The Governor – Anti-Money laundering – Central Bank of Kuwait Circular to all Exchange Companies dated 9th March, 2003

Instructions No. (2/RS/95/2003) to All Exchange Companies
Regarding Combating Money Laundering Operations and the Financing of Terrorism

Introduction

Money laundering operations and the financing of terrorism is a worrisome phenomenon for concerned international institutions* as well as all countries worldwide, due to its detrimental effects at the economic, social and political levels. Consequently, serious efforts were deployed by the international community to curb these operations and the effects thereof, and resulted in the adoption of several relevant standards and recommendations. Furthermore, concerned international institutions are monitoring countries’ efforts in this regard, so as to ascertain their abidance by the above mentioned standards and recommendations, and to take measures against non-compliant countries.

Exchange companying and financial institutions are considered among the bodies most targeted by money launderers and terrorists, in the process of concealing their identities and source of funds. Therefore, it is incumbent upon all units subject to the CBK supervision to realize the dangers inherent in money laundering operations and the financing of terrorism, and the necessity of taking all appropriate measures to ensure that they are not being taken advantage of in the conduct of such operations, along with full compliance with the domestic and international requirements in this regard, so as to avoid any negative effects on the State of Kuwait on the one hand, and the country’s banking and financial institutions on the other.

In light of the above, and pursuant to Law N0. (32) of year 1968 concerning Currency, the Central Bank of Kuwait, and the Organization of Banking Business in the State of Kuwait, and Law N0. (35) of year 2002 concerning combating money laundering operations, in addition to the relevant ministerial decisions, and international legitimacy decisions on combating the financing of terrorism, all exchange companies operating in the State of Kuwait are obligated to abide by the following instructions:

  • Exchange companies and branches thereof, in their provision of any service to customers whether for the purchase or sale of currencies, travelers cheques or precious metals, or the carrying out of domestic or international transfers of funds in Kuwaiti Dinars/ foreign currencies, or any other services, shall -regardless of the transaction value- establish the customer’s identify according to the following:
    • The Civil ID card of Kuwaiti individuals and non-Kuwaitis residents in the State of Kuwait, conditional upon the card’s validity.
    • Travel documents (Passports) of non-Kuwaitis that are not residents in the State of Kuwait, conditional upon the document’s validity.
    • License issued by the Ministry of Commerce and Industry for individual institutions, along with the Civil ID of the institution’s proprietor, conditional upon these documents validity.
    • Articles of Incorporation and Corporation Memorandum endorsed by the concerned bodies in the State, for all companies, conditional upon these documents validity.
    • Supporting documents endorsed by the concerned bodies in the State of Kuwait, for all non-resident companies and institutions.
    • Legal documents establishing that the person dealing on behalf of the company/individual business is legally authorized for executing transactions in the latter’s behalf.
  • In case the customer requests the extension of a service on behalf of a third party, it is mandatory to fulfill the documents establishing the nature and scope of legal representation. The above applies to services provided to customers through law offices, where exchange companies shall in such case verify the names of customers that are directly benefiting from their services.

  • All exchange companies and branches thereof shall refrain from providing services to any customer that refuses to provide the company/branch with personal identification documents, according to the provisions of Item (1) above.
  • Exchange companies including all branches thereof are prohibited from accepting cash amounts exceeding KD one thousand or the equivalent thereof in foreign currency from any customer against the provision of any service in any one day, whereby the portion exceeding the above mentioned limit shall be drawn from the customers’ bank account, through bank cheques, points of sale and other non-cash means of payment allowed by the CBK in the State of Kuwait.
  • Electronic transfers carried out by exchange companies shall encompass the name and ID number of the transferring individual or entity, as well as the name, address and account number (in case of transfer to an account) of the benefiting individual or entity.
  • The execution by exchange companies of transactions for their own benefit or for the benefit of customers, through correspondents in foreign countries, shall exclusively be through correspondents licensed to carry out these transactions by the concerned official authority in the countries where they are located. The relationship between exchange companies and their correspondents shall be governed by endorsed contracts or agreements regulating the relationship between both parties.
  • In case of suspicion by the exchange company about a customer’s transaction, the exchange company shall request further information to ascertaining the seriousness of these suspicions, and provide any documents or evidence corroborating them with a view to notifying the authorities accordingly. And, whereby it is required that the concerned customer remains unaware of the measures taken by the exchange company in this regard until their completion, the exchange company officers and employees should not warn their customers or connected parties of the steps taken by the company in this regard, regardless of the volume of involved amounts.
  • If the exchange company’s suspicions about a customer’s transaction are confirmed, it shall immediately discontinue the execution of the suspicious transaction, notify the general prosecution of the transaction particulars, along with referring a duplicate of that notification and relevant details to the Manager of On-site Supervision Department at the CBK, for information’s sake.
  • Exchange companies shall maintain records encompassing all documents concerning domestic or international transactions carried out by the exchange company and its branches, including duplicates of customers’ personal identification documents, as mentioned in Item (1) above, and transaction documents and correspondence, for at least five years from the date of executing the transaction. These records must contain –as a minimum- all essential data on these transactions, including the transaction amount and currency, involved parties and identities thereof, and type of transaction.
  • Concerned employees at exchange companies shall participate in training programs enabling them to identify all patterns of money laundering and terrorism financing operations likely to occur in exchange companies, and the methods of combating these operations.
  • In this regard, exchange companies shall use the attached guidelines for the identification of patterns of money laundering and terrorism financing operations. Also, the exchange company shall possess its own manual on the identification of patterns of money laundering and terrorism financing operations. It is also important that such manual be periodically updated.

