Bahrain’s Financial Institution Compliance Issues Under Scrutiny as Kingdom Fails to Meet International Anti-Money Laundering Standards
Bahrain, a small island nation in the Middle East, has been put under scrutiny by international financial regulators for its lack of compliance with anti-money laundering and counter-terrorism financing (AML/CFT) standards. A recent assessment by the Financial Action Task Force (FATF) and the Middle East and North Africa Financial Action Task Force (MENAFATF) revealed that Bahrain’s efforts to combat money laundering and terrorist financing are inadequate.
Assessment Highlights
The assessment, conducted based on the 2012 FATF Recommendations and 2013 Methodology, highlighted several key areas where Bahrain fell short of international standards:
- National Risk Assessment: Bahrain’s national risk assessment was ongoing at the time of the visit, but the country failed to use this information to strengthen its measures. Specifically, the report noted that Bahrain’s terrorism offence did not align with the Terrorist Financing Convention.
- Non-Profit Organizations: Bahrain identified non-profit organizations as being at risk of being abused for terrorism financing purposes, but instead of implementing targeted mitigation measures, the country applied restrictive obligations on all non-profit organizations operating in the kingdom. This approach is deemed to be inadequate and inconsistent with FATF requirements.
Financial Institutions
On a positive note, Bahrain’s financial institutions such as banks, money value transfer services, insurance companies, and securities sectors demonstrated a good understanding of money laundering and terrorist financing risks. These institutions are able to implement targeted financial sanctions without delay.
However, designated non-financial businesses showed a fragmented understanding of these risks and failed to implement targeted financial sanctions in a timely manner.
Cooperation and Information Exchange
Bahrain demonstrated a high level of domestic cooperation and information exchange with other countries, responding promptly to formal requests for mutual legal assistance and informal requests for information.
Recommendations and Implications
The FATF adopted this report at its Plenary meeting in June 2018, highlighting the need for Bahrain to address these compliance issues. The kingdom’s failure to meet international anti-money laundering standards poses a risk not only to its own financial stability but also to global efforts to combat money laundering and terrorist financing.
- Immediate Action Required: Bahrain must take immediate action to address the identified weaknesses and strengthen its AML/CFT regime.
- Global Implications: The kingdom’s failure to comply with international standards has implications for global efforts to combat money laundering and terrorist financing, making it a priority for international regulators.