Kuwait FATF Grey Listing - Impact on DNFBPs’ AML Compliance
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Kuwait FATF Grey Listing Impact on UAE DNFBPs at a glance:
- Kuwait was placed on the FATF Grey List in February 2026.
- The findings in Kuwait’s 2024 Mutual Evaluation Report (MER) identified weaknesses in its Terrorism Financing Risk Assessment and Targeted Financial Sanctions (TFS) implementation.
- UAE DNFBPs with customers, suppliers, business associates, or branch offices in Kuwait must take risk-based decisions with regard to jurisdiction risk assessments, enhanced due diligence controls, business-wide as well as customer-specific risk assessment parameters.
Kuwait Added to the FATF Grey List: What Happened?
Kuwait is a high-income country due to its strong petroleum-based economy and is ranked 35th most peaceful country in the world by the 2023 Global Peace Index. Despite its economic strength, FATF identified its vulnerabilities related to terrorist acts and terrorist groups operating outside its jurisdiction.
The Mutual Evaluation Report noted that Kuwait’s Obliged Entities have a limited understanding of ML/TF and PF risks they are exposed to, and their AML regime has significant deficiencies in TFS implementation, with a limited scope for freezing and no general prohibition.
Why Was Kuwait Placed Under Increased Monitoring?
The Financial Action Task Force (FATF), the global AML/CFT and CPF watchdog, placed Kuwait on the Grey List after following its standard mutual evaluation procedure.
The FATF 2024 Mutual Evaluation Report assessed Kuwait’s overall effectiveness largely as Moderate, but certain critical areas were rated Low in the context of:
- Insufficient beneficial ownership transparency
- Lack of cross-border money laundering investigations regarding currency and bearer negotiable instruments
- Deficiencies in suspicious transaction reporting (STRs) in non-banking sectors
- Limited understanding and prosecutions of Terrorism Financing (TF)
- Inadequate implementation of TFS measures not in alignment with FATF standards.
What This Means for UAE Businesses with Exposure to Kuwait?
UAE-based businesses, such as DNFBPs including real estate agents, brokers, dealers in precious metals and stones, corporate service providers, lawyers and accountants, and gaming sector operators engaging with Kuwaiti customers, suppliers, and beneficial owners, may have practical AML compliance implications.
DNFBPs in the UAE must not apply enhanced due diligence measures or “de-risk” i.e., cut off business ties with all customers belonging to Kuwait; they must apply a risk-based approach.
Customer Risk Reclassification
The addition of Kuwait to the FATF Grey List warrants DNFBPs in UAE to:
- Reviewing the risk-matrix and risk-scoring parameters of country risk.
- Re-assessing and re-classifying the ML/TF and PF risk posed by existing Kuwait-linked customers.
- Documenting and recording the rationale and reasoning behind such customer risk reclassification.
- Ensuring that risk-adjustments remain proportionate and commensurate to actual ML/TF and PF risk exposure and the business profile of the customer or supplier.
Enhanced Due Diligence Considerations
As established earlier, applying EDD measures as a blanket risk-control mechanism would not align with a risk-based approach. DNFBPs in the UAE must consider taking a risk-based approach and decide whether or not to apply EDD measures, depending on Kuwait-specific factors such as:
- In the event of coming across corporate customers with unreliable Beneficial Ownership information.
- Other circumstances warranting EDD, such as:
- large or unusual transactions
- transactions without economic or business rationale
- doubts arising upon the authenticity or veracity of customer information and documents
- Appearance of red flags in terms of customer behavior or transactions.
Cross-Border Transaction Monitoring
Businesses in the UAE operating in fields like real estate, precious metals and stones, and incorporation services must recalibrate AML/CFT control measures around their cross-border transactions linked to Kuwait so as to ensure that their transaction monitoring frequency is risk-based and commensurate with the risk posed by their Kuwaiti clients or business associates.
Should Your AML/CFT Risk Assessment Be Updated?
Kuwait’s Grey Listing does not automatically require DNFBPs in UAE to apply any blanket control measures, but to take a risk-based approach. DNFBPs must consider how the inclusion of Kuwait in the FATF Grey List impacts the geography risk component of their Enterprise-Wide Risk Assessment (EWRA).
As the geographic risk gets tweaked, based on Kuwait’s inclusion, a DNFBP is required to document and imbibe the same into its AML Programme. Once the AML/CFT Policy is updated, as a result, the Customer Risk Assessment (CRA) methodology needs to be revised to accurately score and classify customers or suppliers from Kuwait.
DNFBPs are also required to reconfigure their AML/CFT Software and align their Customer Due Diligence measures to ensure that adequate due diligence is performed and risk-based compliance measures are implemented on their existing customers as well as during customer onboarding.
