Corruption Currents ... Commentary and news about money laundering, bribery, terrorism finance and sanctions.

Rapid growth in Kuwait’s banking sector could make the country attractive to money launderers and terrorism financiers, the International Monetary Fund said Monday in a report.

The report, which was conducted during an on-site visit in late-October 2010, came at Kuwait’s request, the state-run Kuwait News Agency reported Tuesday. It said that the country’s anti-money laundering law introduced in 2002 contains many shortcomings that could pose a threat in the future.

“Although there is currently no evidence of significant [money-laundering in the country, Kuwait’s financial sector is growing rapidly in terms of banking sector assets. This development has the potential of creating a suitable environment for money launderers and terrorist financers to exploit,” the report said.

Among the law’s shortcomings, according to the IMF report, is that it doesn’t cover all “predicate offenses,” nor does it cover terrorism financing. Further, the Kuwaiti financial intelligence unit only gets its power to analyze suspicious transaction reports regarding potential money laundering or terrorist financing from the central bank, an inadequate level of independence, the report said.

The report was done under the rubric of the Financial Action Task Force, an international group that guides countries to adopt legal frameworks to follow its 49 recommendations on preventing money laundering and terrorism financing.

Kuwait’s anti-money laundering law also doesn’t have a mechanism in place to implement United Nations Security Council Resolutions, the report said.

The IMF report said Kuwait doesn’t have anything in place regarding politically-exposed people using financial institutions. Further, the regime in place to prevent the use of shell banks fails to meet the standards of the FATF, the report said.

The report comes weeks after a scandal erupted in the parliament over the bank accounts of members that led to a call for an emergency session. Kuwait posted a ranking of 53rd out of 178 countries in the latest edition of the Transparency International Corruption Perception Index.

Read the executive summary, and the full report, below:

FATFkuwait