Money laundering crimes initially arise from generating illegal financial profits through arms trafficking, drug trafficking, smuggling, embezzlement, bribery, electronic fraud, and other legally criminalized financial gains.

Because these funds are considered “unclean,” as bankers call them, their owners need to legitimize them and conceal their source by introducing them into the financial system through small cash deposits in bank accounts, or by purchasing a series of monetary instruments such as checks and others, or tangible assets such as cars, land, and real estate, and then reselling them and collecting the money to deposit it in a bank account elsewhere.

This process is considered a first step, after which the money launderer needs to conduct a series of banking operations by transferring funds through a chain of accounts in various banks worldwide, making it difficult to trace their source.

Subsequently, the owner of these funds invests them in real estate, assets, or commercial projects, thus successfully integrating illegal money into the financial system of the country where they invest, becoming part of legitimate funds.

The international community’s treatment of money laundering as a global problem has led to the adoption of necessary measures to combat it and limit its impact on destabilizing financial stability and facilitating criminal activities funding. These measures aimed to protect financial systems and enhance economic transparency.

The Financial Action Task Force (FATF), established in 1989, is one of the most prominent global measures to combat money laundering as the main international organization responsible for setting policies to combat money laundering and terrorist financing. Its forty recommendations form the basic framework for global efforts in this field. Key recommendations include enhancing financial institutions’ transparency by requiring them to report suspicious transactions, identifying customers to ensure banks and financial companies are not exploited in money laundering operations, promoting international cooperation between countries to exchange information about suspicious financial activities, and imposing strict penalties on entities and individuals involved in money laundering.

When discussing the most important global measures to combat money laundering, we cannot overlook the United Nations Convention against Transnational Organized Crime in 2000, which came into effect in 2003. One of its key outcomes was requiring signatory countries to establish anti-money laundering laws and facilitate judicial cooperation for extraditing criminals involved in these crimes.

The Gulf Cooperation Council (GCC) countries, including Kuwait, are keen to comply with FATF requirements by updating their legislation and implementing effective anti-money laundering policies. The GCC has taken serious steps in this field, such as establishing the Permanent Committee for Combating Money Laundering and Terrorist Financing to enhance cooperation between Gulf countries, supporting intelligence information exchange between regulatory and banking authorities, and adopting advanced electronic systems to monitor suspicious financial transactions.

For its part, Kuwait seeks to continuously strengthen its anti-money laundering procedures, building on key steps taken in this field over the years, most notably the issuance of Law No. 106 of 2013 regarding combating money laundering and terrorist financing, which complies with FATF recommendations, as well as establishing a Financial Intelligence Unit to monitor suspicious financial activities.

Kuwait has also developed supervision of the banking sector, where the Central Bank of Kuwait has imposed strict requirements on banks to enhance and update customer data systems to ensure monitoring and reporting of any unusual financial activities. The current Kuwaiti government, through relevant authorities, seeks to take more measures to improve the international classification in the field of anti-money laundering.

Stay informed with the latest legal developments at Global Law Experts