Financial Crime World

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Bahrain Financial Crime: A Year of Digital Disruption and Regulatory Pressure

2020 has been a year like no other for Bahrain’s financial industry. The COVID-19 pandemic has accelerated the shift away from cash to digital payments, creating new opportunities for financial crime and regulatory scrutiny.

Fraud and COVID-19

The pandemic has created a perfect storm of vulnerability for individuals and businesses alike. The rapid shift to digital payments has led to an increase in online scams, phishing, and fake charitable appeals.

  • In the UAE, cyberattacks increased by 250% last year, including phishing and ransomware incidents.
  • Financial institutions need to re-examine their fraud controls, conduct risk assessments, and educate customers on new risks and typologies.

Digital Onboarding and eKYC

Regulators in the Middle East and Africa have been moving towards greater digitization and use of technology to fight financial crime. The pandemic has only accelerated this trend.

  • In Bahrain, the Central Bank of Bahrain launched an eKYC project in 2019, which continues to develop and improve.
  • Financial institutions need to properly assess and integrate technological solutions into their existing infrastructure.

FATF Mutual Evaluation Report on the UAE

The publication of FATF’s critical Mutual Evaluation Report on the UAE’s money laundering and terrorist financing controls was a major regional news story in 2020.

  • The report highlighted several areas for improvement, including the need for fundamental and major changes to AML/CTF systems.
  • Individual financial institutions need to ensure they have up-to-date risk assessments that reflect the financial crime threats related to the UAE.

MEA Regulators Start to Warm Up to Cryptocurrencies

The growth of cryptocurrency has been relatively low-scale but continued to show promise in Africa and the Middle East.

  • Commentators believe the growing level of interest in Africa, particularly compelling crypto use cases, will force regulators’ hands and encourage the issue of crypto-specific regulations.
  • In Bahrain, the government has granted licenses to crypto exchanges under relevant regulations, and currently has a number of crypto companies in its sandbox programs.

Slow Steps Towards Greater Transparency and Access to Data

2020 saw some positive developments relating to transparency and accessibility of data.

  • A small number of governments have made moves to align themselves with international standards, including the UAE, Egypt, and Kenya.
  • The onus is now on industry bodies to lobby for making all this information public, and on financial institutions to work out how best to integrate these new sources of information into their onboarding, customer risk assessment, and ongoing due diligence processes.

Conclusion

2020 was a transformative year for Bahrain’s financial crime landscape. The pandemic has accelerated the shift to digital payments, creating new opportunities for financial crime and regulatory scrutiny.

As we look ahead to 2021, it is clear that financial institutions must adapt quickly to emerging trends and technologies in order to stay ahead of the curve.

FINTRAIL can assist with:

  • Performing risk assessments
  • Providing training
  • Implementing RegTech solutions
  • Composing policies and procedures
  • Designing and reviewing FinCrime controls

If you would like to contact us about any of the topics raised in this article or your financial crime compliance needs in the MEA region, please email maya.braine@fintrail.co.uk.