee for Combating Money Laundering and Terrorist Financing shall be chaired by the Head of the Kuwait Financial Intelligence Unit, and a Vice-Chairman shall be appointed from among the members representing the authorities named as members of the Committee, to replace him in his absence. For a meeting of the Committee to be valid, at least (7) members shall attend, including the Chairman or the Vice-Chairman. Recommendations shall be issued by a majority of the votes of the members present and, in the event of a tie, the side with which the Chairman voted shall prevail. The Committee may seek the assistance of experts and technicians, and may invite to its meetings, for consultation, anyone whose opinion it wishes to hear on a particular matter, without such persons having the right to vote.

Article 22

The Committee shall meet at the invitation of the Chairman, and its meetings may not be fewer than twice a year. The Committee shall submit its decisions to the Minister of Finance to take such measures as he deems appropriate, including submission to the Council of Ministers.

Article 23

The National Committee shall form a technical team from among its members, which shall be responsible for preparing the necessary technical studies or any other tasks assigned to it by the National Committee in a manner that achieves its competences.
The delegations of the State of Kuwait attending regional and international forums in this field shall be formed from among the members of the technical team.

Article 24

The Minister of Finance shall approve the financial regulations and working rules of the Committee based on a proposal submitted by the Chairman of the National Committee in this regard.

Article 25

The Kuwait Financial Intelligence Unit shall act as the secretariat of both the National Committee and the technical team.

Article 26

This Resolution shall be published in the Official Gazette and shall come into force from the date of its publication.

Issued on 12 June 2013 and published in the Official Gazette Kuwait Al-Youm on 23 June 2013.