  • Pursuant to Article (14) of the Law No (35) of year 2002, concerning combating money laundering operations, which exempts from any legal pursuit natural persons who denounce in good faith suspicious operations, the CBK confirms that it will not take any measure whatsoever against exchange company employees who denounce in good faith a suspicious operation, even if the legitimacy of such operation is subsequently established.
  • Proprietors and staff members of exchange companies shall be fully aware of the risks inherent in money laundering operations and the financing of terrorism, and adopt policies and procedures which avoid the exchange company being taken advantage of in the perpetration of the above operations.
  • They should also be aware of the domestic requirements regarding combating money laundering operations and the financing of terrorism, including domestic legislation, regulatory instructions and related penalties, along with the measures to be taken when finding any operation suspected of involving money laundering or terrorism financing.

    In light of the above, it is important that the exchange companies document in writing all measures taken to inform all staff of the above-mentioned legislations and instructions, including the staff signature in confirmation thereof.

  • In support of internal supervision systems, exchange companies shall abide by the following:
    • Develop clear, accurate and written policies and procedures endorsed by the exchange company management, encompassing the company’s policy with regard to combating money laundering operations and the financing of terrorism, in line with the relevant domestic legislation, ministerial decisions and CBK instructions, and periodically update these policies. Additionally, exchange companies shall lay out a clear definition of these operations and various patterns thereof, along with the means for their detection, monitoring and reporting by the company’s concerned employee.
    • Investigating new job applicants, to avoid appointing new staff subject to any suspicions, which may result in exposing the company to the risks of money laundering operations and the financing of terrorism.
    • Taking legal measures and applying adequate penalties to any exchange company employee, which proves insufficient in the fulfillment of his specific responsibilities in the application of the exchange company’s policies and procedures for combating money laundering operations and the financing of terrorism, along with notifying the CBK of the particulars of the accusation leveled against that employee, and the measures taken by the exchange company in this regard.
    • The external auditor’s report on the exchange company’s closing financial data shall include a clear opinion on the company’s compliance with the domestic legislation, ministerial decisions and CBK instructions on combating money laundering operations and the financing of terrorism.
  • Exchange companies shall submit to the CBK a statement encompassing all transactions they executed for the purchase or sale of currencies, domestic or international transfers of funds, purchase or sale of travelers cheques or precious metals, or any other transaction of a value equaling or exceeding the equivalent of KD 3000, according to the attached table format.
  • The above statement shall also encompass all transactions of any of the company’s customers, should the value of such transactions equals or exceeds in any one day the equivalent of KD 3000.

    Exempted from such notification are all ministries and domestic governmental departments. Furthermore, exchange companies may request CBK’s approval to exempt any other entities from the notification requirement, by submitting a letter specifying the reasons and justifications for the requested exemption. Such exemption shall only apply after receipt by the concerned exchange company of CBK’s written permission in that regard.

    The CBK shall be provided with the required list as per the attached form, on a quarterly basis, starting from the quarter ending on 30/6/2003, within a deadline of 15 days as of the date taken as a basis in preparing the list.

    The list shall be presented on the exchange company’s official letterhead papers and signed by the company’s Director General, along with a computer diskette containing the mentioned list.

  • CBK’s Instructions No. (2/RS/76/98) dated 20/12/1998 regarding combating Money Laundering and Suspicious Transactions shall continue to apply, but will be superseded on 1/4/2003 by the above instructions.

Guidelines for the Identification of
Suspicious Transaction Patterns

  • Customers repeatedly transferring cash funds, where each single transfer is neither noticed nor draws attention, but the total value of all such transfers aggregates to a significant amount.
  • Customers who seek to exchange large quantities of low denomination banknotes for higher denominations.
  • Recurrent exchange of cash amounts to other currencies, not necessitated by the customer’s type of activity
  • Customers whose transfers encompass counterfeit notes and documents.
  • Customers making outbound or inbound international transfers of large sums.
  • Reluctance to provide what is deemed as usual information on extension of the service, by providing minimal or fictitious information, or information that is difficult for the company to verify.
  • Companies’ representatives or agents avoiding contact with the exchange company officers
  • Numerous individuals transferring funds to one beneficiary, without adequate explanation or justifications
  • Transfers to affiliates of subsidiary companies or parties operating in areas know for criminal activities that are likely to result in money laundering crimes.
  • Transactions for the purchase and sale of precious metals carried out for no specific purposes, or taking place in unusual circumstances.
  • Customers regularly paying/receiving large sums through cash payments or Facsimile or Telex transfers, where such sums bear no indication of legitimacy and are linked to transactions with countries known for criminal activities, and therefore likely to result in money laundering crimes.
  • Frequent and regular requests for the issuance of travelers cheques, or drafts in foreign currency.