KUWAIT CITY, Oct 9: The Financial Action Task Force (FATF) has echoed findings previously reported by Al-Seyassah regarding the “gaps and weaknesses in the system of combating money laundering and terrorist financing.” In a recent press release detailing its interim report on Kuwait's mutual evaluation results, FATF identified “serious shortcomings and failures” in the country's response to these types of crime.

According to FATF, while Kuwait possesses a sufficient legal and supervisory framework to tackle illicit finance; however, it faces significant shortcomings in delivering effective outcomes, particularly in its understanding, investigation, and prosecution of money laundering and terrorist financing.

The FATF mutual evaluation report on Kuwait assessed the efficacy of the country's measures to combat money laundering, terrorist financing, and proliferation financing, as well as its compliance level with the FATF Recommendations.

As a high-income country with low levels of violent crime, Kuwait is still at risk of money laundering from crimes such as fraud, corruption, forgery, and offenses committed abroad. Additionally, it faces terrorist financing risks stemming from terrorist acts and groups operating outside its borders.

Kuwait has a basic understanding of the money laundering risks it encounters at the national level but demonstrates only a limited grasp of its terrorist financing risks. Authorities need to enhance their understanding of these risks by conducting comprehensive assessments of the non-profit organization and virtual asset service provider sectors, as well as the misuse of legal entities for money laundering.

Although Kuwait has increased the number of money laundering investigations, authorities encounter challenges in securing convictions without proving the underlying predicate offense. Most prosecuted money laundering cases involve straightforward instances of self-laundering.

Given Kuwait’s risk profile, investigations and prosecutions related to terrorist financing appear limited, with many cases failing to result in convictions at trial. Kuwait does have a legal framework to implement targeted financial sanctions for terrorist financing and the financing of the proliferation of weapons of mass destruction. However, the necessary actions to freeze assets linked to terrorism or proliferation are not adequately reflected in the legal framework, making these actions unenforceable without a solid legal basis in domestic law.

While Kuwait has conducted a risk assessment of its non-profit sector, it needs to adopt a more risk-based approach to protect this sector from potential terrorist financing abuse, ensuring that legitimate non-profit activities are not disrupted or discouraged.

Kuwait’s financial intelligence unit generates the necessary information to initiate inquiries and investigations related to money laundering; however, investigations into terrorist financing largely rely on foreign intelligence. The country has made it a policy objective to confiscate proceeds of crime, and law enforcement has successfully seized valuable assets, including properties and items located abroad.

Banks and larger financial institutions generally possess a solid understanding of their risks and obligations. However, supervisors in both the financial and non-financial sectors (DNFBPs) need to concentrate more on beneficial ownership issues. The lack of understanding in this area means that Kuwait lacks complete and reliable beneficial ownership information.

FATF has provided several recommendations for Kuwait to strengthen its anti-money laundering and terrorism financing framework, including:

- Conducting a comprehensive assessment of the risks of legal entity misuse.

- Considering a wider array of money laundering and terrorist financing methods.

- Investigating and prosecuting various types of terrorist financing activities.

- Identifying potential terrorist financing activities associated with currency movements.

- Ensuring the legal implementation of targeted financial sanctions without delay.

- Proactively utilizing financial sanctions to deprive terrorists of their assets.

- Publishing a complete list of individuals subject to financial sanctions.

- Conducting a thorough assessment of terrorist financing risks in non-profit organizations.

- Reviewing and removing barriers that deter non-profit organizations.

- Deepening the understanding of crimes that generate money laundering proceeds.

- Ensuring authorities have access to legal entity information.