Kuwait: Loophole in dual citizenship allows money laundering, tax evasion

Abu Dhabi: A loophole in Kuwait’s tax compliance laws applicable for foreign accounts and the United States Foreign Account Tax Compliance Act (Fatca) may be resulting in money laundering and tax evasion, experts feel. Crimes linked to the 1MBD Malaysian scandal and other financial offences committed by a number of Korean nationals in recent times has raised concern, a security source told Al Qabas.

While local laws require citizens to disclose any other nationality they might be holding, foreigners are not required to do so.

Passport details

The source explained that many foreigners live in Kuwait with a certain nationality, but their accounts in local banks bear details of passports of other countries and have names other than the ones used elsewhere in Kuwait.

The source cited investigations into many complaints of money laundering, most significant of which is the one involving an Armenian-American resident accused of money laundering and tax evasion.

The accused entered and lived in Kuwait on a passport of the Republic of Armenia, while simultaneously holding an American passport, though he did not disclose the latter. This was an attempt to evade the jurisdiction of the Fatca law, which has been in force since 2015.

Disclosure of assets

Fatca requires US taxpayers who hold foreign financial assets with an aggregate value of more than the reported threshold (at least $50,000) to report information about those assets.

Kuwait has enforced certain financial reforms, whereby it is mandatory for all customers of financial services firms — such as banks, investment companies, portfolios and funds — to disclose their other nationalities, should they have dual statuses.

The reforms were meant to implement the requirements of the International Joint Reporting, as determined in the Common Reporting Standard, and opened a new window for the disclosure of the names of those with dual nationalities.