In a recent development, some local banks in Kuwait have begun warning exchange companies to close their accounts within a specified timeframe or face the banks closing the accounts and potentially seizing the balances. This move has raised concerns among exchange company officials, who are seeking clarification on the reasons for these closures.
The banks have not specified the issues behind the account closures but suggest that this may be part of a broader strategy to reduce exposure to exchange companies, tighten business relationships, and enforce stricter criteria for opening new accounts in line with the Financial Action Task Force (FATF) guidelines on anti-money laundering and counter-terrorism financing. According to reports, the banks have simply stated that the request for account closure is based on the conditions for opening accounts, without providing detailed reasoning. Companies are expected to review the need to withdraw or transfer available balances within ten working days, after which the accounts will be closed.
Some exchange companies have expressed their concerns over this sudden shift, noting that their operations have not undergone any significant changes recently. They also pointed out that the banks have not provided explanations despite the short timeframe for closure. As a result, some of the affected companies are contemplating filing complaints with the Central Bank of Kuwait, as they are regulated by it.
Although this measure has not affected major exchange companies, those impacted are worried that it could have serious consequences for the sector. There are concerns that if other banks follow suit, it could lead to a shortage of foreign currency coverage, hindering financial transfers for both citizens and residents. This could further exacerbate the situation by making exchange companies less able to compete with shadow exchanges.
Banking sources revealed that the closure of accounts is part of a cautious banking approach, particularly with respect to high-risk corporate and exchange company accounts. They emphasized that the Central Bank allows each bank to assess the risks associated with its clients and decide whether to continue or initiate relationships based on the level of risk involved.
While exchange companies do not dispute the need for stringent audits and compliance with global regulatory standards, they believe that closing accounts without specific reasons is unfair and a violation of their contract terms. They argue that if there are concerns or suspicions, the banks should inform the companies and take appropriate legal action rather than closing accounts based on general suspicion.
The situation has brought to light the tension between banks’ need for risk management and exchange companies’ desire for transparency in their dealings. The exchange companies involved are under the supervision of the Central Bank, and they argue that their operations are fully compliant with existing regulations.
Central Bank’s Bond Issuance
In another financial development, the Central Bank of Kuwait announced the issuance of KD 240 million in bonds and tawarruq for a three-month term. The issuance carries a return rate of 4.125 percent, reflecting the central bank’s continued efforts to manage liquidity and stabilize the financial market.
