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Financial Crime and Risk Assessment

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Overview

The Central Bank of Bahrain Rulebook Volume 4: Investment Business requires investment firm licensees to assess various risks associated with financial crime. This includes country/geographic risk, customer/investor risk, product/service/transactions risk, and distribution channel risk.

Key Risk Assessment Considerations

When assessing these risks, the following factors should be considered:

• Nature, scale, diversity, and complexity of business
• Products or services that provide anonymity or ability to pool underlying customers/funds
• Volume and size of transactions
• Profile of customers
• Target markets and jurisdictions with relatively higher levels of corruption or organized crime
• Complexity of transaction chain

Country/Geographic Risk

Countries identified by credible sources as not having adequate Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) systems are considered high-risk. Additionally, countries providing funding or support for terrorist activities, or with designated terrorist organizations operating within their country, are also considered high-risk.

Customer/Investor Risk

The following categories of customers may indicate a higher risk:

• Non-resident customers
• Personal asset-holding vehicles
• Companies with nominee shareholders or bearer shares
• Cash-intensive businesses
• Unusual ownership structures

Product/Service/Transactions Risk

An overall risk assessment should determine the potential risks presented by product, service, transaction, or delivery channel of the investment firm licensee. A Risk-Based Approach (RBA) should be used to assess these risks.

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