KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
reinforced its stance by completely banning banks from carrying out any activities related to the mining of virtual assets. Banks are required to educate their clients about the risks of virtual assets, particularly in cross-border transactions, where these assets are not legally recognised or backed by any authority, exposing users to significant financial risks. Although virtual assets are prohibited, certain securities and financial instruments regulated by the CBK and the CMA are not affected by this ban. Financial institutions are expected to fully comply with the new guidelines, and non- compliance will result in penalties under the AML Law. These penalties will be imposed alongside any other sanctions from relevant authorities. Tax transparency – compliance with Decree-Law No 6 of 2024 on Exchange of Tax Information (the “Exchange of Tax Information Law”) The Exchange of Tax Information Law regulates, among other tax transparency-related matters, the disclosure of tax information with MOF and tax authorities abroad. Under this law, banks must: • submit annual reports to MOF outlining accounts subject to reporting under relevant tax treaties; even if no updates/disclosures are required to be reported, a formal declara - tion confirming this must still be filed for the applicable year; • obtain self-certification forms from customers when opening new accounts to verify their tax status; • maintain records of customer informa - tion, including self-certification forms, for a minimum of six years; these records must be readily accessible for regulatory audits or inspections; and
• designate a specific auditor to ensure adher - ence to the Exchange of Tax Information Law and AML Regulations; all reports must undergo external audit, and to avoid conflicts of interest, the auditor reviewing tax informa - tion reports must be different from the one auditing the institution’s financial statements. Non-compliance with the Exchange of Tax Infor - mation Law will result in penalties, including fines ranging from KWD10,000 to KWD20,000, suspension or revocation of banking licenses, and potential criminal prosecution. These pen - alties will be enforced without prejudice to any applicable sanctions under the AML Law. 6. Depositor Protection 6.1 Deposit Guarantee Scheme (DGS) Kuwait’s Deposit Guarantee Scheme (DGS): Safeguarding the Banking Sector Post-2008 Financial Crisis In the wake of the 2008 Global Financial Crisis, Kuwait acted swiftly to safeguard its banking sector by introducing an unlimited deposit guar - antee. The deposit guarantee scheme has been designed to ensure the protection of depositors and maintain the stability and competitiveness of Kuwait’s banking sector amidst regional chal - lenges. DGS requirements Law No 30 of 2008 Regarding the Guarantee of Deposits with Local Banks (the “Deposit Guar - antee Law”) introduced an unlimited guarantee for bank deposits. The Deposit Guarantee Law covers all types of deposits, including savings accounts, current account balances, and other funds held at local banks, with no cap on the amount guaranteed.
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