IMF warns Kuwait on money laundering risk

The National by Tom Arnold / Sep 4, 2011

Kuwait needs to tighten its anti-money laundering rules or risk its growing financial sector being exploited by criminals, the IMF has warned.

Smuggling to and from neighbouring Iraq, fraud and corruption are among the main money laundering crimes identified by authorities to date, the organisation, based in Washington, said in a report.

At present, there is no evidence of significant money laundering in the country, it said.

But the IMF said criminal risks increased as the financial sector expanded, fuelled by increasing oil revenue and higher government spending, and would increase further if plans to create an international financial centre were realised.

“These developments have the potential of creating a suitable environment for money launderers seeking to exploit the Kuwaiti financial sector to exercise their illegitimate activities,” it said.

Kuwait trailed other GCC states in Transparency International’s Corruption Perceptions Index last year, ranking 54th out of 180 countries. In 2003, it was 35th on the index.

The country has been battling against corruption in government and industry in recent years. Members of parliament last month discussed allegations that two MPs had received frequent cash payments into their bank accounts from unknown sources. Siemens uncovered evidence of corruption at its business in Kuwait, the German conglomerate said in June.

A major problem in Kuwait, the IMF noted, was insufficient anti-money laundering rules. A law introduced in 2002 did not criminalise the financing of terrorism and did not put in place a means of enforcing UN Security Council resolutions, it said.

A new draft anti-money laundering law has yet to be agreed on, despite being sent before the national assembly in 2007. In addition, preventative measures safeguarding financial firms from money laundering were not comprehensive, the IMF said.

Kuwait’s finance sector, one of the pillars of the country’s non-oil economy, is recovering from heavy losses linked to the global downturn. Gulf Bank required a government bailout and the investment industry underwent a hefty shake-up after several investment companies started to default on financial obligations.


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