Financial Crime World

Customer Due Diligence Requirements in Bahrain: Relying on Third Parties

The Central Bank of Bahrain has outlined specific regulations for customer due diligence (CDD) requirements, focusing on reliance on third parties to conduct CDD measures. This article will outline the key points from these guidelines.

Reliance on Third Parties

Licensees may rely on a third party, which is either a CBB licensee or an overseas financial institution regulated for FATF standards, to perform elements of customer due diligence measures. However, it’s essential to note that:

  • The ultimate responsibility for compliance with CDD measures remains with the licensee.
  • Licensees must ensure that their AML/CFT policies and procedures address specific requirements for reliance on third parties conducting CDD.

Requirements for Reliance

To rely on third parties, licensees must:

  1. Conduct periodic reviews of arrangements with third parties to ensure compliance.
  2. Ensure that their AML/CFT policies and procedures address specific requirements for reliance on third parties conducting CDD.
  3. Enter into a written agreement with the third party, specifying rights, responsibilities, and obligations.

Criteria for Relying on Third Parties

When relying on a third-party financial institution, licensees must meet certain criteria:

  • Obtain necessary information concerning the elements of CDD measures.
  • Ensure copies of identification data and other relevant documentation are available upon request without delay.
  • Satisfy themselves that the third party is regulated and supervised for CDD and record keeping requirements in line with FATF Recommendations 10 and 11.
  • Not rely on third-party financial institutions in high-risk countries or jurisdictions considered non-cooperative or inadequately regulated with respect to AML/CFT standards.

Country Risk Assessment

Licensees must assess country risk when determining which countries meet the conditions for relying on third-party financial institutions.

Remedying Deficiencies

If a licensee identifies deficiencies in CDD measures undertaken by the third party, they must reperform the CDD to remedy the deficiencies.

These guidelines aim to ensure that licensees in Bahrain comply with AML/CFT standards when relying on third parties for conducting customer due diligence measures.