FATF AML Deficiency List
Non - Compliance with FATF MER Recommendations
US Dept of State Money Laundering assessment
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Kuwait is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies.
FATF Statement re AML Strategic Deficiencies - 27 February 2015
The FATF welcomes Kuwait’s significant progress in improving its AML/CFT regime and notes that Kuwait has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2012. Kuwait is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Kuwait will work with MENAFATF as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report, in particular, fully implementing UNSC Resolution 1373.
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Kuwait was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, Kuwait was deemed Compliant for 1and Largely Compliant for 10 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 4 of the6 Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
Kuwait was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Kuwait is not a regional financial center. As of March 31, 2015, the Central Bank of Kuwait reported total banking sector assets of $188 billion. Currently, 23 banks operate in Kuwait. Financial crimes, including money laundering, remain concerns. Illicit proceeds are primarily related to cases of fraud, smuggling (especially to/from Iraq), and corruption. Other proceeds- generating crimes are credit card fraud, piracy of goods, insider trading, and market manipulation. The authorities are unaware of the presence of serious organized or transnational crime.
Private financial support to terrorist groups, particularly by individuals who operate outside of government-approved charitable-giving mechanisms, also continues to be a concern. In 2015, the Government of Kuwait took several measures to improve the oversight and regulation of charities operating in the country, including monitoring transfers to international beneficiaries. The Ministry of Social Affairs and Labor has also taken steps to monitor social media and regulate online donations.
There are no international sanctions currently in force against this country.
The Arab League (comprising 22 Arab member states), of which this country is a member, has approved imposing sanctions on Syria. These include: -
Cutting off transactions with the Syrian central bank
Halting funding by Arab governments for projects in Syria
A ban on senior Syrian officials travelling to other Arab countries
A freeze on assets related to President Bashar al-Assad's government
The declaration also calls on Arab central banks to monitor transfers to Syria, with the exception of remittances from Syrians abroad.
The Arab League has also boycotted Israel in a systematic effort to isolate Israel economically in support of the Palestinians, however, the implementation of the boycott has varied over time among member states. There are three tiers to the boycott. The primary boycott prohibits the importation of Israeli-origin goods and services into boycotting countries. The secondary boycott prohibits individuals, as well as private and public sector firms and organizations, in member countries from engaging in business with any entity that does business in Israel. The Arab League maintains a blacklist of such firms. The tertiary boycott prohibits any entity in a member country from doing business with a company or individual that has business dealings with U.S. or other firms on the Arab League blacklist.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 42
World Governance Indicator – Control of Corruption 51
Corruption is a hurdle for businesses investing in Kuwait. The ruling family and the Kuwaiti elite control key economic activities and sectors. Informal monopolies and oligopolies exist, and connections between the administration and private companies have resulted in uneven market competition. Kuwaiti law criminalises abuse of office, extortion, money laundering and active and passive bribery, among other corruption offences, but not the bribery of foreign officials. Bribery, facilitation payments and giving and receiving gifts are widespread in Kuwait despite being illegal. The government does not implement anti-corruption laws effectively, and public officials reportedly engage in corrupt activities with impunity. For further information - GAN Integrity Business Anti-Corruption Portal
Kuwait has a geographically small, but wealthy, relatively open economy with crude oil reserves of about 102 billion barrels - more than 6% of world reserves. Kuwaiti officials plan to increase oil production to 4 million barrels per day by 2020. Petroleum accounts for over half of GDP, 94% of export revenues, and 90% of government income.
In 2015, Kuwait, for the first time in 15 years, realized a budget deficit after decades of high oil prices. Kuwaiti authorities have tried to reduce the deficit by decreasing spending on subsidies for the local population, but with limited success. Despite Kuwait’s dependence on oil, the government has cushioned itself against the impact of lower oil prices, by saving annually at least 10% of government revenue in the Fund for Future Generations.
Kuwait has failed to diversify its economy or bolster the private sector, because of a poor business climate, a large public sector that crowds out private employment of Kuwaiti nationals, and an acrimonious relationship between the National Assembly and the executive branch that has stymied most economic reforms. The Kuwaiti Government has made little progress on its long-term economic development plan first passed in 2010. While the government planned to spend up to $104 billion over four years to diversify the economy, attract more investment, and boost private sector participation in the economy, many of the projects did not materialize because of an uncertain political situation.
Agriculture - products:
petroleum, petrochemicals, cement, shipbuilding and repair, water desalination, food processing, construction materials
Exports - commodities:
oil and refined products, fertilizers
Exports - partners:
South Korea 14.5%, China 12.1%, India 12.1%, Japan 10.4%, US 7.6%, Pakistan 5.9%, Singapore 4.3% (2015)
Imports - commodities:
food, construction materials, vehicles and parts, clothing
Imports - partners:
China 13.2%, US 9.6%, Saudi Arabia 7.7%, Japan 6.5%, Germany 5.1%, France 4.3%, India 4.2% (2015)
Investment Climate - US State Department
Kuwait has continued to make strides over the past year to improve its investment climate. The ongoing implementation of the 2013 Foreign Direct Investment (FDI) law continued to ease constraints on doing business in Kuwait. The stock exchange was privatized in April 2016. The government is considering a phased privatization of the management and operations of the air and sea ports. After years of delays, the state oil companies awarded several high-value contracts to foreign consortia to upgrade refineries and power plants. Despite the sharp decline in oil prices, Kuwait’s economy – most notably its oil sector and pension and sovereign wealth funds – remained robust.
Nevertheless, Kuwait is a difficult place in which to invest and do business, and challenges to operating in the country remain. Kuwait ranked 101st out of 189 in the world, and lowest in the Gulf Cooperation Council (GCC), on the World Bank’s 2016 “Ease of Doing Business” survey. Implementation of the FDI law has lagged and obstacles to foreign investment remain, including regulations barring foreign entities from the upstream petroleum and real estate sectors, bureaucratic hurdles that delay the start of new enterprises, and a business culture based on clan and family ties that can be difficult for foreigners to penetrate. Kuwaiti law continues to restrict foreign banks from offering investment banking services and prohibits them from competing in the retail sector. While the new Kuwait Direct Investment Promotion Authority (KDIPA) ramped up its operations, its “one-stop shop” to assist investors is not yet fully operational. Kuwait’s copyright legislation is most likely not consistent with its World Trade Organization (WTO) obligations. The U.S. Trade Representative’s (USTR) 2014 and 2015 Special 301 Reports listed Kuwait on the Priority Watch List. The application and enforcement of labor laws are not consistent.
According to the U.S. Department of Commerce, Kuwait was ranked 37th in 2014 as a source of investment in the United States, with an FDI position of USD 1.4 billion. The actual investment into the United States from Kuwaiti sources is very likely to be many orders of magnitude larger and diversified across several sectors. Two major announcements in early 2016 included Gatehouse Capital’s purchase of ten select service hotels in the upper Midwest for USD 137 million and MEGlobal’s planned construction of a new world-scale monoethylene glycol manufacturing facility in Texas worth over USD one billion.
Kuwait has attracted little FDI, in part because of legal and bureaucratic impediments. Despite the many challenges to doing business in Kuwait, however, several U.S. companies have won lucrative contracts and operate successfully in the country. U.S. engineering firms such as Fluor figure largely in the execution of infrastructure development projects, including the USD 16 billion Al-Zour Refinery Project. General Electric is a major vendor to power generation and desalination facilities. Citibank has a branch, and numerous U.S. retail chains operate franchises successfully. Dow Chemical Company owns 42.5% of the EQUATE Petrochemical Company joint venture.
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