Introduction

The battle against further money laundering (‘AML’) and terrorism funding (‘CFT’) is a top concern for the National Bank of Bahrain. Bahrain is a participant of the Financial Action Task Force (‘FATF’). This is due to the Gulf Cooperative Authority’s full participation in the FATF. It is devoted to adhering to all global norms in this regard. Bahrain is also a founder participant and host of the regional MENA-FATF secretariat.

The CBB operates an Enforcement Directorate. This is entrusted with managing the CBB’s AML/CFT operations. This is in order to guarantee efficient enforcement with applicable standards. Also to protect Bahrain’s good image as a well-regulated financial hub.

AML in Bahrain

Money laundering is still a concern in Bahrain. The Anti-Money Laundering Unit (AMLU) received the most Suspicious Transaction Reports (STRs) ever since its creation in 2007.

The Bahraini administration passed an anti-money laundering (AML) legislation in January 2001. It makes laundering of funds from any underlying offense illegal. Accused money fraudsters and anyone who helps or facilitates them face up to seven years in jail. They will also be charged with a penalty of up to one million Bahraini dinars (BD). If there is an organized illegal relationship, bribery, or concealment of the source of earnings. A punishment of at least 100,000 dinars and a jail time of at least five years are the statutory penalties.

Importantly, the AML statute authorizes it to pursue a financial laundering breach. That is even if the conduct is not a criminal in the country. For instance, there is zero income tax in Bahrain. But anybody engaged in unlawful monetary operations for the aim of dodging another country’s taxation structure may be convicted in the country for financial laundering.

following the latest passage of the bill, the Bahrain Monetary Agency (BMA), the country’s federal bank’s primary finance industry watchdog, released guidelines mandating financial companies to submit Suspicious Transaction Reports (STRs). This is to keep information for a five-year period. Account credentials should also be easily accessible to law investigation agents. Those who identify fraudulent activity are immune from illegal or civil prosecution. There is no minimum threshold for filing an STR.

Establishment of Anti Money Laundering Unit

Furthermore, the legislation calls for the establishment of the Anti-Money Laundering Unit (AMLU) as Bahrain’s Financial Intelligence Unit (FIU). The AMLU is located inside the Department of the Interior. It has the authority to accept allegations of financial laundering violations. Also to undertake preparatory examinations. They carry out processes linked to multinational collaboration in accordance with the legislation. Also, to carry out rulings, judgments, and decisions made by appropriate authorities in cases involving financial laundering. In July 2003, the AMLU joined the Egmont Group of FIUs.

In 2021, the AML statute was updated.

Bahrain Compliance with FATF Recommendations

The Financial Action Task Force (FATF) conducted the most recent Mutual Evaluation Report on the execution of anti-money laundering and counter-terrorist funding requirements in Bahrain. Based on the assessment, Bahrain was found to be Compliance for 8 of the FATF’s 40 guidelines, and Compliance or Nearly Compliance for 26 of them. It received an Extremely Efficient rating for 0 and a Significant Efficient grade for 3 of the Efficiency and Technical Compatibility categories.

US Department of State Money Laundering assessment (INCSR)

According to the US Ministry of State’s 2016 International Narcotics Control Strategy Report, Bahrain is a Jurisdiction of Concern (INCSR). The following are the review’s major discoveries: –

Bahrain is the Arab area’s main economic capital. It’s financial system is mainly service-based. The financial industry accounts for around 18% of GDP. It is home to a varied range of financial companies. It comprises 113 licensed banks, 19 financial intermediaries, and a number of other financial organizations, including 151 insurance companies.

The biggest danger of money laundering comes from criminal earnings of immigrant provenance passing through the nation. It’s extensive financial infrastructure, as well as its position as a transportation hub throughout the Gulf and into Southwest Asia. It has the potential to encourage financial laundering operations. It’s has no substantial black marketplace for stolen items or recognized ties to narcotics smuggling.

The country’s main harbour, Khalifa bin Salman Harbour, has a special movement corridor. This is to promote duty-free imports of equipment and infrastructure. The North Sitra Commercial Estate also has a free zone. Raw commodities destined for refining in the country, as well as equipment supplied by Bahraini-owned companies, are duty-free. Duty-free storage is available for foreign products. These free regions do not serve as a major resource of financial laundering or terrorism funding.

The Economy of Bahrain

Bahrain is the country’s second-freest economy in the Middle East and North Africa. It is now ranked thirty-ninth on the planet.

Bahrain is host to a plethora of global corporations with operations throughout the Gulf. All thanks to its advanced communication and transportation infrastructure. Petroleum manufacturing and refining contribute to more than 60% of Bahrain’s export earnings, 70% of federal income, and 11% of GDP (exclusive of affiliated sectors). It backs Bahrain’s current robust economic development. After oil, aluminum is the country’ second most important export. The finance and industrial industries are also important parts of Bahrain’s economy. It is is mostly concerned with Islamic finance. On a global dimension, it competes with Malaysia as a global financial hub.

Economic Expansion

Bahrain is aggressively seeking economic expansion and privatization. This is in order to minimize the nation’s reliance on oil. As part of this endeavor, Bahrain and the United States signed a Free Trade Agreement (FTA).  The first FTA involved the United States and a Gulf nation. Bahrain’s capacity to obtain fresh natural fuel sources as feedstock to power its developing petrochemical and aluminum sectors is critical to the country’s ongoing robust development. Long-term economic challenges include joblessness, particularly amongst the youth, and the degradation of hydrocarbon and subsurface water supplies.

Sanctions

There are presently no global sanctions in place regarding this nation.

The Arab League (composed of 22 Arab partner entities), of which this nation is a participant, has agreed to impose sanctions on Syria. These are some examples: –

• Interrupting operations with Syria’s central bank.
• Arab states are suspending financing for developments in Syria.
• Visiting other Arab nations by prominent Syrian officials is prohibited.
• Properties associated with President Bashar al-regime Assad’s have been frozen.
• The statement also requests that Arab central banks supervise payments to Syria, with the exemption of donations from Syrians living abroad.

Conclusion

Bahrain is a participant of the Financial Action Task Force (FATF) and is committed to adhering to global norms to combat money laundering (AML) and terrorist financing (CFT). The Central Bank of Bahrain (CBB) operates an Enforcement Directorate to ensure efficient enforcement of applicable standards and protect Bahrain’s reputation as a well-regulated financial hub. The AML statute authorizes Bahrain to pursue a financial laundering breach, even if the conduct is not a criminal offense in the country.

It was found to be Compliance or Nearly Compliance for 26 of the FATF’s 40 guidelines. The country’s primary economic sector is services-based, and the financial industry accounts for about 18% of GDP. The biggest risk of money laundering comes from criminal earnings of immigrant provenance passing through the nation. It’s extensive financial infrastructure and position as a transportation hub could encourage financial laundering operations. Country is aggressively seeking economic expansion and privatization to reduce its dependence on oil.