Kuwait unveils stricter bank oversight to curb money laundering

K UWAIT: The Central Bank of Kuwait has instructed local banks to apply stricter oversight to customers under investigation for suspected money laundering or terrorist financing

Under the new directive, financial institutions are required to request additional information and supporting documents from clients placed under audit, giving them a reasonable period to justify the legitimacy of their transactions.

If a customer fails to provide sufficient information proving the soundness of their financial activities, banks must terminate the relationship in accordance with regulatory instructions.

Where documentation is deemed insufficient, banks must invoke Clause 14 of the anti-money laundering and counter-terrorist financing instructions issued on 16 February 2023, which mandates ending the client relationship.

According to sources, in such cases, banks are prohibited from informing customers that the account closure is linked to suspicions of money laundering or terrorist financing. Instead, closures must be carried out under the terms of account agreements, which allow banks to end relationships without specifying a reason.

The measures are designed to reduce the risks associated with continuing to serve individuals previously reported for suspicious transactions. The directive also seeks to protect banks from potential legal or regulatory liability if questionable activities persist after reports have been filed with the Financial Intelligence Unit.

According to sources, the move forms part of a broader framework by the Central Bank to limit exposure to high-risk clients. Banks are required to maintain strict monitoring over a defined review period to ensure that transactions remain consistent with a customer’s declared business activities.

The Central Bank said that withholding the true grounds for account termination is essential to strengthening anti-money laundering safeguards and is a practice prohibited under international compliance norms.

Banking sources added that the measures reinforce Kuwait’s legal and regulatory framework to combat financial crime, reflecting ongoing legislative and supervisory efforts to boost transparency and accountability.

They described the termination of relationships with non-compliant customers as a proportionate and deterrent step designed to protect the integrity of the financial system and safeguard the country’s standing as a credible regional financial hub.