KUWAIT CITY, Feb 22: In a significant tightening of oversight measures, the Central Bank of Kuwait has directed local banks to apply enhanced due diligence procedures to customers under investigation for suspected money laundering or terrorist financing.

Under the new guidance, banks are required to request additional data and supporting documents from clients placed under audit, granting them a reasonable timeframe to substantiate the legitimacy of their transactions. Should a customer fail to provide sufficient information proving the soundness of their financial activities, banks must terminate the relationship in accordance with regulatory instructions.

Sources said that in such cases, banks are prohibited from informing customers that the account closure is linked to suspicions of money laundering or terrorist financing. Instead, closures must be justified under the terms of the account opening agreement, which grants banks the right to close accounts without stating specific reasons.

The move is aimed at minimizing the risks associated with continuing to deal with individuals previously flagged for suspicious transactions. It also seeks to shield banks from potential liability arising from repeated questionable activities on an account after initial reports have already been submitted to the Financial Intelligence Unit.

According to informed sources, the directive falls within the Central Bank’s broader framework to assess and limit banks’ exposure to high-risk clients. Financial institutions are required to maintain strict monitoring over an appropriate review period to ensure that any requested transactions are consistent with the customer’s declared business activity. If the documents provided are deemed insufficient to dispel suspicion, banks must activate Clause 14 of the anti-money laundering and counter-terrorist financing instructions issued on February 16, 2023, which mandates termination of the client relationship.

The Central Bank emphasized that non-disclosure of the true grounds for account closure is essential to strengthening anti-money laundering safeguards and aligning with international compliance standards.

Banking sources noted that the measures reinforce Kuwait’s legal and regulatory framework in combating financial crimes and reflect ongoing legislative and supervisory efforts to enhance transparency and accountability. They added that terminating relationships with non-compliant customers represents a proportionate and deterrent step designed to protect the integrity of the financial system and safeguard the country’s standing as a credible regional financial hub.