Financial crime watchdog puts Kuwait on grey list

• FATF places Kuwait under scrutiny
• Tougher compliance checks
• ‘Significant progress’ since report

The Paris-based Financial Action Task Force (FATF) has added Kuwait to its so-called grey list, placing the Gulf state alongside a number of other Middle East and North African jurisdictions under increased monitoring for money-laundering and terrorist-financing risks.

The decision was taken at the global watchdog’s plenary meeting in Mexico last week, extending closer international scrutiny of Kuwait’s financial system at a time when long-delayed economic reforms are beginning to gather pace.

In practical terms, the designation is likely to prompt banks and multinational companies to apply tougher compliance checks, analysts said, with stricter due diligence and more-rigorous onboarding.

The move follows the publication of a “mutual evaluation report” last year by the FATF, which found Kuwait had only a basic understanding of money-laundering risks and a low understanding of terrorist-financing risks at a national level.

However, since the adoption of that report, the FATF said Kuwait had made “significant progress” on the majority of recommended actions.

Analysts said they did not see inclusion on the grey list as an indication that sanctions were imminent or of fundamental economic challenges. 

“This should be beneficial to Kuwait’s monetary system in the long run as it adheres to global standards,” said James Swanston, senior economist at London-based Capital Economics. 

“Near-term inclusion may only be a reputational worry at best, rather than actual concerns over money laundering,” he said.

As part of an action plan, Kuwait has committed to tighter oversight of high-risk sectors, including real estate agents and dealers in gold and other precious metals.

The grey-listing coincides with gradual implementation of Kuwait’s long-stalled reforms after years of legislative gridlock. 

Last year, Kuwait amended property ownership rules to grant expatriates limited rights to own real estate under specific conditions and introduced a 15-year residency track – a form of “golden visa” – for investors who buy property or establish a business in the country.

Kuwait has also announced plans to introduce a freelance-work residency permit within the next two months, aimed at combating residency trafficking and regulating Kuwait’s labour market.

The FATF listing “signals closer international monitoring as reforms are implemented to bring greater order, efficiency and structure to the country’s business environment”, said Vijay Valecha, chief investment officer at Century Financial in Dubai.

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While inclusion on the list does not automatically trigger enhanced due-diligence requirements, it acts as a signal for other jurisdictions and institutions to take a risk-based approach in dealings with Kuwait.

“To exit the grey list, the government must effectively implement the plan within the agreed timeframe,” Valecha said.

“Countries must also ensure competent authorities have timely, accurate access to beneficial-ownership information. This is one of the most common reasons countries are grey-listed,” he said.

Countries that follow through on reforms typically exit the list within two to three years. The UAE, for example, was placed on the grey list in March 2022 and removed in February 2024.

Other Mena countries on the FATF’s grey list include Algeria, Lebanon, Syria and Yemen.