Bahrain's measures to combat money laundering and terrorist financing

Anti-money laundering and counter-terrorist financing measures in the Kingdom of Bahrain– Mutual Evaluation Report – Sept. 2018 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in The Kingdom of Bahrain
Fourth Round Mutual Evaluations
Key findings, ratings and priority actions
September 2018
http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-Bahrain-2018.html

Anti-money laundering and counter-terrorist financing measures in the Kingdom of Bahrain– Mutual Evaluation Report – Sept. 2018
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Bahrain has
achieved this
objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Moderate
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Substantial
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Substantial
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Moderate

Extent to
which
Bahrain has
achieved this
objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Moderate
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Substantial
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Moderate
8. Proceeds and instrumentalities of crime are confiscated. Moderate

Extent to
which
Bahrain has
achieved this
objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Moderate
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Moderate
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Moderate

Ratings – Effectiveness
April 2018
0
3
8
0
High
Substantial
Moderate
Low

3-Sep-18
6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach ParPa ParPar Partially Compliant
2. National cooperation and coordination LarLarLarLar Largely Compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence LarLarLarLar Largely Compliant
4. Confiscation and provisional measures ComCo ComCom Compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence ParPa ParPar Partially Compliant
6. Targeted financial sanctions related to terrorism & terrorist
financing ParPa ParPar Partially Compliant
7. Targeted financial sanctions related to proliferation ParPa ParPar Partially Compliant
8. Non-profit organisations LarLarLarLar Largely Compliant

3-Sep-18
7
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws ComCo ComCom Compliant
Customer due diligence and record keeping
10. Customer due diligence LarLarLarLar Largely Compliant
11. Record keeping ComCo ComCom Compliant
Additional measures for specific customers and activities
12. Politically exposed persons LarLarLarLar Largely Compliant
13. Correspondent banking LarLarLarLar Largely Compliant
14. Money or value transfer services LarLarLarLar Largely Compliant
15. New technologies ComCo ComCom Compliant
16. Wire transfers LarLarLarLar Largely Compliant

3-Sep-18
8
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties ComCo ComCom Compliant
18. Internal controls and foreign branches and subsidiaries LarLarLarLar Largely Compliant
19. Higher-risk countries LarLarLarLar Largely Compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions LarLarLarLar Largely Compliant
21. Tipping-off and confidentiality LarLarLarLar Largely Compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence ParPa ParPar Partially Compliant
23. DNFBPs: Other measures ParPa ParPar Partially Compliant

3-Sep-18
9
(4/5)
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL
PERSONS AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons LarLarLarLar Largely Compliant
25. Transparency and beneficial ownership of legal arrangements LarLarLarLar Largely Compliant
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions LarLarLarLar Largely Compliant
27. Powers of supervisors LarLarLarLar Largely Compliant
28. Regulation and supervision of DNFBPs LarLarLarLar Largely Compliant
Operational and Law Enforcement
29. Financial intelligence units ComCo ComCom Compliant
30. Responsibilities of law enforcement and investigative
authorities ComCo ComCom Compliant
31. Powers of law enforcement and investigative authorities ComCo ComCom Compliant
32. Cash couriers LarLarLarLar Largely Compliant

3-Sep-18
10
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics LarLarLarLar Largely Compliant
34. Guidance and feedback LarLarLarLar Largely Compliant
Sanctions
35. Sanctions LarLarLarLar Largely Compliant
INTERNATIONAL COOPERATION
36. International instruments LarLarLarLar Largely Compliant
37. Mutual legal assistance LarLarLarLar Largely Compliant
38. Mutual legal assistance: freezing and confiscation LarLarLarLar Largely Compliant
39. Extradition LarLarLarLar Largely Compliant
40. Other forms of international cooperation LarLarLarLar Largely Compliant

April 2018
8
26
6
0
Compliant
Largely compliant
Partially compliant
Non compliant

Key findings
 Overall, Bahrain has a moderate level of understanding of
its money laundering and terrorist financing (ML/TF) risks,
with the national risk assessment (NRA) process on going at
the time of the onsite. The understanding of ML/TF risks is
still evolving and will be further developed as the NRA
process is concluded.
 Domestic coordination, cooperation and information
exchange at the operational level is strong and proactive.
There have been a number of initiatives, policies and
actions by authorities to address ML/TF risks. However,
more generally, the objectives and activities of authorities
will need to be strengthened and aligned with the identified
ML/TF risks.
12April 2018

