Gold traders required to continuously monitor customers' purchases

Ibrahim Ali: The Ministry of Commerce and Industry issued Decision No. 172 of 2026 regarding the regulations governing the operations of institutions and companies engaged in the trade of gold, precious stones, and precious metals, specifically concerning the fight against money laundering and the financing of terrorism. The decision stipulates that companies and institutions dealing in gold, precious stones, and precious metals must refrain from executing a transaction and terminate the business relationship if they are unable to verify the identity of the customer or the beneficial owner, or if they cannot document any information confirming the beneficial owner of the transaction. In such cases, companies and institutions are required to notify the Kuwait Financial Intelligence Unit (KAFIU).

According to the decision, obtained by "Al-Anbaa," companies and institutions must conduct continuous monitoring of transactions carried out periodically by their customers. This monitoring must include auditing their transactions to verify procedures in accordance with the entity’s knowledge of the customer, their risk profile, and their sources of funds, without prejudice to the control of predefined limits on the amount, volume, and type of transactions.

The decision prohibits dealing in cash for sales or purchases, restricting payment to non-cash payment instruments approved by the Central Bank of Kuwait, with full compliance with its regulations governing such matters.

Under these controls, companies and institutions are obligated to establish policies, work procedures, systems, and internal controls commensurate with the size, nature, and scope of their operations. These must be approved by senior management and apply to all local and foreign branches, if any. When formulating these policies, they must adhere to assessing customer and transaction risks, identifying the customer and the beneficial owner, maintaining records and transactions related to customers and transactions, applying due diligence measures to the customer, the beneficial owner, and politically exposed persons (PEPs), and verifying them. They must also report suspicious transactions to the Kuwait Financial Intelligence Unit. These policies, procedures, systems, and internal controls are subject to independent examination and review, and a compliance officer must be appointed at the senior management level, responsible for implementing the provisions of the Anti-Money Laundering and Counter-Terrorist Financing Law, its executive regulations, and these instructions.

The Ministry of Commerce has mandated high standards for employee recruitment and the implementation of a continuous training program for all new and current employees, board members, executive and supervisory management members, and managers. This includes mechanisms for accessing lists of targeted terrorist entities and financial sanctions, proliferation of weapons, and any other requirements set by the Ministry.

The decision obliged companies and institutions dealing in gold, precious stones, and precious metals to assess the money laundering and terrorist financing risks of their operations, including those related to the development of new products and technologies. They must maintain a written risk assessment study and related information, update it periodically, and provide it to the Ministry upon request. They must also take appropriate measures to identify, assess, monitor, manage, and mitigate risks, taking into account risks posed by customers, countries or geographic areas where customers conduct their business or where transactions originate or are destined, the nature of products and services provided, channels for product and service delivery, and risks of terrorist financing and proliferation of weapons.

The Ministry emphasized adherence to potential risk factors that constitute high-risk situations, requiring companies and institutions to apply enhanced due diligence measures. These include, but are not limited to, customer-related risk factors such as business relationships conducted under unusual circumstances, non-resident customers, activities involving cash or exposed to money laundering and terrorist financing risks, an unusual or highly complex corporate ownership structure lacking clear economic or legitimate purposes relative to the nature of the activity, business relationships and transactions not conducted in the presence of the customer, politically exposed persons or those associated with a politically exposed person, and customers possessing substantial assets or whose source of income or assets is unclear.

The decision addressed geographic risk factors or those related to countries classified by reliable sources, such as joint assessment reports or follow-up reports, as lacking adequate systems to combat money laundering and terrorist financing. It also covers countries classified by the Kuwait Financial Intelligence Unit as high-risk, those subject to sanctions, embargoes, or similar measures issued by the United Nations, those classified by reliable sources as having high levels of corruption or other criminal activities, and those classified by reliable sources as providing funding or support to terrorist activities or hosting designated terrorist organizations on their territory.

The decision obliged companies and institutions to manage risks by adopting measures for assessing risk factors, including the purpose of the relationship, the volume of transactions conducted by the customer, the frequency of transactions or duration of the relationship, and obtaining additional information about the customer and the beneficial owner. They must establish a risk profile for customers and transactions based on sufficient information about the customer and the beneficial owner, when available, including the expected relationship with gold, precious stones, and precious metals trading companies and the customer’s source of funds, as required.

The Ministry of Commerce prohibited companies and institutions from establishing business relationships with anonymous or fictitious customers. They must identify and verify the identity of the customer or beneficial owner before conducting any transaction with the customer. This applies when there is suspicion of money laundering or terrorist financing, or when there is doubt regarding the authenticity or sufficiency of previously obtained customer identification data.

Valid documents must be obtained to identify the customer or beneficial owner, including: civil ID cards for citizens or residents; passports or travel documents for non-residents in Kuwait; commercial licenses issued by the Ministry of Commerce and Industry for companies and institutions registered in Kuwait; and for foreign companies and institutions, documents issued by the competent authorities in the country of registration or establishment. Additionally, documents, papers, instruments, and court rulings proving that a person has been appointed to represent the concerned individual, and official identity documents certified by competent official authorities or bodies issuing such documents for customers not mentioned above. It is noted that attaching transaction documents is required for transactions exceeding 3,000 Kuwaiti Dinars or their equivalent in foreign currency.

The decision stipulated that companies and institutions must take necessary measures to determine whether a customer is acting on behalf of one or more beneficial owners. This can be done by obtaining a signed certificate from the customer stating that they are acting or conducting the transaction on behalf of another person, or through any other sources deemed necessary by the company or institution.

If it is confirmed that the customer is acting on behalf of one or more beneficial owners, the company or institution must verify the identity of the beneficial owner(s) using relevant information or data obtained from a reliable source, ensuring certainty of the beneficial owner’s identity. In such cases, they must also apply due diligence measures to the beneficial owner(s).

Companies and institutions dealing in gold, precious stones, and precious metals must maintain beneficial owner data in an electronic record or an independent electronic database within the entity’s systems. This must be separate from daily sales records and invoices to ensure ease of reference and verification upon request. It must include the following: the beneficial owner’s name, the purpose of the transaction, the nature of the relationship with the buyer, the invoice number associated with the transaction, and the transaction date.

This is aimed at verifying the beneficial owner and maintaining independent records supporting compliance procedures. In cases where complete beneficial owner data cannot be obtained, available information must be documented, and the existence of another beneficiary of the transaction must be indicated according to the customer’s statement, without prejudice to the entity’s obligations regarding risk assessment and taking appropriate measures.