Anti-Money Laundering (AML) and Combating of Financial Crime Requirements for Capital Market Service Providers (CMSPs)

Summary

The Central Bank of Bahrain’s Rulebook Volume 6: Capital Markets outlines the Anti-Money Laundering (AML), Combating of Terrorism Financing (CFT), and Combating of Proliferation Financing (CPF) requirements for Capital Market Service Providers (CMSPs). A key component of effective AML/CFT/CPF implementation is the Risk-Based Approach (RBA).

What is a Risk-Based Approach (RBA)?

A RBA involves:

• Recognizing varying ML/TF/PF threats across customers, geographies, products, services, transactions, and distribution channels.
• Identifying and assessing ML/TF/PF risks in relation to customers, countries/jurisdictions, products/services/transactions, and delivery/distribution channels.
• Documenting risk assessments and findings.
• Considering relevant risk factors before determining the overall risk profile and mitigation level.
• Keeping assessments up-to-date through periodic reviews (at least annually).
• Providing risk assessment information to the CBB as required.

Key Requirements

CMSPs must:

Implement Effective Risk Management

• Implement and maintain policies and procedures for customer risk profiling during business relationship establishment and throughout its course.
• Identify and assess ML/TF/PF risks in relation to:
  • Country risk
  • Customer risk
  • Products/services/transactions risk
  • Delivery/distribution channel risk
• Ensure that measures taken to identify, assess, monitor, manage, and mitigate ML/TF/PF risks are commensurate with the nature, scale, and complexities of its activities.

Conclusion

The RBA is a crucial component of effective AML/CFT/CPF implementation for CMSPs. By understanding and implementing the key requirements outlined above, CMSPs can ensure that they are adequately identifying, assessing, and mitigating ML/TF/PF risks in their business operations.