Are your business operations exposed to Kuwait?
You may need to revise and document jurisdiction risk in your EWRA to align with latest FATF Grey Listing.
Practical Compliance Steps for UAE DNFBPs
DNFBPs in the UAE can take the following practical steps to ensure compliance with AML/CFT obligations.
- Reviewing Geographic Risk classifications: Enabling reassessment and reconfiguration of risk factors, control measures, risk appetite, and residual risk.
- Reassessing existing Kuwait-linked clients: Ensuring that changes in their risk profile, if any, have been mitigated with adequate control measures and risk-based decision making.
- Strengthening Beneficial Ownership Verification: Ensuring that no misuse of corporate structures, complex ownership structures, shell or shelf companies is done to evade UBO identification.
- Evaluating EDD Thresholds: Ensuring that there is no under- or over-compliance and that due diligence measures remain risk based.
- Updating Screening and Monitoring Systems: Incorporating Kuwait’s name in Grey Listed countries, Re-KYC cycle configuration, changing transaction monitoring rules, revising triggers for screening, KYC and risk assessment.
- Documenting Board and Compliance Oversight: Ensuring that no high-risk business relationship with Kuwait based customer or supplier is continued or established without senior management approval.
- Conducting adequate Staff Training and Awareness: Ensuring that personnel are equipped with the Customer Acceptance Policy and Customer Offboarding Procedures based on inclusion of Kuwait to the FATF Grey List.
- Implementing adequate Record-Keeping Measures: Ensuring that any changes made to DNFBPs’ policies or procedures, including Kuwait’s name in the FATF Grey List and resultant procedural tweaks, are recorded and documented to fulfil record-keeping obligations and withstand regulatory scrutiny.
How Can AML UAE Help DNFBPs with Exposure to Kuwait?
DNFBPs in UAE having customers, suppliers, intermediaries, or beneficial owners linked to Kuwait may require a focused reassessment of geographic risk factors in their EWRA to ensure that continuing and establishing business relationships with Kuwaiti clients is within their firm’s risk appetite.
AML UAE assists DNFBPs with reviewing EWRA parameters, recalibrating customer risk scoring, strengthening beneficial ownership verification, and aligning screening controls proportionately.
AML UAE’s approach helps DNFBPs ensure that geographic risk remains well documented and consistently aligned with UAE’s evolving AML regulatory expectations, while avoiding under- or over-compliance.
Frequently Asked Questions around Kuwait’s FATF Grey Listing
Does Kuwait’s FATF Grey Listing prohibit business with Kuwaiti clients?
No, FATF Grey Listing does not prevent conducting business with Kuwaiti clients, it only necessitates that businesses take a risk-based approach and continue with the business relationship with Kuwaiti clients after conducting adequate due diligence to mitigate ML/TF and PF risks, if any, posed by them.
Do UAE DNFBPs need to apply enhanced due diligence to Kuwaiti customers?
UAE DNFBPs need not apply enhanced due diligence as a blanket approach, they must take into account the geographic risk element and decide appropriate due diligence measures. In simple words, stronger due diligence with high-risk customers and simplified due diligence for low-risk customers from Kuwait.
Should Kuwait now be classified as a high-risk country in internal risk assessments?
The decision to classify Kuwait as high-risk depends on the individual business’s risk appetite. Many DNFBPs may opt to increase the geographic risk rating, following the FATF grey listing and some may not, depending on their risk appetite. Any adjustment in the internal risk assessments must be adequately documented within the firm’s EWRA.
Why did FATF place Kuwait under Increased Monitoring?
FATF placed Kuwait in the Grey List due to several deficiencies such as weakness in terrorism financing risk assessment, poor TFS implementation, unclear beneficial ownership transparency in its 2024 Mutual Evaluation Report.
What practical step should UAE DNFBPs take after Kuwait’s Grey Listing?
UAE DNFBPs with exposure to Kuwait should consider reviewing geographic risk ratings, conducting KYC of existing customers from Kuwait again, to incorporate geographic risk and re-classify customer risk ratings, reconfiguring AML Software for updating monitoring parameters and documenting the outcome of their compliance review.
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About the Author
Pathik Shah
FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)
Pathik is an ACAMS-certified AML consultant specialising in governance, risk, and compliance for regulated entities in the UAE. He brings over 28 years of experience, with 1,000+ hours of AML training and 200+ advisory engagements across DNFBPs, VASPs, and FIs. He supports businesses in aligning with AML/CFT requirements from the CBUAE, DFSA, MoET, MoJ, VARA, CMA, FSRA, and FATF. Known for translating complex regulations into audit-ready procedures, Pathik enables operational clarity and compliance readiness.
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