Exchange companies face tougher scrutiny on transfers below 50 dinars
Frequent money transfers for others may be scrutinized, requiring justification, as authorities assess sender-recipient relationships, especially for recurring transactions, with future requests potentially denied without a valid reason or manager approval.
• The Central Bank of Kuwait is tightening fund transfer regulations to combat money laundering and terrorism financing, in line with FATF guidelines, requiring stricter verification, record-keeping, and due diligence on transactions.
If you frequently transfer money on behalf of friends, whether because the exchange company is nearby or you handle salaries for overseas employees, be prepared for scrutiny. Regular or recurring transfers may require justification, and future requests could be denied unless you provide a valid reason—or have a good rapport with the manager.
On this occasion, sources revealed to Al-Rai newspaper that regulatory authorities have recently tightened their oversight of exchange companies to ensure the identification of the actual beneficiary in financial transfers, even for amounts below 50 dinars.
The sources indicated that authorities will scrutinize the relationship between the sender and the recipient, particularly for transactions that are periodic and of consistent value.
Increased regulatory scrutiny of fund transfers
The sources noted that the increased regulatory scrutiny of fund transfers from Kuwait is part of the Central Bank of Kuwait’s efforts to combat money laundering and terrorist financing, in line with Financial Action Task Force (FATF) requirements.
The FATF has emphasized the need to enhance regulatory controls on financial transfers to and from Kuwait. This includes verifying customer and beneficiary information, maintaining records throughout the business relationship, and regularly updating collected data, documents, and information as part of due diligence measures.
Authorities will also assess the effectiveness of automated systems used to detect suspicious transactions, ensuring continuous monitoring and compliance based on available customer data.
Customer records must be retained for five years
Sources indicated that the regulatory authority emphasizes the retention of all customer records, including documents related to completed transactions or attempted transactions, for at least five years from the date of transaction completion.
Additionally, exchange companies must ensure the accuracy of Financial Control Transactions (FCT) data submitted to the Central Bank of Kuwait, particularly for money transfers to and from Kuwait that meet or exceed 3,000 dinars (or the equivalent in foreign currency) within a single day.
Furthermore, exchange companies are required to assess the effectiveness of their procedures for reporting suspicious transactions. They must conduct research, investigations, and gather relevant information when there is suspicion that a transaction involves proceeds of crime or is linked to money laundering or terrorist financing. This includes scrutinizing all parties involved and ensuring that the findings of such investigations are documented in writing and retained for reference.
Reviewing a selected sample of customer files and transactions
The Central Bank also underscores the importance of applying due diligence measures based on the risk level associated with each customer (low, medium, or high). This is to be verified by reviewing a selected sample of customer files and transactions, with a particular focus on high-risk customers.
Notably, the Central Bank of Kuwait mandates that exchange companies under its supervision engage an audit firm affiliated with an international office to assess their compliance with Law No. 106 of 2013.
Special attention must be given to unusual transactions or those lacking clear economic justification. This audit process must be conducted semi-annually, with reviews scheduled for June 30 and December 31 each year.
Automatic verification system
As part of the due diligence procedures followed by exchange companies in processing money transfers, an automated system is used to verify names listed in freezing decisions. These include names on sanction lists issued by the UN Security Council Sanctions Committee, as well as those designated by the local committee formed within the Ministry of Foreign Affairs. This measure aims to ensure compliance with regulations on combating terrorism and preventing the financing of weapons of mass destruction.
Additionally, sources confirmed that, under regulatory directives, exchange companies are prohibited from providing any financial or related services to individuals, entities, or groups listed in fund-freezing decisions.
