PRELIMINARY DRAFT OF AMENDED AML LAW IN PARLIAMENT

UNCLAS KUWAIT 001208 SENSITIVE SIPDIS C O R R E C T E D COPY CAPTION NEA/ARP, NEA/RA, S/CT, EEB/ESC, TREASURY FOR U/S LEVEY E.O. 12958: N/A TAGS: EFIN KU PGOV PINR PTER KTFN SUBJECT: PRELIMINARY DRAFT OF AMENDED AML LAW IN PARLIAMENT REF: A. KUWAIT 1178 ¶B. KUWAIT 1021 ¶1. (SBU) Summary. GoK officials formally announced at the December Anti-Money Laundering Conference (ref. b) that in accordance with decree No. 328, an amended version of law number 35/2002 has been passed to parliament for review and ratification. Embassy Kuwait received an Arabic copy of the draft amendment for review and has done an informal translation. The amended law specifically criminalizes terrorist financing, provides for cash export declarations, and further clarifies how Suspicious Transaction Reports are managed. The Director of the Ministry of Commerce,s Anti-Money Laundering Unit has told U.S. customs advisors that he would welcome their comments. End Summary. ¶2. (SBU) Following is the text of the amended law as translated by Embassy Kuwait. ¶3. (SBU) Begin text. Section One - Definitions Article (1) In implementing the provisions of the law herein, each of the following words and phrases will have the meaning assigned to it, unless otherwise provided: A) Monies: Assets whether material, immaterial, movable, immovable, tangible or intangible, and legal instruments in all forms supporting the above mentioned, and any interest, profit or income derived from such assets. B) Money Laundering: Any act to acquire, possess, use, dispose, manage, keep, exchange, deposit, guarantee, invest, transfer money or manipulate its value if it was derived from a crime provided in article (3) herein, if the intention of this act was to conceal the money, or cover up its nature or source. C) Financial institutions, its branches and subsidiaries working in the state of Kuwait and abroad, and non-financial institutions working in the state of Kuwait include: 1- National banks and branches of foreign banks working in the state of Kuwait 2- Money exchange companies and institutions 3- Investment companies 4- Investment funds in all forms 5- Insurance agents and companies 6- Money brokerage companies and institutions 7- Companies and institutions dealing with negotiable instruments 8- Companies entrusted for keeping, collecting or managing monies 9- Companies and institutions owned by individuals working in gold, precious stones and valuable minerals 10- Charitable or non-profitable institutions, authorities or organizations 11- Other bodies as determined by the competent minister The above-mentioned activities will apply whether being practiced by a natural person or a body corporate. (D) Proceeds: Money originating or derived, directly or indirectly, from any crime as provided in article (3) herein. (E) Terrorism: Any act of violence or threat for whatever reason or purpose committed to execute a criminal action, by an individual or collectively, with the intention of frightening people, endangering their lives, freedom or security, or damaging the environment or public or private properties, or occupying the same, take hold of them or endangering a national resource. (F) Terrorism Financing: Any action of gathering, collecting, delivering, allocating, transporting, providing or transferring money or its proceeds to any terrorist activity inside or outside the country, or perform any banking or financial legitimate or commercial operations for the interest of this activity, or its aspects, or acquire money, directly or indirectly, or through brokerage, to use for its interest or seek to promote its principles or set up places for training or accommodating its agents, provide weapons, documents or any another sort of assistance to support and finance the same, knowingly, whether the terrorist action has actually occurred or otherwise. (G) Supervisory Authorities: The supervisory authorities are government authorities entrusted by law to grant work license for financial institutions and non-financial institutions, as mentioned in article (C),they are responsible to supervise and observe these institutions. (H) Unit: Kuwait Financial Investigations Unit established according to the provisions of the law herein. (I) Competent Authorities: Government authorities assigned by this law, its ministerial resolutions or other laws in the country to combat crimes. (J) National Committee: The National Committee for Combating Money Laundering and Terrorism Financing. (K) Beneficiary Owner: Any person who owns or controls, wholly, the monies or properties of an agent or a person of which behalf transactions are made, in addition, persons who practice actual control on the monies or properties of a corporate body. (L) Competent Minister: Minister of Finance Section Two - The National Committee for Combating Money Laundering and Terrorism Financing Article (2) Establish the National Committee for Combating Money Laundering and Terrorism Financing; the competent minister will issue a resolution determining its authorities, structure, and work system. Section Three - Money Laundering Crimes Article (3): Money Laundering Crimes It is prohibited to launder money derived from the following crimes: - Assault on the state security internally or externally - Crimes for the purpose of terrorism or financing terrorism, or crimes executed by terrorism - Planting, manufacturing, importing, exporting and the trafficking of narcotics - Procuring, importing, possessing and manufacturing alcohol for trafficking - Importing, trafficking, and manufacturing weapons, ammunition and explosives illegally - Seizing transportation means, detaining people, premeditated murder and assault on people - Human trafficking or smuggling immigrants - Bribe, exploit influence and make profit out of a public post - Embezzlement, taking possession of public monies, or facilitating this action to others - Cause intentional damage to public monies - Counterfeiting money and coins, deception and fraud - Violation to intellectual property rights - Robbing by the use of violence and extortion - Swindling and breach of trust - Pornography, prostitution and gambling - Tax evasion - Customs evasion - Crimes concerning the environment, in relation to hazardous materials and debris The money laundering, terrorism financing, the above-mentioned crimes and/or any part, shall be subject to punishment if so provided by Kuwait law and the foreign country's law. Section Four - Kuwait Financial Investigation Unit Article (4) An independent financial investigations unit will be established to undertake the responsibilities as provided by the law hereunder. The Council of Ministers will issue a resolution to determine its subordination, form and work system. Article (5) The Financial Investigations Unit (FIU) is responsible to do the following: 1- Receive reports from financial institutions, their branches and subsidiaries, working in the state of Kuwait and abroad, and from non-financial institutions working in the state of Kuwait regarding suspicious operations in relation to money laundering and terrorism financing. 2- Gather and analyze information and data in relation to suspicious transactions notifications. 3- Exchange information received from suspicious transactions notifications with all other the supervisory authorities, competent bodies and counterpart FIU's in other countries, in accordance with international agreements in which Kuwait is part of, or in implementing the reciprocity principle. 4- Create database for the available information, which will be confidential. 5- Issue instructions to the financial and non-financial institutions, their branches and subsidiaries in Kuwait directing them to hold suspicious transactions concerning money laundering or terrorism financing for no more than a maximum of three working days. 6- Issue statistical reports or bulletins concerning their activities. Article (6) The FIU is responsible to investigate and verify the notifications and information of a suspicious money laundering and terrorism financing operation. It will report to the public prosecution of the results of its investigations concerning any evidence of a crime as provided by the law herein. The FIU may request the public prosecution to have access to the banking accounts, statements, and necessary information, as it deems necessary to perform its tasks. Article (7) According to a resolution by the competent minister, members of the FIU and the concerned ministries will be authorized for a legal seizure for crimes provided herein, in relation to their jobs. Article (8) Personnel of the FIU are prohibited to reveal any available information or data concerning their work nature whether during or after their employment term. Section Five - Precaution Procedures Article (9) The prosecutor, or his appointed attorney general, may issue an order to prevent the accused from disposing all of or part of his money until the settlement of the case. Claiming against this order to the competent court is not accepted except after three months from the date of this order. The court shall settle this claim in a summary matter, by rejecting, canceling the order or amending it, and will determine the necessary guarantees, if demands. Re-submitting the claim shall not be allowed except after six months from the date of the first claim. The prosecutor, or his appointed attorney general, may change or amend the order according to his own considerations. Section Six - Obligations of the Supervisory Bodies and Authorities Article (10) The supervisory bodies are obliged to establish and set up all measures to ensure the commitments of financial and non-financial institutions to the regulations and rules prescribed by law concerning money laundering and terrorism financing. Section Seven - Obligations of Financial and Non-Financial Institutions Article (11) Financial institutions, branches and subsidiaries working in the state of Kuwait and abroad, and non-financial institutions working in the state of Kuwait, shall abide by the following: 1- Notify the FIU of any suspicious financial transaction involving money laundering or terrorism financing as referred in article (1) herein, upon discovery. 2- Adopt written polices and internal supervisory regulations which enable institutions authority to investigate any financial operation involving money laundering or terrorism financing, and prevent them from using these operations to cover suspicious transactions. 3- Not to allow transactions that hold anonymous, false or factious names. 4- Set the necessary procedures to obtain data concerning the identity and the legal status of their clients, based on official documents, this will apply to natural person and body corporate. 5- Comply with the instructions and ministerial resolutions issued by the supervisory bodies in respect of combating money laundering and terrorism financing. 