Key findings
April 2018 13
 Financial intelligence and other information are accessed and used in
investigations for ML/TF and associated offences. During 2012-2017,
Bahrain initiated 43 investigations for ML, resulting in nine convictions,
and a number of ongoing cases. However, the investigation and
prosecution of ML, generally, do not appear to be fully in line with its
ML risks.
 Bahrain’s terrorism offence (which is cross referenced in the TF offence)
includes an exemption that is inconsistent with the TF Convention. This
exemption significantly impacts Bahrain’s compliance at the technical
level, but has not yet had a discernible impact on effectiveness. TF
activities are identified and investigated by LEAs, though TF is mostly
identified as a result of terrorism investigations. Given the strong
domestic coordination in Bahrain, information and intelligence is rapidly
exchanged in TF cases.

Key findings
 Financial institutions in Bahrain immediately implement TFS
(both PF and TF) without delay. However, the majority of
the DNFBP sector does not implement TFS without delay,
and the remaining DNFBPs (as well as all natural and legal
persons in Bahrain) do not have legal obligations in relation
to TFS.
 Bahrain identified a subset of high risk NPOs for potential
terrorism abuse. Yet, restrictive obligations are placed on all
NPOs operating in Bahrain, regardless of their identified risk
profile. While these measures may be effective at mitigating
TF abuse of the NPO sector, they are not applied on a risk-
basis and may unduly or inadvertently restrict NPO’s ability
to access resources, including financial resources, to carry
out their legitimate activities.
14April 2018

Key findings
15April 2018
 In the financial sector, the application of proportionate
mitigating measures by large financial institutions is robust.
Progress still needs to be made regarding the understanding
and implementation of beneficial ownership obligations.
Implementation of preventive measures, including
suspicious transaction reporting by the DNFBP sector needs
improvements.
 Bahrain has strong controls to prevent criminals from
beneficially owning a significant or controlling interest or
holding a management function in a financial institution.
The CBB has strong elements of a risk based approach to
supervision and requires remediation from institutions it
supervises. It has imposed a range of sanctions and made
referrals for prosecution, though there is scope to increase
the use of sanctions as the level of onsite supervision
increases.

Key findings
16April 2018
 International cooperation between Bahraini authorities and
foreign counterparts is collaborative and provided upon
request and spontaneously, with priority given to terrorism
and TF. Mutual Legal Assistance (MLA) requests are mainly
used as complementary tools, in addition to more informal
cooperation channels.

Priority Actions for Bahrain to
strengthen its AML/CFT System
17April 2018
 Bahrain should finalise its NRA, including by utilising
information from outside Bahrain; utilising more statistics
and ensuring that the statistics used are robust; further
analysing external risks and the risks of organised crime;
and reviewing the DNFBP sectors in more detail.
Assessment of TF risk should improve in depth and
coverage.
 Bahrain should develop and implement national AML/CFT
policies based on the findings of the ML/TF risk assessment
and provide a clear strategy as well as action plans to
address the risks identified.
 Bahrain should prioritise the investigation and prosecution
of all types of ML in accordance with the country’s risks, in
particular cross-border risks.

 Bahrain should develop policy guidelines and strategies on
seizures and confiscation in order to ensure a consistent
approach across LEAs. Bahrain should also take measures to
adequately track trends and results obtained in this regard.
 Bahrain should urgently amend its terrorism offence (which
is cross-referenced in its TF offence) to remove the
exemption as it is inconsistent with the TF Convention.
 Bahrain should seek to routinely identify and investigate TF
as a distinct criminal activity instead of investigating TF
primarily as part of terrorism cases.
18April 2018

 Bahrain should implement mitigation measures that are
commensurate to the risks identified through its review of
the NPO sector and understanding of the TF risks in the
sector. A targeted risk based approach, outreach and
guidance on how to identify, prevent and report TF, with a
focus on those NPOs assessed as higher risk for potential TF
abuse would help avoid restricting and disrupting legitimate
NPO activities.
 Bahrain should further develop the understanding of the
ML/TF risks being faced by the financial sector and DNFBPs,
in particular by communicating the findings of NRA once
finalised and through proactive engagement.
19April 2018

Bahrain's measures to combat money laundering and terrorist financing

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