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Bahrain’s Central Bank Raises Concerns over Insufficient AML/CFT Measures in Local Banks

Manama, Bahrain - The Central Bank of Bahrain (CBB) has expressed concerns over the lack of adequate Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) measures in some local banks.

According to sources within the CBB, several Islamic bank licensees have failed to properly implement AML/CFT procedures, systems, and controls as required by the Financial Crime Module FC-B.2.2.

Concerns over Lack of Compliance

The CBB has issued guidelines to ensure that all financial institutions, including Islamic banks, implement robust AML/CFT programs to prevent money laundering and terrorist financing. However, it appears that some licensees have not taken these guidelines seriously, putting the integrity of the financial system at risk.

Potential Impact on Banking Sector Stability

Under FC- B.2.3, if a bank cannot agree on satisfactory implementation with the CBB, it may be required to cease operations in the relevant jurisdiction. This has raised concerns among industry experts and investors about the potential impact on the stability of Bahrain’s banking sector.

Group-Wide AML/CFT Programs

The CBB has also emphasized the importance of group-wide AML/CFT programs for financial groups, which must include policies and procedures for sharing information within the group for AML/CFT purposes (FC- B.2.4).

Risk-Based Approach to AML/CFT

Furthermore, the CBB has reiterated the need for a risk-based approach to AML/CFT, as outlined in FC-C.1.1-1.5. This approach requires banks to identify, assess, and understand money laundering and terrorist financing risks to which they are exposed, and take necessary control measures to mitigate them.

Industry Expert Opinion

Industry experts have called for stricter enforcement of these guidelines to ensure the integrity of Bahrain’s financial system. “It is essential that all financial institutions comply with AML/CFT regulations to prevent money laundering and terrorist financing,” said a banking expert. “The CBB must take firm action against any institution that fails to comply.”

Future Action Expected

The CBB has yet to comment on the specific measures it plans to take to address these concerns, but industry insiders expect stricter enforcement of AML/CFT guidelines in the coming months.

Background

The Financial Crime Module FC-B.2 was introduced by the CBB in 2018 to regulate the financial sector and prevent money laundering and terrorist financing. The module outlines the requirements for Islamic banks, including the need for adequate AML/CFT procedures, systems, and controls.

Risk-Based Approach

The Risk-Based Approach (RBA) outlined in FC-C.1 is a key component of the AML/CFT program, requiring banks to identify, assess, and understand money laundering and terrorist financing risks to which they are exposed.

Sources

  • Central Bank of Bahrain, Financial Crime Module FC-B.2
  • Central Bank of Bahrain, Financial Crime Module FC-C.1
  • Industry experts and banking insiders