Firms face tough penalties for flouting sanctions in Kuwait
The Capital Markets Authority has observed a recurrence of certain violations by brokerage companies, despite previous alerts to rectify these issues and improve customer classification processes.
• Companies are obligated to filter and rate their customers and must notify each customer of their classification. Based on this classification, customers will receive associated advantages, restrictions, and rights
The Capital Markets Authority has once again referred several companies to the Disciplinary Board for imposing stringent penalties. These companies failed to rectify previous violations that had already incurred financial sanctions, according to Al Jarida newspaper.
Informed sources told the newspaper that the authority has observed a recurrence of certain violations by brokerage companies, despite previous alerts to rectify these issues and improve customer classification processes. They noted that the authority has a significant interest in this matter, which pertains to violations of anti-money laundering regulations outlined in Book XVI of the Executive Regulation of Law No. 7 of 2010 and its amendments.
The sources indicated that companies are obligated to filter and rate their customers and must notify each customer of their classification. Based on this classification, customers will receive associated advantages, restrictions, and rights. The authority requires companies to maintain a special register for customer classifications, which will be subject to audit and monitoring. This register should detail the classification type for each customer, including the reasons and justifications for their classification, along with copies of any mutual agreements and declarations related to that classification.
Furthermore, it was pointed out that some companies are conducting operations for high-risk customers without complying with the relevant instructions. The authority emphasized the need for companies to update the contracts with several customers, as it has been noted that some companies failed to update customer data in these agreements.
The sources stressed the vital role played by the Capital Markets Authority in preventing any negative practices that could affect investors’ decisions, their money, and the reputation of the Kuwait Stock Exchange. This comes as the exchange has come under scrutiny from major international institutions and funds, particularly since it received the “startup” designation from entities such as Morgan Stanley, Standard & Poor’s, and FTSE Russell. The announcement of similar violations and abuses by certain companies may undermine these investors’ confidence in their investment decisions regarding some firms.
