KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
audit functions, whose roles materially affect the risk landscape of the entity. These categories ensure that those with the greatest influence over the entity’s operations and risk exposure are subject to strict remuner - ation policies designed to promote long-term stability. Remuneration Principles Key principles that govern the remuneration structure for CBK-Regulated Entities include: • Risk alignment: Remuneration, particularly variable compensation, must be closely tied to the entity’s risk profile and long-term performance. This is to ensure that individuals are not incentivised to take excessive risks in pursuit of short-term gains. • Performance-based pay: Variable compen - sation should reflect sustained, measurable performance aligned with the entity’s broader objectives. The goal is to reward long-term value creation rather than speculative or short-term achievements. • Deferral of variable pay: The CBK encourages the deferral of variable pay over an appropri - ate period to ensure compensation is based on enduring performance, reducing the risk of rewarding short-lived results. Supervisory Approach The CBK employs a robust supervisory approach to ensure compliance with these remuneration guidelines: • Remuneration committee oversight: CBK- Regulated Entities must establish a remu - neration committee comprising independent members of the board. This committee is tasked with reviewing and implementing remuneration policies that align with the
entity’s risk management strategy and long- term goals. • Transparency and disclosure: CBK-Regulated Entities are required to disclose their remu - neration policies in their annual governance reports. These disclosures should explain how remuneration aligns with risk and per - formance objectives, providing transparency to regulators, shareholders, and other stake - holders.
5. AML/KYC 5.1 AML and CFT Requirements AML and CFT Framework in Kuwait
The banking sector is governed by a robust framework aimed at combating money launder - ing and terrorist financing. This framework is established by the AML Law and its executive by-laws issued by the Minister of Finance Reso - lution No 37 of 2013 (the AML Regulations”). AML and CFT Requirements for the Banking Sector AML Regulations impose critical requirements on the banking sector to prevent money launder - ing and terrorist financing activities. Below are some of the requirements: • Policies and procedures: Banks are required to develop robust internal policies and procedures. This includes thorough vetting processes for hiring employees to prevent potential risks. • Employee training: Continuous training pro - grammes must be in place to keep employ - ees updated about AML Regulations, emerg - ing trends in money laundering and terrorism financing, and their obligations, including reporting suspicious transactions.
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