Kuwait’s Cabinet has approved a draft decree-law criminalising informal remittance systems, including hawala-style networks, as part of a broader effort to strengthen financial oversight and counter money laundering. The Ministry of Commerce and Industry confirmed the amendment on 3 December 2025, introducing a new Article (12 bis) to the Commercial Licensing Law No. 111 of 2013.
The measure targets unlicensed currency exchange and value-transfer networks that operate outside regulated banking and exchange channels. According to the ministry, such systems represent one of the more significant illicit financial risks due to their limited documentation and vulnerability to misuse.
The amendment is relevant to remittance senders in Kuwait, licensed exchange houses and money transfer operators, financial institutions monitoring regional compliance developments, and policymakers assessing anti-money laundering enforcement across the Gulf Cooperation Council (GCC).
What Are Informal Remittance Systems and Why Are They Being Regulated
Informal remittance systems, commonly known as hawala, rely on unlicensed brokers who accept funds in one country and arrange for an equivalent payout in another, without the transaction passing through a regulated bank or licensed exchange house. Because these networks operate without standard documentation or oversight, financial regulators globally have identified them as posing elevated money-laundering and terrorist-financing risks compared with licensed remittance channels.
The Kuwaiti Ministry of Commerce and Industry stated that the spread of such practices creates a parallel financial system that operates without regulatory visibility, which it said undermines the ability of authorities to monitor and verify the legitimacy of financial flows.
How the New Legal Amendment Works
Under the new Article 12 bis, any unlicensed currency-related activity is prohibited, including buying, selling, exchanging, or transferring local or foreign currency within or outside Kuwait without proper licensing. Individuals found in violation face penalties of up to six months in prison or fines of up to KD 3,000.
Penalties for Commercial Establishments
Offences committed through registered commercial establishments may face more severe consequences, including closure of the business or any implicated branch, confiscation of related funds and equipment, and publication of the court ruling in the official gazette.
Enforcement Authority
The Public Prosecution has been granted full authority to investigate and prosecute offences arising from the amendment, positioning enforcement within Kuwait’s existing judicial framework rather than requiring a separate regulatory body.
Key Factors Behind Kuwait’s Regulatory Action
The ministry described the amendment as forming a core part of Kuwait’s wider strategy to strengthen defences against money laundering, terrorist financing, and other illicit financial activity. It noted that unlicensed remittance networks can undermine licensed exchange businesses by operating outside the cost and compliance structures those businesses are subject to.
The measure also reflects broader international compliance standards that Gulf financial regulators have increasingly aligned with in recent years, as cross-border enforcement bodies place greater scrutiny on informal value-transfer systems globally.
Impact and Implications for Remittance Senders and Licensed Operators
For individuals in Kuwait who have relied on informal networks, often due to lower costs, cash convenience, or lack of banking access, the amendment is likely to increase reliance on licensed exchange houses and banks for cross-border transfers. For licensed remittance operators, the measure may reduce competitive pressure from unregulated alternatives, though the ministry has not disclosed projected effects on formal remittance volumes.
The ministry stated that eliminating unregulated channels is intended to increase compliance across the financial sector and strengthen confidence among investors and consumers in Kuwait’s financial system.
Risks and Limitations
The amendment’s practical enforcement outcomes, including prosecution volumes and the extent to which informal networks are displaced rather than driven further underground, are not yet available given the recency of the Cabinet’s approval. Historical experience in other jurisdictions that have restricted informal remittance channels shows mixed enforcement outcomes, and the effectiveness of similar measures can depend on the availability and affordability of licensed alternatives for lower-income remittance senders.
This report is based on statements from Kuwait’s Ministry of Commerce and Industry; independent assessment of the law’s downstream effects on remittance costs or financial inclusion is not available at this stage.
Outlook for Remittance Regulation in Kuwait
The ministry indicated the amendment will be applied without exception as part of Kuwait’s ongoing effort to build a transparent and secure financial environment. No specific timeline for implementation review or reassessment of the law’s effectiveness has been disclosed.
Conclusion
Kuwait’s criminalisation of informal money transfer networks represents a significant tightening of financial oversight aimed at closing regulatory gaps exploited by unlicensed currency and remittance activity. The amendment aligns Kuwait’s licensing framework more closely with international anti-money laundering standards, though its longer-term effects on remittance costs, financial inclusion, and enforcement outcomes remain to be observed.
