Kuwait banks to monitor six months of salary transactions to detect wage manipulation

Kuwait’s Central Bank has directed local banks to strengthen monitoring of salary transactions involving private sector employees earning monthly wages of KD300 or less, introducing mandatory two-factor authentication for withdrawals, transfers and payments of KD25 or more.

The new requirements, which took effect on December 31, 2025, aim to prevent fictitious salary payments and protect workers from employers who may record wages as paid but subsequently pressure employees to return some or all of the money.

Under the instructions, banks must apply two-factor authentication to every withdrawal, transfer or payment transaction of KD25 or more from designated salary accounts. The requirement will cover transactions made through associated payment methods and different banking channels. Salary deposits themselves will not require additional authentication.

An employee’s eligibility for the additional security measures will be determined using the latest monthly salary information held by the bank, rather than the account balance or the amount of an individual transaction. Banks must update this classification whenever an employee’s salary changes.

The Central Bank has also specified that authentication must establish both the employee’s identity and consent through two separate verification methods from different categories. Simply logging into a banking application or another banking channel will not satisfy the requirement.

Before approving a transaction, banks must display its type, amount and beneficiary to the employee. Authentication methods must also be personally linked to the account holder, with banks required to independently verify customer contact details whenever they are registered, changed or retrieved.

Financial institutions must also provide alternative secure authentication options for employees who do not own smartphones or cannot access banking applications.

The instructions make clear that successful two-factor authentication does not automatically rule out wage manipulation or situations in which employees may be pressured into returning their salaries.

Banks will therefore remain responsible for identifying suspicious activity, examining transactions and reporting potential violations, including transactions below the KD25 authentication threshold.

When suspicious indicators emerge, banks must review the employee’s transactions over the preceding six months, compare them with their usual financial behaviour and examine possible links with the employer or related parties. The findings must be appropriately documented.

However, the Central Bank has stressed that banks must not delay salary deposits or prevent employees from accessing their money solely because of a suspicion, unless there is a legal basis for doing so.

Investigating employer violations and protecting workers' rights remain the responsibility of the Public Authority for Manpower and other competent authorities.

The Central Bank has identified several indicators that could point to fictitious wage payments or potential coercion of employees into returning their salaries.

These include employees transferring their wages back to employers or affiliated parties without an apparent legitimate reason, employers retaining workers’ bank cards or PINs, and documented complaints from employees alleging that they were forced to return their wages.

Other indicators include:

• Large withdrawals: Withdrawing or transferring 80 per cent or more of an employee’s salary within 72 hours in at least two of the previous three salary cycles.

• Transfers to employers: Transferring 50 per cent or more of the salary to the employer or an affiliated party within 72 hours.

• Group transaction patterns: Similar transactions involving at least five employees or 20 per cent of an establishment’s workforce, whichever is lower.

• Repeated cash withdrawals: Groups of employees repeatedly withdrawing their salaries from the same ATM.

• Joint accounts: Salary transfers into joint accounts linked to the employer.

The instructions classify suspicious cases according to risk. High-risk cases involve strong evidence of potential violations, while medium-risk cases involve repeated suspicious behaviour supported by additional indicators. Low-risk cases involve a single suspicious indicator.

The Central Bank has clarified that withdrawing an entire salary in cash does not, by itself, constitute evidence of fictitious wage payments or a violation. The objective is to identify suspicious patterns rather than restrict employees' freedom to withdraw or spend their wages.

The new instructions establish specific timelines for banks to investigate and report suspicious transactions.

Banks must conduct an initial review within two days. If sufficient grounds for suspicion are established, the case must be reported by the end of that day.

Financial institutions will then have an additional three-day monitoring period to complete a detailed investigation, while urgent cases must be reported immediately.

Banks have also been directed to complete their technical and operational preparations before December 31, 2025, and submit monthly reports detailing monitoring activities and investigation findings by the fifth working day of the following month.

They must establish internal supervisory policies and subject these to annual internal audits. Institutions that fail to comply may face supervisory measures determined by the Central Bank.

The requirements build on Kuwait’s Wage Payment System (WPS), introduced in September 2015 to address fictitious wage payments and ensure employees receive the salaries recorded as paid to them.

By strengthening transaction monitoring and authentication requirements, the Central Bank aims to close gaps between recorded salary payments and the actual receipt of wages, particularly among lower-paid private sector workers.

The measures also reinforce the distinction between employers fulfilling their salary payment obligations on paper and employees having genuine control over the money deposited into their accounts.