6- Refrain from executing any suspicious transactionin relation to money laundering or terrorism financinguntil reporting these suspicious operations to the FIU.If this was not possible, or it may result in revealing these suspicions to the transaction's parties, the financial and the non-financial institutions, branches and subsidiaries working in the state of Kuwait, can execute the transaction and report immediately to the FIU. 7- Provide the FIU with the necessary information and data to perform its tasks, without prejudice to the provisions of the second paragraph of article 6. The rules of implementation shall determine the standards that the financial institutions, branches, and subsidiaries working in the state of Kuwait and abroad and non-financial institutions working in the state of Kuwait must observe to execute their commitments. Article (12) The financial institutions, branches and subsidiaries working in the state of Kuwait and abroad, and non-financial institutions workingin the state of Kuwait, should maintain records and documents for the local and international financial transactions including sufficient data to identify these transactions and related data. Institutions must keep records and documents for atleast five years from the expiration date of the transaction or closing the account, as the case may be. Those records and documents should be at the disposal of the judicial authorities and competent bodies upon their request during investigation, examination, evidence gathering, interviewing, or prosecuting any crime subject to the provisions herein. Section Eight - Crimes & Punishment Article (13) Any one who, with good faith, notifies of suspicious operation subject to the provisions of the law herein, or provides information or data violating the rules of confidentiality, will not be under any criminal, civil or administrative liability. Article (14) It is prohibited to disclose any procedure of notifying, investigating or examining a suspicious financial transaction involved in money laundering or terrorist financing or data in relation, except to the competent bodies and concerned authorities. Article (15) Every passenger departing or entering the country shall report to customs authorities of any national or foreign currency, negotiable instruments, in his/her possession, subject to the rules and regulations issued by the competent minister. Article (16) Without prejudice to other stronger punishment stipulated by criminal law or other law, the crimes set forth will have the punishment as provided therein. Article (17) Any person that commits or attempts to commit a money laundering crime as provided herein, shall be imprisoned for seven years maximum and will be subject to a fine of half of the amount of monies in question at least, and the whole amount of such monies maximum. In all cases, the monies, properties, proceeds and means used to commit the crime or the proceeds of the crime will be confiscated, or additional fine equal to its value will be imposed, in case of the inability to seize such or disposing to others with good faith. The termination of a criminal case, for any case whatsoever, will not prevent from confiscating the monies originated from the money laundering operation. Article (18) Any person who commits or attempts to commit a terrorist financing crime, shall be imprisoned for a period not exceeding ten years, and will be subject to a fine of three thousand dinars minimum and twenty thousand dinars maximum. In all cases, the monies or proceeds, weapons, documents or other support and finance means, will be confiscated. Article (19) Without prejudice to the criminal liability of the natural person as provided by law herein, financial institutions, branches and subsidiaries and non-financial institutions working in Kuwait will be legally responsible for money laundering crime as provided by the law herein. Financial institutions, branches and subsidiaries and non-financial institutions working in Kuwait will be subject to a fine of one million dinars maximum, if the crime was committed in its name, for its interest, or though its equipments, managers, representatives or workers. The court will cancel the company's work license for practicing activity, if the company was established for committing a crime as provided by article three of the law herein. In all cases, and without prejudice to the rights of others with good faith, monies, properties, proceeds and means used to commit the crime will be confiscated, and the verdict will be published in the official gazette and in two daily newspapers at the expense of the convicted. Article (20) The imprisonment term provided in article (17) herein will be doubled, and the fine will be in the amount of the monies subject matter, at least, and not exceeding double its value, with the confiscation of monies, properties, proceeds and means used in committing the crime, without prejudice to the others with good faith, in case any of the following cases occur: 1- The crime was committed through an organized group 2- The crime was committed to execute a terrorist objective or finance it 3- The perpetrator committed the crime by exploiting his job authority or influence 4- The crime was committed through a public utility association 5- The perpetrator was convicted of a crime previously Article (21) Any one who intentionally breaches articles 8, 11, 12, 14 herein, or destroys or conceals documents or tools in relation to this crime, will be subject to imprisonment for three years maximum, and a fine of not less than five thousand dinars or twenty thousand dinars maximum,or either one, besides termination from post. Any one who is proved to fail in observing any of the obligations provided in