The Central Bank of Kuwait (CBK) is showing deep interest in the transfer of funds outside the banking system, whether between individuals and exchange companies, or between authorized money changers themselves, as these companies are forbidden from importing Kuwaiti dinars in cartons from abroad, especially if the amount transferred in the shipment exceeds KD3,000 Kuwaiti dinars, the Al Rai daily said, quoting informed sources.
The supervisory authority with the intention to reduce the risks of money laundering and terrorist financing crimes, has halted shipments of cash that was imported from abroad to some exchange companies through various outlets.
The amounts packaged in these shipments sometimes reached one million Kuwaiti dinars per day. Some exchange companies rely on the formation of liquidity from the dinar on more than one source of cash, including buying it from exchange companies and foreign entities, which is similar to conducting an exchange between the local currency abroad and currency of the country exchanged with its companies.
When Kuwaitis and expatriates are outside Kuwait, they convert the dinar into the currency of the country they are visiting. In this case, the liquidity levels are based on the dinars.
As a result, some foreign companies create a balance in dinars, most of which are small companies seeking to reduce their costs. On the other hand, there are cash centers made up of foreign currencies in local companies which are also formed as a result of transfers of foreign currencies into local currencies by consumers who have come to Kuwait. Some local exchange firms have a tradition of coordinating with companies operating in neighboring markets. The vast majority of them carry out a similar activity, whereby the dinar sums are imported in cash that were present at these parties through traditional shipping methods, either by exchanging them for other currencies that are exported from Kuwait or by purchasing them directly. Usually these sums arrive at Kuwait Airport in cardboard boxes, and their values range from a quarter of a million dinars to a million dinars.
Regulations
Money exchange companies have been operating under these procedures for years. However, CBK recently informed them that they are not allowed to import cash exceeding KD3000 from abroad through traditional shipping systems, and that this method must be replaced with transferring funds through banking systems.
Several companies have privately rejected the regulatory decision, and of course, CBK’s decision comes with a number of procedural steps it has taken in coordination with the relevant regulatory authorities in the field of combating money laundering and terrorist financing. As this type of crime festers, it will be possible to use cash shipments transferred to Kuwait to smuggle illegal funds. Relevant local authorities are launching a massive campaign to combat the phenomenon of money laundering, with swift and strong steps to handle its repercussions by developing tools to combat this phenomenon. As part of the tools, there are further restrictions on all potential outlets for suspicious money movements, including cash boxes that arrived in Kuwait years ago via shipment.
Remittances
Perhaps the question that arises strongly in this regard is – why do local exchange companies not obtain their cash flow from abroad by transferring through banking systems, since it is their primary activity especially with the remittances of expatriates, who open a main account in the bank where they deposit and withdraw money according to his needs?
The daily said, quoting the sources that the main reason exchange companies prefer to import high levels of liquidity of the dinar in boxes is that these sums will be exchanged at their exchange rate or upon request, in addition to the low cost of transporting these funds. When transporting via the freight system, it is calculated on the kilo per price system. In the event that it is transferred through the banking system, there are additional fees which will have to be paid the banks, which means that within the account the margin of return on investment that can be collected from these funds will narrow in the case of transfer through the usual bank accounts, which is what compels them to prefer shipping money via cartons.
The sources revealed to the daily that CBK appears firm in its position in this regard, indicating that the money laundering and terrorist financing operations are seeing lower profits and strong action. CBK is also banning exchange companies from accepting cash from customers to pay the value of their required transactions that exceeds KD3000 or its equivalent in foreign currency within one day, as more than this limit must be paid as a deduction from the customer’s account in a bank or by using a banking method that is allowed as payment method.
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