Financial Crime World

Bahrain’s Financial Sector Under Scrutiny: Money Laundering Concerns Emerge

Manama, Bahrain - In a shocking revelation, experts have raised concerns over Bahrain’s financial sector, citing weaknesses in money laundering and terrorist financing (ML/TF) regulations. The tiny Gulf state, known for its lucrative banking industry, is facing scrutiny from international authorities over its ability to prevent illicit activities.

Lack of Clarity in Money Laundering Offence

According to sources close to the matter, Bahrain’s legal framework is being criticized for its lack of clarity on the autonomy of the money laundering offence. This ambiguity could allow criminal activity to flourish, experts warn.

  • The absence of clear boundaries and requirements for prosecution makes it difficult for courts to establish jurisdiction.
  • This lack of clarity could result in criminal activities going undetected or unpunished.

Domestic Factors Contributing to ML/TF Vulnerabilities

A report has highlighted domestic factors contributing to Bahrain’s ML/TF vulnerabilities. The Financial Action Task Force (FATF) has expressed concerns over:

  • The absence of effective communication among major players in Bahrain’s AML efforts.
  • Inadequate supervisory resources.
  • Lack of criminalization of financial transactions.

Financial Sector Overview

Bahrain’s financial sector is comprised of approximately 360 institutions, including:

  • Banks
  • Securities firms
  • Insurance companies
  • Money changers
  • Money brokers

The Banking and Monetary Agency (BMA) is responsible for licensing, supervision, and regulation of the sector.

Banking Licenses

Bahrain offers three types of banking licenses:

  • Full commercial banks
  • Offshore banking units
  • Investment bank licensees

These licenses allow for varying levels of activity, including:

  • Retail and commercial banking
  • Foreign currency transactions
  • Investment activities

Consolidated Balance Sheet Assets

The total consolidated balance sheet assets of Bahrain’s banking system stood at approximately BD 20.6 billion (US$54.5 billion) as of 2022.

Conclusion

As international authorities continue to scrutinize Bahrain’s financial sector, experts warn that the country must take immediate action to address its ML/TF vulnerabilities and ensure the integrity of its banking system. Failure to do so could have serious consequences for the global economy.