articles 8,11, 12, 14 of the law herein will be subject to a fine that does not exceed twenty thousand dinars. Article (22) In case of breaching article (15) herein, customs authorities will hold national or foreign currency, negotiable financial instruments subject matter, until being released by the public prosecution after verifying its connection to another crime, as provided by the law herein. Article (23) In case of having more than one perpetrator in a money laundering and terrorism financing crime, and if one of them report to the competent authorities about the crime and other perpetrators before the authorities becomes aware of it, or if he notifies the authorities after their awareness of the crime, and this resulted in seizing the perpetrators or monies subject matter, the court, according to its discretion, will dispense the informant from imprisonment and penalty as prescribed in the first paragraph of article (17) herein, without prejudice to any penalties provided in the second paragraph of the same article. Article (24) Prescription will not affect the criminal case of a money laundering or terrorism financing crime as provided herein and which occur after enforcing this law. Prescription will not affect the punishment imposed on the crimes provided herein, after enforcing this law. The provisions of the criminal law no. (81) & (82) do not apply to money laundering and terrorist financing crime. Section Nine - International Judiciary Cooperation Article (25) The public prosecution will exchange with the foreign judiciary authorities judicial assistance concerning money laundering or terrorist financing crimes, in terms of delivering accused or convicted persons and requests to hold money, this will be according to the rules provided in mutual or multi-party agreements endorsed by Kuwait or according to the reciprocity principle. Article (26) The public prosecution, upon the request of a foreign judiciary authority in another country, may order to pursue or detain properties, proceeds or means involved in crimes provided in the law herein, if such crimes were committed in violation to the laws of the other country. This will be in accordance of mutual agreements endorsed by Kuwait in this regard or according to the reciprocity principle, without prejudice to the rights of others in good faith. Article (27) The criminal court shall order to execute the final criminal judgments issued by foreign competent jurisdiction regarding the confiscation of money derived from money laundering or terrorism financing crimes and proceeds. All of this will be according to the regulations and procedures provided in the mutual agreements and multi-party agreements endorsed by Kuwait or according to the reciprocity principal. Article (28) Kuwaiti jurisdiction bodies' can dispose of the proceeds of which final verdict has been issued for confiscation in money laundering or terrorism financing crimes according to the rules that regulate the disposal of the proceeds according to the agreements endorsed by Kuwait or the reciprocity principal. Section Ten - Final Provisions Article (29) The public prosecution, excluding other bodies, is responsible to investigate, dispose and prosecute crimes provided in the law herein; the criminal court is responsible to review these crimes. Article (30) The competent minister will issue the rules of implementation for the law during three months from the date of issuing this law. Article (31) E Law no. 35 for the year 2002 regarding combating money laundering and any provision contradicting the provisions herein will be void. Regulations and resolutions currently practiced will remain valid until issuing the rules of implementation of this law. Article (32) The ministers, according to their responsibilities respectively, will enforce this law which will be published in the official gazette. End Text. ¶4. (SBU) Comment. Our initial review suggests the new amended law is a significant improvement over Law No. 35/2002 and seems to address many of the more glaring concerns raised by FATF. The most noteworthy addition is the specific statute which outlaws terrorism financing in section one, article one, (E). The amendment also significantly expands definitions and authorities, better defines how suspicious transaction reports (STR) are managed, and adds a provision for declaration of goods upon exiting the country. Post would welcome any immediate analysis about the proposed draft law, which we can pass on to the GoK. Absent major omissions, however, we recommend against adopting an overly critical approach to the draft law. The law as drafted is currently with the Kuwaiti parliament, and there appears to be some momentum for passage. Should we seek, and the GoK concur, to pursue major revisions of the law, it would have to be pulled back from parliament and redrafted, then approved through the various and time-consuming layers of Kuwaiti bureaucracy (where time for full clearance of draft laws is usually measured in years, not months). Consequently, it may be wiser to urge passage of the law as drafted in order to get a substantially better statute on the books, and then work with the Gok to look at a process down the road for potential revision (to include looking at available administrative or interpretive fixes). End Comment. ********************************************* ********* For more reporting from Embassy Kuwait, visit: visit Kuwait's Classified Website at: http://www.intelink.sgov.gov/wiki/Portal:Kuwa it ********************************************* ********* WILLIAMS