KUWAIT CITY, June 30: The issue of money laundering through exchange companies in Kuwait has come under scrutiny recently, revealing both positive assertions and concerning findings about their operations. According to the Financial Intelligence Unit’s report for 2023, a total of 2,241 notifications of suspected money laundering operations were received, highlighting exchange companies as the second largest source of suspicions at 29% of the total notifications, equating to 640 notifications.

This underscores a significant area of concern regarding the role of these companies in facilitating illicit financial activities. In December 2023, the Court of Cassation’s ruling to imprison two expatriate money changers and fine them 60 million dinars further underscored the gravity of the situation. The verdict stemmed from their involvement in a major money laundering scheme where transactions did not align with the companies’ financial capabilities, involving large sums without legitimate economic justifications. Abdullah Najib Al-Mulla, head of the Federation of Exchange Companies, defended the industry, stating that exchange companies in Kuwait operate under strict oversight from the Central Bank.

Al-Mulla emphasized that none of these companies engage in unauthorized transfers, attributing this to the stringent controls enforced by the Central Bank. He noted that customers receive immediate OTP (One- Time Password) notifications for any transactions, aiming to prevent unauthorized activities. However, concerns remain about the potential exploitation of customer data by unscrupulous individuals within these companies. Dr. Sadiq Al-Bassam, from Kuwait University, acknowledged lapses in compliance among some exchange companies despite regulatory oversight. He highlighted instances where companies abuse customer data to facilitate illicit transactions, emphasizing the need for stronger regulatory measures and enforcement to curb such activities effectively.

Faisal Manaa Al Shammari, Vice President of the Committee for the Protection of Public Funds at the Lawyers Association, characterized money laundering as an organized crime involving complex methods to launder illicit funds. He urged individuals to promptly report any misuse of their data or bank accounts to relevant authorities to avoid inadvertent involvement in criminal activities. Dr. Abdullah Al-Amiri, a banking expert, emphasized the broader economic repercussions of money laundering, including currency devaluation, harm to local businesses through undercutting prices, and negative impacts on the country’s reputation and foreign investment climate. In conclusion, while efforts are made to enforce regulations and prevent illicit financial activities, the revelations suggest ongoing challenges and the imperative for enhanced vigilance and regulatory measures to safeguard Kuwait’s financial integrity and stability.

In related news, Abdullah Najib Al- Mulla, the head of the Federation of Exchange Companies, highlighted that Kuwait has a total of 185 exchange companies, with 153 falling under the supervision of the Ministry of Commerce, and an additional 32 licensed by both the Ministry of Commerce and the Central Bank. These companies play a crucial role in facilitating financial transfers domestically and internationally, serving as vital channels for monetary transactions. Even following the events of September 11, 2001, exchange companies have maintained a high level of trust and credibility. This is largely attributed to the rigorous oversight exercised by the Central Bank of Kuwait and their adherence to internationally recognized standards, particularly under Law No. (106) of 2013, which specifically addresses combating money laundering and the financing of terrorism.

The Central Bank’s directives mandate that exchange companies thoroughly assess the risks associated with customers and transactions They are required to verify the identities of customers and the ultimate beneficiaries involved in financial transfers. Furthermore, these companies must maintain comprehensive records and documentation related to their customers and transactions. Any activities that raise suspicion of illicit financial behavior must be promptly reported to the appropriate authorities for further investigation and action. Overall, exchange companies in Kuwait serve as integral components of the financial and banking system, contributing significantly to the economy by facilitating secure and regulated financial transfers both domestically and internationally.

In latest development, the Ministry of Commerce and Industry said it is verifying the commercial licenses of exchange companies, reports Al- Seyassah daily. In 2023, the Ministry introduced a ministerial decision aimed at identifying the actual beneficiaries to safeguard company and institution data from suspicious exploitation. This decision helps all parties and the state’s financial and supervisory agencies obtain accurate data. Detailed records of each money transfer transaction are maintained to build a complete, correct, and reliable database, with legal actions to follow if the data is found to be incorrect. The source emphasized the importance of promptly reporting any unauthorized transactions and urged customers to regularly audit their bank accounts. He added that the Ministry’s procedures are stringent: if any exchange company is found to be involved in money laundering operations, it will be immediately referred to prosecution, the company will be closed, and financial penalties and fines will be imposed.

By Najeh Bilal
Al-Seyassah/Arab Times Staff