Money laundering is often viewed as a victimless crime but the truth of the matter is that it is a very important cog to the machinery funding organized crime and terrorism across the globe. Corruption has often been referred to as the “cousin” to money laundering and the value and significance of these crimes is often misunderstood and underestimated. However, due to the valuable work being done by various NGOs and international bodies, such as the IMF, this issue has gained significantly more prominence not only in Kuwait, but also elsewhere in the Middle East region. While there have been recent developments under Kuwaiti law in respect to both corruption and money laundering, we will focus below on recent developments pertaining to the combat of money laundering.
During June of 2013 the Kuwaiti legislature promulgated Law no. 106 of 2013 (the “ML Law”) which regulates issues pertaining to the crimes of money laundering and the funding of terrorism. Regulations were also issued giving effect to the ML Law under Ministerial Resolution 37 of 2013 (the “Regulations”). The ML Law replaced Law no. 35 of 2002, which was the previous money laundering law, and sought to address various shortcomings with the previous law. By way of example, while the previous law addressed issues pertaining to money laundering, it did not criminalize the actions of financing terrorism, the importance of which significantly increased since the attacks on the trade towers which occurred during 2002 (and after the initial promulgation of the previous money laundering law).
The ML Law defines the crime of financing terrorism as the direct or indirect provision or otherwise raising of funds in a voluntarily and unlawful manner for the purpose of using such funds to commit a terrorist act or knowing that such funds will be wholly or partially used for such acts of terrorism or to fund a terrorist organization or person.
Noted above, the ML Law also criminalizes the act of money laundering which is provided to be the intentional disposition of any funds which is known to be the proceeds of crime by:
- converting, transferring or replacing such funds with the purpose of concealing or disguising the illegal source of such funds or assisting any person who participated in committing the initial crime from which the funds were generated to evade the legal consequences of his act;
- concealing the true nature of the funds, its location, its source, its ownership, the method of disposing of the funds or the rights attached to such funds; and/or
- obtaining, possessing or using such money.
A juristic person may also be liable for the crime of money laundering if it is was done in the name of or for the account of such entity. Significantly, penalizing the perpetrator for the main crime will not affect his liability for the crime of money laundering.
Financial institutions (which includes, amongst others, parties carrying out the activities of accepting deposits and lending) (“FIs”) and “Designated Non-financial Businesses and Professions” (which includes amongst others, real estate brokers as well as lawyers (which participate in the sale of real estate and commercial entities or manage clients’ funds) and certain businesses depending on their activities (e.g. business dealing in precious metals etc.)) (collectively referred to as “DB&Ps”) also incur additional obligations under the ML Law. For example, if not already done, FIs and DB&Ps are to establish and implement anti-money laundering policies, procedures and systems as well as implement enhanced due diligence procedures to cater for particular situations (e.g. when establishing a relationship with its clients, when processing transactions exceeding the value of KD 3,000/- in favor of customers that have no working relationship with the relevant FIs and DB&Ps etc.). FIs and DB&Ps are also required to retain information on transactions performed and to report suspicious behavior to the authorities.
To assist in the implementation of the ML Law and its Regulations, FIs and DB&Ps are to develop internal policies and systems to guide its staff on these issues and to train staff on the obligations being imposed vis-à-vis money laundering. Records, documents and information are also to be retained pertaining to particular transactions and the parties relationships generally with their clients for prescribed periods of time. Independent audits are also to be performed to ensure compliance with best practice on these issues.
Various authorities regulate different provisions under the ML Law depending on the nature of the obligations (e.g. Central Bank of Kuwait, the Capital Markets Authority, the Ministry of Commerce and Industry etc.). Such authorities may also conduct inspections to ensure compliance with the ML Law and the Regulations. Provision is also made for the establishment of a “Financial Intelligence Unit” (the “Unit”). This Unit is organized and governed by Ministerial Resolution No. 1532 of 2013 (the “Resolution”). Under the Resolution, the Unit is to receive information and reports regarding any suspicion that the relevant revenues were obtained pursuant to a crime as well as any other suspicion regarding transactions which may constitute a crime under the ML Law. The Unit may refer matters as it deems appropriate to the prosecution authorities. The prosecution authorities may also cooperate with foreign authorities in combating money laundering and issues pertaining to the finance of terrorism.
In addition to the Unit, a national commission (the “Commission”) is also established to, amongst other things, assess, promote and establish a national strategy for combating money laundering, the financing of terrorism and the proliferation of weapons of mass destruction. The Commission is made of various authorities (e.g. the Unit, the Central Bank of Kuwait, the Kuwaiti Ministry of Finance, the Kuwaiti Ministry of Commerce and Industry, the Kuwaiti customs authority etc.). The advantage of the Commission is that it can adopt policies in a unified manner affecting different Government departments thereby facilitating the implementation of the ML Law and the Regulations.
The ML Law also imposes various penalties in respect to the commission of the crimes set out therein. For example, a person guilty of money laundering may be liable to 10 years imprisonment and a fine of between half the value of the amount laundered and the whole of that amount. All amounts involved in such crime will also be forfeited. Any person guilty of financing terrorism can be liable to 15 years imprisonment and a fine of between the value of the finance which was purported to be provided and twice its value. Increased penalties are also provided for where the crimes involve, amongst other things, syndicates and persons of authority. Any corporate entity found guilty of committing money laundering or financing terrorism may be subject to a fine of not less than KD50,000 and not higher than KD1 million or an amount equal to that which is the subject of the crime, whichever the higher. Further penalties are also provided for (e.g. in respect to a manager of an entity which had knowledge of the breach and failed to act against it etc.).
These developments under Kuwait law has brought Kuwaiti legislation and rules in line with the current international practices and will have a positive effect in facilitating the combat of money laundering and the finance of terrorism.